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

Summary

Concerns for business’ accountability for inter alia the human rights incidence of their commercial activities are neither new nor undeserved. Arbitration is increasingly perceived as the most appropriate independent and impartial venue to adjudicate and seek redress for BHR infringements. Whilst arbitration may indeed offer some positive features, many weaknesses remain that considerably undermine its efficiency and legitimacy on BHR disputes. A thorough reflection is required on the means, stakes and risks. This presentation sets out to discuss some of these weaknesses. This summary discussion is the result of the author's personal reflections in the context of an adversarial debate within the framework of Panel 8A - Protecting Human Rights through Arbitration The Hague Rules on Business and Human Rights Arbitration. It is the sole responsibility of its author and not that of the institutions employing her or which she is related, and does not exhaustively reflect the author's position on a subject whose sensitivity and complexity she appreciates.

*   *   *

Concerns for business’ accountability for inter alia the human rights incidence of their commercial activities are neither new nor undeserved. These are not new echoed in the acute debate over the necessary interaction between investment and non-investment obligations such as indigenous and human rights, labour, and environmental laws[2]. They are not undeserved as illustrated by the relative helplessness of the system to integrate them efficiently as increasingly reflected in investment cases and discussions to reform foreign investment treaties and enforcement mechanisms. It is defiantly submitted, however, that international arbitration is not the panacea for the resolution of business-related human rights (BHR) disputes, on account of intrinsic arbitration features, namely its consensual basis (below 1), its private essence and anationality (below 2), its flexible approach to material applicable law (below 3), its structural lack of transparency (below 4), its prevailing reliance of parties to argue and finance it (below 5) and the limited effect of ensuing awards and remedies (below 6). We submit by ways of conclusions that, whereas arbitration might be no silver bullet for the adjudication of business-related human rights, there are other more efficient leads to pursue to ensure a proper integration of human rights (and other public interest issues, in particular environmental matters) in business activities and ensure full accountability in case of breach (below 7).

1.        Illusory consent to arbitrate BHR disputes

By contrast to a state judge, who draws his legitimacy from the social contract and is the guardian thereof for the entire society, an arbitrator derives his authority and powers from a private contract and not from the authorities of a state and must proceed and decide the case on the basis of such an agreement[3]. Consent is also a necessary prerequisite to secure enforcement of any arbitral award[4]. Transposed to BHR disputes, chances are that business-side parties will be reluctant to offer their consent to arbitrate a BHR claim, particularly when it could open the floodgates for similar claims. This consent issue has been flagged by the Hague Rules but consent modalities have not been defined[5]. A practical illustration of consent-generated difficulties is provided for instance by the delicate never-ending coordination in the multi-fora Texaco Petroleum-Chevron / Ecuador disputes over charges of toxic waste waters release incidental to mining activities in estuaries and rivers, massive deforestation of tropical forests and abandonment non decommissioned wells on the one side[6], and allegations of breaches of the terms and conditions of the concession agreements on the other side[7].

2.        Inappropriateness of forum to resolve BHR disputes

Another fundamental feature inherent in the private essence of arbitration is that it vests decision-making powers in private individuals[8] operating in tribunals related to no specific national or international legal order (autonomous arbitral legal order)[9]. Transposed to BHR disputes, it is debatable whether a private forum operating in a business setting would be apposite to resolve human rights issues, as “corporate arbitrators are not natural guardians of the public interest, but of business interests and of a new “industry” that, as experience shows, has privileged investors over the public interest […]”[10]. It is also debatable whether private forums related to no particular legal order should have any legitimacy to ensure human rights compliance.

3.        Applicable law dilemma related to BHR disputes

As a matter of principles, arbitrators would decide disputes based on the terms of contract, the chosen law and subsidiary of most appropriate law(s) as well as possibly in equity. Transposed to BHR disputes, the attention given to human rights laws in arbitration would be aleatory to say the least. Firstly, human rights tend to be an exogenous variable to most international investment / commercial laws and contracts. Secondly, human rights instruments are prevalently meant to govern the State-to-individuals relationship with limited business-to-individual incidence, thus exposing per se primarily State liability and only incidental business liability. Human rights standards applying to business activities are mostly derived from non-binding external or internal code of conduct hence hardly enforceable. Thirdly, there are also no agreed conflict of law principles to resolve inevitable conflicts between human rights standards and investment/commercial laws, the jus cogens qualification being reserved only to a limited number of core human rights. The Occidental Petroleum v Ecuador case is cited one among many salient examples of this tension between investment law and human and indigenous rights and the misapprehension an arbitral ruling may generate[11].

4.        Transparency deficit of arbitration inapposite for BHR disputes

Inherent to their private essence, arbitration proceedings are held strictly inter partes and confidential[12]. Transposed to BHR disputes, confidentiality would be inconsistent with the transparency requirement generally expected in public interest matters such as human rights, raising suspicion of behind closed-door arbitration process keeping human rights abuses outside media coverage, ultimately altering the sense of justice being administered (“Not only must Justice be done; it must also be seen to be done.”[13]) instructs that justice should be seen to be done) and undermining the exemplarity and deterrent effect. Whereas the BHR Arbitration Rules endeavor to address this concern with enhanced transparency provision (BHR Arbitration Rules, sect. IV), said adjustment is limited in scope and subject to tribunal’s discretion. Such provision could incidentally be a further disincentive to consent to BHR arbitration (above 1).

5.        Parties’ asymmetrical legal and financial resources

As an all-inclusive private adjudication mechanism (private dispute resolution process, voluntary essence of arbitration, private individuals acting as arbitrator – secretary to arbitral tribunals, private infrastructure and logistics), arbitration remains fully independent from state apparatus, including on financial issues, and arbitrators lack the imperium necessary to instruct the case independently from the parties. It thus leaves it on the parties to designate the arbitrators, to argue their case in compliance with the agreed arbitration rules, and to advance and assume the entirety of arbitration costs (including arbitrators’ fees and expenses, hearing and expert report costs) without any temporary exemption of arbitration costs and outside any public legal aid mechanism based on the understanding that in line with the nature of the institution the State does not have to facilitate access to courts that do not depend on it[14].

Transposed to BHR disputes, these features would inevitably create serious imbalances between human rights victims and commercial or state entities, ultimately undermining effective access to the remedies BHR arbitration is supposed to be serving. These disparities may arise, inter alia, in relation to mastering arbitration technicalities and strategies, access to legal and financial resources (unlikely (financial) interest of third-party funders in directly supporting even high-profile human right cases), and possibly even finding arbitrators/experts available and willing to sit in sensitive cases. Whilst BHR Arbitration Rules provide a costs-containment provision, its efficiency remains to be tested in cases most likely to be long and complex (BHR Arbitration Rules art. 52).

6.    Inappropriateness of remedies to BHR disputes and limited enforcement means

As the outcome of a private, consent-based proceeding issued by arbitrators appointed by the parties to state the law on a particular dispute, arbitral awards would only dispose of the specific issued referred to the arbitrators (saisine limitée), are final and binding only on the parties (no erga omnes effect)[15], and can be enforced only by the parties bound by the arbitration agreement exclusive any third-party enforcement.

Transposed to BHR disputes, even leaving aside the dubious arbitrability of human rights issues, arbitration most likely constitutes no satisfactory remedy for victims of human rights abuses, with the possibility of monetary compensation but limited prospects of long-term change in business practices. Incidentally, it is submitted that there is a certain paradox in claiming bypassing state judiciary to adjudicate human rights claims and suggesting as an alternative thereto to include such claim in investment or even contract arbitration involving, as a party, that same State. Besides, depending on their procedural status in the arbitration, BHR affected parties might have limited or no means of enforcing the ensuing awards. There are numerous examples showing that human rights enforcement cannot be (solely) left in the hands of private parties and companies, the dilemmas triggered by the current Burma/Myanmar situation being only the latest illustration of a long list of similar controversies.

7.        Conclusions

By way of conclusion, it is argued that there are possible alternative leads to be explored to increase businesses’ exposure to BHR accountability. These would include the opening of existing human rights institutions to include individual v companies claims rather than creating yet new dedicated BHR arbitration institutions, it being unlikely that BHR claims could be part of strictly commercial arbitrations. An upstream option would be to ensure the proper internalization of human rights in international investment agreements (which efficiency would still, possibly unrealistically, lie within the hand of host governments)[16] and to provide for a possible denunciation of international investment agreements intended to perpetuate a system that violates human rights, social rights, indigenous rights, minority rights, and environmental laws. 

____________________________

* Dr Isabelle Fellrath is a Swiss qualified and registered Attorney at Law, holding an LL.M. and Ph.D. from the University of Nottingham, UK. She represents parties in domestic and international arbitral proceedings and before state courts, and serves as an arbitrator with accreditation from various arbitral institutions (Hong Kong International Arbitration Centre, Lagos Court of Arbitration, Kigali International Arbitration Centre, General List of Arbitrators of the Court of Arbitration for Sport, Member of the Swiss Swimming Arbitral Tribunal for aquatic sports). She also has particular expertise in environmental and energy laws. She regularly publishes in her areas of expertise, which she has been teaching for many years at the Universities of Glasgow and Lausanne as well as at the Swiss Federal Institute of Technology in Lausanne. She is counsel at SwissLegal Rouiller & Associés, in Lausanne and Geneva, Switzerland.

[2]    Publications are numerous ; cf. e.g. P.-M. Dupuy, E.-U. Petersmann, and F. Francioni (eds), Human Rights in International Investment Law and Arbitration, 2009; J. Hepburn, Domestic Law in International Investment Arbitration, 2017; P.-M. Dupuy, J. E. Viñuales (eds), Harnessing Foreign Investment to Promote Environmental Protection, Incentives and Safeguards, 2015; I. Feichtner, Markus Krajewski et al. (eds), Human Rights in the Extractive Industries: Transparency, Participation, Resistance, 2019;  L. W. Mouyal, international Investment Law and the Right to Regulate: A human rights perspective, 2016.

[3]    L. Gouiffès, L’arbitrage international propose-t-il un modèle original de justice?, in Recherches sur l’arbitrage en droit international et comparé, 1997, 1 at 49 ; R. David, Arbitration in International Trade, 1985, at 5 as quoted in W.L. Craig, ‘Uses and Abuses of Appeal from Awards’, 4 Arb. Intl (1988) 174, at 179; Premium Nafta Products Ltd (20th Defendant) & Ors v. Fili Shipping Company Ltd & Ors [2007] UKHL 40 (17 October 2007) ¶ 5.

[4]    E.g. United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958, art. IV.

[5]    BHR Arbitration Rules, 2019, Introductory note p. 3.

[6]    Maria Aguinda et al. v. Texaco, Inc., 945 F. Supp. 625 (S.D.N.Y. 1996), 142 F. Supp. 534 (S.D.N.Y. 2001), 93 Civ. 7527, 2000 WL 122143 (S.D.N.Y. Jan. 31, 2000), 303 F.3d 470 (U.S. Court of Appeals for the Second Circuit, Aug. 16, 2002), dismissing liability claim on basis of forum non conveniens, Ecuador, resulting in liability litigation before Ecuadorian courts.

[7]    Texaco’s successor Chevron successfully proceeded against Ecuador before Ecuadorian courts (in vain) and eventually arbitral tribunals operating under UNCITRAL to obtain compensation for various breaches of the terms and conditions of concession agreements; e.g. arbitration award March 30, 2010 (“2.The Respondent has breached Article II(7) of the BIT through the undue delay of the Ecuadorian courts in deciding TexPet’s seven court cases and is liable for the damages to the Claimants resulting therefrom); 3.The Claimants have not committed an abuse of process and are not estopped from bringing the present claim against the Respondent.” and PCA CASE N° 2009-23.

[8]    B. G. Poznanski, The Nature and Extent of an Arbitrator’s Powers in International Commercial Arbitration, 4/3 JIA (1987) 71 at 71.

[9]    E. Gaillard, Legal Theory of International Arbitration, 2010, Chap. 1(C).

[10] Report of the Independent Expert on the promotion of a democratic and equitable international order to the UNGA, 14 July 2015, A/HRC/30/44, ¶15.

[11] Occidental Petroleum Corporation and Occidental Exploration and Production Company v. The Republic of Ecuador, ICSID Case No. ARB/06/11.

[12] Oxford Shipping Co. Ltd v Nippon Yusen Kaisha (Eastern Saga) [1984] 3 All ER 835 (QB, 1984), at 842 ¶ B: “The concept of private arbitration derives simply from the fact that the parties have agreed to submit to arbitration particular disputes arising between them and only between them”; Justice Toohey (dissenting) in Esso/BHP v Plowman case: “[Privacy and confidentiality] are, to a considerable extent, two sides of the same coin”; Justice Colman, in Hassneh Insurance case, at 225-26 ¶ 8: “The disclosure to a third party of such documents [which are created for the purpose of private arbitration hearing] would be almost equivalent to opening the door of the arbitration room to that third party”; L.Y. Fortier, The Occasionally Unwarranted Assumption of Confidentiality, 15/2 Arb. Intl (1999) 131, at 132: “[…] [I]t has been the experience of the members of this Tribunal and their colleagues whom they have consulted who often act as ICC arbitrators that, as a matter of principle, arbitration proceedings have a confidential character which must be respected by everyone who participates in such proceedings […]”.

[13] Lord Chief Justice Hewart in R v Sussex Justices ex parte McCarthy ([1924) 1 KB 256, [1923] All ER Rep 233.

[14] Swiss Supreme Court in ATF 99 Ia 325 g. 3.

[15] Samsung Logix Corporation, Deval Denizeilik VE Ticaret A.S. v Oceantrade Corporation, EW High Court (Queen's Bench Division), 18 October 2007 [2007] EWHC 2372 (Comm).

[16]   Cf. e.g. Netherlands model Investment Agreement of March 22, 2019; further : Ch. Blair, E. Vidak-Gojkovic, M.-A. Meudic-Role, The Medium Is the Message: Establishing a System of Business and Human Rights Through Contract Law and Arbitration, 35/ 4 JIA (2018) 379.

Paper presented at the AfAA 2nd Annual International Arbitration Conference, 15th - 16th April 2021[1]

Summary

“The road to hell is paved with good intentions.” The Hague Rules on BHR Arbitration definitely pursue a noble purpose. Yet, they threaten the arbitration process and its legitimacy. The scarcity and fragmentation of the substantive rules that the arbitral tribunals are amenable to apply to decide on BHR disputes increase the risk of contradicting awards. The specificities of BHR disputes shake the efficiency and effectiveness of arbitration and question the accountability of arbitrators. A lesson should have been learnt from the ISDS debate and Reform. But no, it was irresistible to “tendre le bâton pour se faire battre”. 

*** 

It is certainly not an easy task to be on the side “against” the Hague Rules on Business and Human Rights (“BHR”) Arbitration. It is not an easy task to advocate against “arbitration” among arbitration practitioners, and it is even more difficult when we add the words “Human rights”. Arbitrators strive for the enshrinement of the Rule of Law, which in our view, includes Human Rights. Therefore, advocating against the Hague Rules would entail that I am advocating against the Rule of Law, in a conference aiming to enhance the Rule of Law and the development of arbitration in the African continent. 

Hearing the presentation of my dear colleague and friend Femi Omere, by advocating against the BHR Arbitration Rules, I would be advocating for the Multinational enterprises (“MNEs”), the “new colonisers of the Post-colonial era”, according to many?[2] 

I am the devil incarnate, then. 

Yet, what if we think about the suitability of arbitration in BHR disputes from a different perspective and put things into context: 

1)     what if advocating against the Hague Rules, or more generally the BHR arbitration, is actually to “protect arbitration” and its “perception” by the public at large? 

2)    Is BHR Arbitration (and not only the Hague Rules) not in fact a real threat to the viability of arbitration as a dispute resolution method in matters involving public interests? 

3)    Will BHR Arbitration not most likely increase the campaign against arbitration and give rise to the same criticism that we are witnessing today in Investor State Dispute Settlement (“ISDS”)? 

Any imperfections happening or even the feeling that there are shortcomings in a single BHR arbitration case could shake the credibility of the whole arbitration system and question its legitimacy. 

After all, the reasons which have led to the current ISDS reform and questioning the appropriateness of arbitration to solve Investor State disputes in favour of the creation of a multinational court are present in BHR Arbitration. 

Regarding the ISDS reform, we have heard along the conference about: the “fragmentation of rules”, the “spaghetti bowl”,[3] a term that is very well-placed here. 

That fragmentation, which has led to a strong debate about the effectiveness of the arbitration mechanism and its replacement by a multinational court in ISDS, was at the origin  of contradicting awards and an ensuing lack of predictability and serious doubts about the legitimacy of arbitration in light of the lack of accountability of arbitrators. That fragmentation, contradiction and inconsistency, lack of effectiveness and accountability are the same critics that one can address to BHR Arbitration. 

1-The “Spaghetti Bowl” – The Fragmentation of the Substantive Rules Governing BHR Disputes and the Lack of Predictability and Legal Certainty

The main purpose behind the Hague Rules on BHR Arbitration is to fill the existing gap of unavailable courts because of justiciability or lack of jurisdiction issues, and provide the redress required by the Pillar III of UN Guiding Principles on Business and Human Rights, i.e. the Remediation by MNEs to both victims of human rights violations on the part of companies, and companies themselves in relation to human rights violations carried out by their business parties.[4] 

Therefore, it is legitimate to contend that we are in presence of Premature rules, a Premature remedy that will negatively impact the perception of arbitration. Have we put the cart before the horse? 

Indeed, the rules governing Business and Human Rights are still embryonic. The UN Guiding principles on Business and Human Rights[5] were endorsed by the UN Human Rights Council on 16 June 2011. The principles implement the UN “Protect, Respect and Remedy Framework” developed by the Special Representative of the Secretary-General’s Report on the issue of human rights and transnational corporations and other business enterprises, who endorsed the Guiding principles to his final report to the Human Rights Council[6]  with the aim of “contributing to a socially sustainable globalization”. 

The Guiding Principles include three Pillars, the first sets-out the States’ duty to protect Human Rights; the second, the Corporate’s responsibility to protect Human Rights; and the third, safeguards the “access to remedy”, and by remedy the Principles mean “appropriate and effective”. 

The UNGPs are the outcome of the Millennium Declaration of the UNGA of 8/9/2000; the Adoption of the UN Secretary General First Report on the rule of law and Transitional justice in Conflict and Post-Conflict Societies of 23 August 2004[7]. They were reinforced by the 2012 UNGA Declaration on the rule of law adopted only in 24/9/2012,[8] and the UN Secretary General 2012 Report to the Security Council on the rule of law and transitional justice in conflict and post-conflict societies.[9] 

Since then, we have started to hear more and more about ESG (environment, social and governance) and CSR (corporate social responsibility). More and more practitioners are now becoming aware of ESG and CSR. 

Yet, it is common knowledge that, whereas there is a plethora of rules with regard to Environment, the rules are still embryonic when it comes to Social and Governance. Both MNEs and States are still “learning” in this field, such there is lots of uncertainty and lacunae when it comes to the substantive rules applicable by arbitral tribunals sitting in BHR arbitrations. 

Concerning the “E” for environment, there are more than 1500 climate-change related laws and policies, international, regional, sub-regional and national rules,[10] which, absent harmonization, creates a lot of inconsistency and unclarity, in a matter with lots of extraterritorial ramifications. This inconsistency is increased in a supply chain, where environmental concerns are integrated differently in each of the production units and where internal practices are often conflicting.

When it comes to the S (Social) and the G (governance) and CSR, there is a real lacuna about what these terms actually encompass and what they entail. 

There is very little guidance to businesses about the conduct of human rights due diligence, and how to consider effectively issues of gender, vulnerability and/or marginalization, recognizing the specific challenges that may be faced by indigenous peoples, women, national or ethnic minorities, religious and linguistic minorities, children, persons with disabilities, and migrant workers and their families. 

The other main problem when it comes to substantive rules, is the extraterritorial nature of obligations and rules that come into play in this kind of dispute, such that the inconsistency of awards will be a serious issue, which in our opinion, will inevitably impact the trust in the arbitration mechanism and its perception by the public at large. 

In recent court cases brought by Human Rights victims against the mother company in the seat of its incorporation, we have seen that the fragmentation and unclarity of the standards of duty of care and of the substantive norms have led to inconsistent decisions by the courts of the same country and between national courts.[11] 

If this is the case in State courts, how about arbitration where arbitrators are not bound by only one set of conflict of law rules and the factors of extraterritoriality can be increased with the increase of the number of the parties involved? 

According to Article 46 of the BHR Rules, 

“The arbitral tribunal shall apply the law, rules of law or standards designated by the parties as applicable to the substance of the dispute, or failing such designation, the law or rules of law which it determines to be appropriate.   In all cases, the arbitral tribunal shall decide in accordance with the terms of the applicable agreement(s), if any, and shall take into account any usage of trade applicable to the transaction, including any business and human rights standards or instruments that may have become usages of trade”. 

As explained in the commentary, 

“The use of the complete phrase “law, rules of law or standards” in Article 46(1) intends to provide the parties with the broadest possible flexibility in choosing the normative sources from which the applicable law is drawn, including, for example, industry or supply chain codes of conduct, statutory commitments or regulations from sports-governing bodies or any other relevant (business and) human rights norms which the parties have agreed to apply.  3. The applicable law or rules of law determined by the tribunal under Article 46(2) may include international human rights obligations. Another matter for the tribunal to consider is the potential direct or indirect relevance of international human rights obligations of any States involved in the dispute either as parties or as the State of nationality of any of the parties.”

Putting Article 46 into context, given the fragmented legal framework, the arbitrators’ task will definitely not be the easiest, especially where there was no choice of law by the parties. 

Added to that, the Commentary of Article 12 of the UNGPs provides that, “the responsibility of business enterprises to respect human rights is distinct from issues of legal liability and enforcement, which remain defined largely by national law provisions in relevant jurisdictions”. 

In these circumstances, how would an arbitral tribunal determine such personal liability and whether or not it has been engaged in abstract of the laws applicable to legal liability and enforcement, if any? 

The Urbaser v. Argentina Award of 2016 which involved the human right to water and sanitation and where the UNGPs have been invoked is a stark example of the challenges faced by arbitral tribunals in this type of disputes. The Tribunal emphasised that Argentina did not provide any legal ground entitling individuals to claim compensation for the violation of their right to water, nor that such violation entails a duty of reparation under international law with the effect that the concerned individuals obtain compensation for the alleged harm. 

In this case, the Arbitral Tribunal solemnly declared that, “in light of this more recent development [CSR], it can no longer be admitted that companies operating internationally are immune from becoming subjects of international law. On the other hand, even though several initiatives undertaken at the international scene are seriously targeting corporations' human rights conduct, they are not, on their own, sufficient to oblige corporations to put their policies in line with human rights law. The focus must be, therefore, on contextualizing a corporation’s specific activities as they relate to the human right at issue in order to determine whether any international law obligations attach to the non-State individual.”[12] 

Moreover, very complex issues of conflict of laws will arise in disputes involving supply chains which involve parties from multiple jurisdictions, and thus, include domestic measures involving extraterritorial obligations. 

Aware of the complexities of supply chains and business structures, the Commentary of Article 17 of the UNGPs clarifies that “where business enterprises have large numbers of entities in their value chains it may be unreasonably difficult to conduct due diligence for adverse human rights impacts across them all. If so, business enterprises should identify general areas where the risk of adverse human rights impacts is most significant, whether due to certain suppliers’ or clients’ operating context, the particular operations, products or services involved, or other relevant considerations, and prioritize these for human rights due diligence.”[13] 

This leads us to the following question: Can an arbitral tribunal appreciate whether human rights due diligence requirements have been met in a supply chain in a vacuum, or on the basis of Article 17 only, without relying on national legislations (if any)? and if the latter do exist, which ones? 

Furthermore, although not at the origin of the Human Rights adverse impact, a business may find itself “complicit” in the acts of another business “if they are seen to benefit from an abuse committed by that party”. It will be a matter for national legislations on civil and criminal liability to deal with the legal liability according to the UNGPs commentary.[14] Yet, in the meantime, until such legislations are enacted, how can an arbitral tribunal determine such complicity? On which set of rules? Based on which criteria? 

Finally, which rules to apply in case of gross human rights abuses in conflict-affected and high-risk areas?   

These are not mere hypotheses as may be evidenced by existing material addressing serious violations of Human Rights such as “The OECD Due Diligence Guidance for Responsible Mineral Supply Chains”[15] and “The Lusaka Declaration of the ICGLR (International Conference of the Great Lakes Region)”.[16] 

Accordingly, there is an increased likelihood of contradicting awards, which leads to the second criticism that can be raised against BHR Arbitration: the lack of effectiveness. 

2-   The Lack of Effectiveness and Efficiency of BHR Arbitration 

I will not address the topic from the perspective of effectiveness of the award, which involves issues of arbitrability, commerciality, public policy, and class actions. I will address it from the effectiveness of the arbitration process itself. 

To advocate for the BHR Hague Rules, my learned colleague Clémence Assou has mentioned that “arbitration provides ‘Innovative procedures’, like site visits”. 

This, however, raises the following questions: 

-        How would experts be able to access conflicted zones to investigate? 

-      What is the likelihood for arbitrators to be willing or able to travel to the conflicted zone for appreciation of evidence?

Additionally, the UNGPs adopt the principle of proportionality concerning the means through which businesses meet their responsibilities to respect Human Rights, in consideration of their size, the sector of their activities and the severity of impacts of their activities on Human Rights, amongst others. The “Severity of impacts will be judged by their scale, scope and irremediable character.” (Commentary of Art. 14). 

Yet, how would arbitrators and experts investigate the severity of impacts of the activities on Human Rights when they need visas to get into the country where the violations are taking place? 

Moreover, coming to the costs of arbitration, “the BHR Arbitration Rules are not drafted from a rights holder-claimant’s perspective. […] The Rules’ default position on costs, for instance, claimants bear their and the defendant company’s legal costs, a possibility that would likely deter legitimate claims, especially if defendant companies are expected to employ high-priced legal counsel.”[17] 

Finally, one may wonder why a Corporate would insert an arbitration clause instead of a choice of court clause recognising the jurisdiction of the courts of its place of incorporation?  As pointed-out by learned Scholars, “arbitration will be agreed to when it has advantages for the corporate defendant. The flipside is that, for victim claimants, arbitration may pose risks that litigation in other forums does not. Prospective claimants may not be aware of these benefits to companies, and risks to claimants, when they agree to arbitrate.”[18] 

This points us back to the issue of informed decision by the stakeholders and the fairness and effectiveness of the arbitration process in BHR disputes. 

3-   The Lack of Accountability and The Lack of Effectiveness 

Article 19 provides for Multiparty arbitration including class actions and Joinder under the two following scenarios: 

-        parties or third-party beneficiaries of the underlying legal instrument that includes the relevant arbitration clause; and 

-    that of parties to, or third-party beneficiaries of, the arbitration agreement itself.

Firstly, regarding Class actions and the arbitrators' powers, how will arbitrators deal with Class Actions and actually, can they? is the arbitration system tailored in the first place to deal with them? Class actions in BHR Arbitration give rise to the same issues and debate about class actions in arbitration in general, such as issues of consent, arbitrability and management and conduct of the proceedings with fairness, efficiency and effectiveness. 

Secondly, BHR Arbitration also thrusts into the limelight issues of accountability of arbitrators and effectiveness of the arbitration process when the host State has the same interests as the MNE and all reasons to thwart the arbitration proceedings. 

Would the State seriously grant visas to the arbitrators and experts to conduct site visits? Can we really expect the enforceability of the award in the host State, if the arbitrators decide in favour of the victims?

Added to that, what if the State intervenes in the proceedings for the purpose of supporting the investor and not the victims of Human Rights violations? 

What if the State invokes its right to regulate and thus its sovereign power to sacrifice certain rights, of a minority group for instance, in favour of the more general public interest? Article 1 of the Charter of Economic Rights and Duties of States enshrines, every State’s “sovereign and inalienable right to choose its economic system as well as its political, social and cultural systems in accordance with the will of its people, without outside interference, coercion or threat in any form whatsoever”. 

Besides serious issues of jurisdiction, does an arbitral tribunal have the power, the tools, and even more, the legitimacy to apply the proportionality test in that case? Can it seriously appreciate and decide whether the State complied with the proportionality test requirements when it sacrificed the rights of minorities for the benefit of a more crucial interest of the more general public? 

Finally, and more generally, are three, five or seven individuals well-armed and have the necessary tools to assess abuses and violations of Human Rights? 

Conclusion

The BHR Arbitration Rules are both premature and “out of synch”. 

One may wonder if, instead of spending resources to pay a panel of arbitrators who lack any accountability, would it not be more appropriate to use these resources to adjust the court system and rules and correct the pending deficiencies? 

After all, Africa is not a rich continent, and it would be more beneficial both for African States and victims to use spent resources in BHR Arbitration (with or without Third-Party Funding) to foster the court system of these countries and enhance the Rule of Law. Perhaps, enhancing the rule of law in Africa through enactment of regulations and building capacity of African judges would be more beneficial for the victims of Human Rights. 

The by-default rules, opt-out rules on transparency and the rules on expedited procedures require an “informed decision”. One may doubt that today, any of the stakeholders, including the MNEs themselves, have enough information of any kind to make an informed decision. 

Finally, beyond the issue of perception of arbitration, with all the by-default rules added by the Hague Rules to adapt the arbitration system to the specificities of BHR disputes, are we actually still talking about the same thing?

____________________

* Dr Sally El Sawah is Founder and Principal of El Sawah Law | Paris and AfAA Deputy Secretary General. She is Attorney-At-Law at Paris and Cairo Bar Associations and Registered Foreign Lawyer (England & Wales). She holds an LL.M. and a Ph.D. in International Law from Sorbonne University and a Bachelor of Laws from Cairo and Sorbonne Universities.

[2] Anna Berti Suman, “Human rights violations in the ChevronTexaco case, Ecuador: Cultural genocide?” Global Campus Human Rights Journal 2017, p 259. Regarding the Chevron/Ecuador saga, the author explained that ‘‘the core of the discussion is represented by the assertion that the Chevron case could be regarded as a form of colonisation, cultural genocide and even a crime against humanity. This reflection is rooted in the analysis of international instruments enacted in defence of indigenous peoples’ rights.’’, p. 261.

[3] Patience Okala used this term in her contribution on “Current Initiatives and Proposals on ISDS Reform at Multilateral Levels”.

[4] Bruno Simma and others, “International Arbitration of Business and Human Rights Disputes- Elements For Consideration In Draft Arbitral Rules, Model Clauses, And Other Aspects Of The Arbitral Process, Prepared by the Drafting Team of the Hague Rules on Business and Human Rights Arbitration”, 2018, p. 3, <https://www.cilc.nl/cms/wp-content/uploads/2019/01/Elements-Paper_INTERNATIONAL-ARBITRATION-OF-BUSINESS-AND-HUMAN-RIGHTS-DISPUTE.font12.pdf> .

[5] <https://www.ohchr.org/documents/publications/guidingprinciplesbusinesshr_en.pdf>.

[6] A/HRC/17/31. 

[7] Report of the Secretary-General, UN Doc S/2004/616 (2004), 23 August 2004.

[8] A/RES/67/1. In principle, the UN Declaration which underlies the interrelation between the rule of law and sustainable development is non-binding.

[9] S/2011/634.

[10] Grantham Research Institute on Climate Change and the Environment, “Global trends in climate change legislation and litigation: 2018 snapshot”, <https://www.lse.ac.uk/GranthamInstitute/wp-content/uploads/2018/04/Global-trends-in-climate-change-legislation-and-litigation-2018-snapshot-3.pdf>.

[11] Vedanta Resources Plc and Konkola Copper Mines Plc (Appellants) v Lungowe and Ors. (Respondents) [2019] UKSC 20; Ekaterina Aristova, Tort Litigation against Transnational Corporations in the English Courts: The Challenge of Jurisdiction, Utrecht Law Review Volume 14, Issue 2, 2018, p 7; Okpabi & Others v Royal Dutch Shell Plc & Another [2021] UKSC 3 ; Wiwa v. Royal Dutch Petroleum Co., Wiwa v. Anderson, Wiwa v. Shell Petroleum Development Company (3 cases before US Court for the Southern District of New York), < https://ccrjustice.org/home/what-we-do/our-cases/wiwa-et-al-v-royal-dutch-petroleum-et-al>.

[12] Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. The Argentine Republic, ICSID Case No. ARB/07/26, 8 Dec. 2016, para. 1195. (Emphasis added).

[13] Emphasis added.

[14] Commentary of Article 17 of the UNGPs.

[15] The 3rd Edition of the OECD Due Diligence Guidance was published in April 2016, <OECD (2016), OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas: Third Edition, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264252479-en>.

[16] The Lusaka Declaration on Illegal Exploitation of Natural Resources was signed by 11 Heads of State of the International Conference on the Great Lakes Region (ICGLR) in December 2010. The signatories are Angola, Burundi, Central African Republic, Democratic Republic of Congo, Kenya, Rwanda, Sudan, Tanzania, Uganda. The Declaration provides that “11. Call on the Multinational Companies to put an end to unfair protectionism and working with illegal or criminal organized groups in the region to the detriment of security in the region”. < https://www.oecd.org/daf/inv/mne/47143500.pdf>.

[17] Lisa E. Sachs, Lise Johnson, Kaitlin Y. Cordes, Jesse Coleman & Brooke Güven, “The Business and Human Rights Arbitration Rule Project: Falling Short of its Access to Justice Objectives”, (2019), <https://scholarship.law.columbia.edu/sustainable_investment_staffpubs/152>.

[18] Ibid.

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

Executive Summary

Incorporating investor obligations in international investment agreements may serve to achieve a more equitable balance as between the interests of host States and investors in international investment law.  This approach has gained considerable traction in Africa.  Now, as the project for the African Continental Free Trade Area advances, the question is not whether its investment protocol should contain investor obligations but rather how such obligations might be adopted in the most impactful manner.  Beginning from the framework of prior instruments culminating in the draft Pan-African Investment Code of 2016, this article proposes the inclusion of enforceable investor obligations which may be balanced against better-defined investor protections in order to afford greater legal certainty paired with meaningful legal remedy, and thereby to foster expansion of responsible intracontinental investment in Africa.

Investor Obligations in Africa to Date

Identifying an optimal means of balancing the interests of the investor and the host State requires understanding their true interests.  While the interest of the investor is to realize (and often to repatriate) a profit under rule of law, the interest of the host State is to enjoy benefits of capital inflows while free from harm.  In order to balance these interests, investment agreements may establish not only rights of investors but also their obligations.  While perhaps considered novel in some corners of the earth, investor obligations have a rich history in Africa.[2]   

Through the nearly five years of the Pan-African Investment Code’s existence, it is by now well known that the Code is declared non-binding.  Further than this, it would not itself textually establish arbitral jurisdiction to hear investor-State disputes even if it were binding.  Rather, the Code permissively sets out that the African States may consent to such sort of arbitral jurisdiction if they so wish.[3]  It is thus little more than a truism, a simple affirmation of an existing and inherent sovereign right.   

Looking beyond consent and jurisdiction to the merits, to the substantive rights granted and the obligations that would be imposed under the model of the Code, what one finds is, as measured by the paradigm of global treaty practice over the past half-century, quite extraordinary.  That paradigm has been the one-way street, a street in which substantive protections (substantive rights) flow in favor of the investor only.  But when one looks to the Code, one sees two things, in rather stark relief.  

First, while certain investment protections have been preserved (including the classic protection against expropriation), others which investors have come to expect as a matter of right, first and foremost the guarantee of fair and equitable treatment (“FET”) as well as the guarantee of full protection and security (“FPS”), are nowhere to be found.  It is difficult to ignore the irony that by this choice, the African States would deny to investors of their African counterparties guarantees which have been afforded to Northern investors essentially since the time of independence (and which would continue to be afforded to those investors in the absence of any parallel effort to alter or amend still-extant North-South treaties).  In a rather perverse manner, it is almost as if intra-African investors would be made to suffer for the African States’ dissatisfaction with a generation’s worth of arbitration results originating in the North and with which they have had nothing to do. 

Second, building upon the tradition of the regional economic communities (“RECs”) and other recent intra-African investment instruments,[4] the Code contains investor obligations, thus marking a definitive end to the one-way street.  The provisions on investor obligations are perhaps less than fully formulated, but they are more than merely aspirational or preambulatory: they are conceived to be hard investor obligations.[5]  In a certain sense, here, the irony deepens.  Northern investors may continue to enjoy FET and FPS while being free of any countervailing control on their conduct at international law.  Meanwhile, intra-African investors are denied FET and FPS and, not only this, they are saddled with burdensome obligations (or so the argument might go).  It has been written that this result is “not a function of animus” but rather “doctrinal confusion.”[6]  What is certain is that as measured by these two features, the Code marks a fairly dramatic swing of the pendulum: reduced investor protections paired with inclusion of investor obligations. 

This result in the Code is, in large part, a function of the multilateral negotiation dynamic.  It may be recalled that as the modern era of international investment law was first being forged in the decade after the Second World War, the multilateral 1959 Draft Convention on Investments Abroad (the so-called Abs-Shawcross initiative) would fail.[7]  Meanwhile, the first bilateral investment treaty (the renowned Germany-West Pakistan treaty) was markedly more successful in setting the tone; it was concluded in that same year.[8]  It seems evident that the enduring paradigm of bilateral instruments may be explained by elementary negotiation theory: States with greater bargaining power (or the perception or illusion thereof) were able to gain more favorable terms vis-à-vis a single negotiating partner.[9]  More powerful States thus preferred this result as contrasted to the less advantageous lowest common denominator which would inevitably emerge in a more rigorous multilateral negotiation.[10]  Put more bluntly, capital exporting States were able to gain more favorable terms vis-à-vis capital importing States by playing them one-on-one. 

In an illustration of the enduring power of this bilateral paradigm, four decades after the demise of the Abs-Shawcross initiative, an initiative by the OECD for a Multilateral Agreement on Investment would similarly meet with failure when negotiations were discontinued in the late 1990s.[11]  Looking forward another twenty years, it is evident that this multilateral negotiation dynamic persists in the present pan-African investment initiatives.  The instrument establishing the Continental Free Trade Area is, after all, not merely a multilateral instrument but a sort of mega-multilateral instrument comprising all the African States minus Eritrea. 

The result that has been reached in the Code may ultimately contravene the very purpose of that insrument itself, as traceable to venerable prior African instruments.  The establishment of the Organisation of African Unity in 1963 may be said to formally mark the birth of the pan-African project.[12]  By 1980, when the Lagos Plan of Action for the Economic Development of Africa was adopted, the States clearly indicated their commitment to regional integration.[13]  This agenda was furthered in the Treaty Establishing the African Economic Community of 1991,[14] following which many RECs were established.  A primary purpose of these instruments was to promote intra-African trade and investment and thereby propel a balanced economic development.[15]  The Code was, by its own terms, aimed squarely toward this end.[16] 

To tie these strands together: the swinging of the pendulum that is seen in the Code reflects an element of backlash against the status quo of the investment law régime, dissatisfaction with the investment law jurisprudence, to be sure.  But this result portends deep dissatisfaction paired with the reality of the mega-multilateral negotiation dynamic.  We have today vastly uneven levels of economic development and capital accumulation across and within the very many African States.  This reality leads to competing objectives and interests in the crafting of a pan-African brand of international investment law.

The bad news is that a poor historical record in the seeking of multilateral investment agreements now forms the backdrop against which the investment protocol initiative unfolds.  The good news is that if we honestly acknowledge and confront this challenge, there may be a solution that presents itself. 

The Prospect of Balance in the Investment Protocol of the African Continental Free Trade Area

The Agreement Establishing the African Continental Free Trade Area came into effect on 30 May 2019.[17]  Within a July 2019 joint report of the United Nations Economic Commission for Africa, the African Union, the African Development Bank, and the United Nations Commission on Trade and Development entitled Assessing Regional Integration in Africa IX (“ARIA IX”), the authors offer four pillars of a foundation for its investment protocol.[18]  These four pillars are now adopted as underpinning the forthcoming investment protocol negotiations, including a pillar of Investor Obligations:

 

United Nations Economic Commission for Africa et al, Assessing Regional Integration in Africa IX (2019) 187

One also sees in this depiction an Investment Protection pillar, including reference to FET (or a possible alternative thereto).  Further, one sees a first pillar of Investment Promotion and Facilitation (which items are often foremost in investors’ minds at the time of making an investment) as well as a final pillar of State Commitments (which rightfully calls upon the States to do their part in achieving the goals of sustainable development). 

Each of these pillars carries the potentiality of transformative power that may be unleashed to expand responsible intra-African investment.  The focus for purposes of the present article is upon the second and third pillars, for the fundamental suggestion is that perhaps the pathway forward in first reaching a mutually agreeable instrument and thereby advancing intra-African investment lies in seeking an optimal point of balance as between investor rights and obligations.  This objective requires going beyond merely setting out in a meaningful way the host State’s right to regulate.[19]  It rather requires hard investor obligations that are actually justiciable in the investment arbitration forum.[20]

As may be seen in the Code, Africa has now spoken in favor of the enfranchisement of investor obligations.  This approach is also gaining acknowledgement in the context of other fora, including more universal efforts for the reform of international investment law.  Thus, the UNCITRAL Secretariat has recorded that its Working Group III for Investor-State Dispute Settlement Reform “may wish to consider formulating provisions on investor obligations which would form the basis for a State’s counterclaims” and that such obligations “may relate to the protection of human rights and the environment, compliance with domestic law, measures against corruption and the promotion of sustainable development.”[21]  The Institut de Droit International has, for its part, recorded by resolution that “[b]oth the State and the investor are equally entitled to submit a claim in relation to an investment to a tribunal, subject to the terms of the instrument of consent, interpreted in accordance with the principle of the equality of the parties,” this latter being “a fundamental element of the rule of law that ensures a fair system of adjudication” and, as such, “a general principle of law applicable to the procedure of international courts and tribunals.”[22]  Within the very most recent workplan document of the Working Group III, the point is affirmed once again, it being noted that its scope of works shall include “consideration of new rules with respect to… counterclaims.”[23] 

Having witnessed the pendulum swing of the Code, reduced investor protections and expanded investor obligations, one manner of propelling the investment protocol of the Continental Free Trade Area may be to let the pendulum fall to the center of gravity, to seek a truly fair and equitable balance of investor rights and obligations. 

On investor protections, reaching back to FET, it might be re-incorporated in a manner so as to afford greater legal certainty than one presently enjoys at the status quo.  On this point, Africa faces a vast spectrum of options, perhaps beginning from a simple express prescription that FET is to be equated to the minimum standard of treatment of aliens at customary international law.  This has been done in the context of, for example, the 2001 note of interpretation rendered by NAFTA’s Free Trade Commission and intended thereafter to be binding in disputes under NAFTA.[24]  The formulation was then adopted in the 2004 US model treaty and maintained in the 2012 model treaty: 

“1. Each Party shall accord to covered investments treatment in accordance with customary international law, including fair and equitable treatment and full protection and security. 

2. For greater certainty, paragraph 1 prescribes the customary international law minimum standard of treatment of aliens as the minimum standard of treatment to be afforded to covered investments. The concepts of ‘fair and equitable treatment’ and ‘full protection and security’ do not require treatment in addition to or beyond that which is required by that standard, and do not create additional substantive rights. The obligation in paragraph 1 to provide: 

(a) ‘fair and equitable treatment’ includes the obligation not to deny justice in criminal, civil, or administrative adjudicatory proceedings in accordance with the principle of due process embodied in the principal legal systems of the world; and 

(b) ‘full protection and security’ requires each Party to provide the level of police protection required under customary international law.”[25]  

In 2007, the drafters of the Common Market for Eastern and Southern Africa investment agreement employed a perhaps functionally equivalent formulation: 

“1. Member States shall accord fair and equitable treatment to COMESA investors and their investments, in accordance with customary international law. Fair and equitable treatment includes the obligation not to deny justice in criminal, civil, or administrative adjudicatory proceedings in accordance with the principle of due process embodied in the principal legal systems of the world. 

2. Paragraph 1 of this Article prescribes the customary international law minimum standard of treatment of aliens as the minimum standard of treatment to be afforded to covered investments and does not require treatment in addition to or beyond what is required by that standard.”[26] 

The drafters added however a further provision which, while commendable for its sensitivity to varying host State conditions, may not assist in the endeavor to achieve greater legal certainty: 

“3. For greater certainty, Member States understand that different Member States have different forms of administrative, legislative and judicial systems and that Member States at different levels of development may not achieve the same standards at the same time. Paragraphs 1 and 2 of this Article do not establish a single international standard in this context.”[27] 

Within the 2012 Southern African Development Community Model Bilateral Investment Treaty, a note by the drafting committee records as follows: 

“The fair and equitable treatment provision is, again, a highly controversial provision.  The Drafting Committee recommended against its inclusion in a treaty due to very broad interpretations in a number of arbitral decisions.  It requested the inclusion of an alternative formulation of a provision on ‘Fair Administrative Treatment.’”[28] 

Two options are then set out.  The first reads that “[e]ach State Party shall accord to Investments or Investors of the other State Party fair and equitable treatment in accordance with customary international law on the treatment of aliens,”[29] accompanied by the following specification: “For greater certainty, [the standard] requires the demonstration of an act or actions by the government that are an outrage, in bad faith, a wilful neglect of duty or an insufficiency so far short of international standards that every reasonable and impartial person would readily recognize its insufficiency.”[30]  With these words, the drafters have captured essentially verbatim one of the most oft-quoted articulations of the deferential minimum standard in international jurisprudence, dating from the Neer Claim of nearly one hundred years ago.[31] 

The precise contours of the minimum standard remain something less than fully demarcated, and this threshold remains oft-litigated even today.  As such, even formulations such as these may not be fully effective in removing the indeterminacy that is characteristic of the standard nor in resolving the feature of most strident criticism. 

A further option is to trend toward an independent standard detached from the international minimum, a more highly particularized prescription which might spell out a more precise meaning.  The alternative formulation presented within the Southern African Development Community model treaty offers that “[t]he State Parties shall ensure that their administrative, legislative, and judicial processes do not operate in manner that is arbitrary or that denies administrative and procedural [justice] [due process] to investors of the other State Party or their investments [taking into consideration the level of development of the State Party.]”[32]  Meanwhile in, for example, the Comprehensive Economic and Trade Agreement between Canada and the European Union and its member States, the parties have ascribed the following content to the FET standard: 

“1. Each Party shall accord in its territory to covered investments of the other Party and to investors with respect to their covered investments fair and equitable treatment and full protection and security in accordance with paragraphs 2 through 7.

2. A Party breaches the obligation of fair and equitable treatment referenced in paragraph 1 if a measure or series of measures constitutes:

(a) denial of justice in criminal, civil or administrative proceedings;

(b) fundamental breach of due process, including a fundamental breach of transparency, in judicial and administrative proceedings;

(c) manifest arbitrariness;

(d) targeted discrimination on manifestly wrongful grounds, such as gender, race or religious belief;

(e) abusive treatment of investors, such as coercion, duress and harassment; or

(f) a breach of any further elements of the fair and equitable treatment obligation adopted by the Parties in accordance with paragraph 3 of this Article.

3. The Parties shall regularly, or upon request of a Party, review the content of the obligation to provide fair and equitable treatment. The Committee on Services and Investment, established under Article 26.2.1(b) (Specialised committees), may develop recommendations in this regard and submit them to the CETA Joint Committee for decision.

4. When applying the above fair and equitable treatment obligation, the Tribunal may take into account whether a Party made a specific representation to an investor to induce a covered investment, that created a legitimate expectation, and upon which the investor relied in deciding to make or maintain the covered investment, but that the Party subsequently frustrated.

5. For greater certainty, ‘full protection and security’ refers to the Party’s obligations relating to the physical security of investors and covered investments.

6. For greater certainty, a breach of another provision of this Agreement, or of a separate international agreement does not establish a breach of this Article.

7. For greater certainty, the fact that a measure breaches domestic law does not, in and of itself, establish a breach of this Article. In order to ascertain whether the measure breaches this Article, the Tribunal must consider whether a Party has acted inconsistently with the obligations in paragraph 1.”[33] 

The States may now ascribe to their chosen treaty standards of investment protection any meaning they might wish in a forthcoming Africanization of international investment law. 

Enforcing Investor Obligations 

As for investor obligations, numerous of the substantive bases identified in the ARIA IX report are eminently viable candidates for inclusion, including in respect of human rights, labor rights, environmental rights, indigenous peoples’ rights and, of course, anti-corruption.[34]  The proposed framework for balancing investor rights and States’ interests becomes meaningful where the investment protocol contains a mechanism to enforce the chosen investor obligations.  On the issue of how to achieve jurisdiction over the investor in the arbitral forum, the authors of the ARIA IX report offer the following: 

“Investor obligations 

The international investment regime historically imposed obligations only on host States, not on private investors (Paulsson, 1995). However, as underscored by the PAIC, IIAs may serve as vehicles for investor rights and also for their obligations, which could rebalance the regime. Investor obligations can be a source for claims against transgressing investors and for counterclaims by defending States. The right to initiate proceeding may be bestowed upon the [host] State, its nationals or both (Amado, Kern and Rodriguez, 2017).”[35] 

In similar vein, the UNCITRAL Secretariat has recorded that its Working Group III for Investor-State Dispute Settlement Reform “may wish to consider whether the framework for counterclaims by respondent States could be expanded to allow for claims by third parties against investors.”[36]  Where desired, enhancements may be applied to the model of presently existing texts carrying investor obligations (such as in the RECs and the Pan-African Investment Code) to conclusively achieve obligations that are justiciable in international law.  

In a first option, a contingent consent clause may be entered into the investment protocol, such that each host State’s standing offer of arbitration in respect of the investment protections is no longer unconditional but is rather contingent upon the investor giving his own consent to arbitration in respect of the chosen investor obligations:[37]

In a second option, jurisdiction over the investor may be obtained by direct effect of the investment protocol, with each State party acting to submit its own investor-nationals to the jurisdiction of an international tribunal by the simple fact of their effecting a cross-border investment, without need of their express consent, in a form of arbitration without privity:[38] 

After all, in one of the very first treaty instruments to establish investor-State arbitration (and the first to confer jurisdiction upon the International Centre for Settlement of Investment Disputes), the Netherlands and Indonesia accorded in 1968 that “[t]he Contracting Party in the territory of which a national of the other Contracting Party makes or intends to make an investment, shall assent to any demand on the part of such national and any such national shall comply with any request of the former Contracting Party, to submit, for conciliation or arbitration, to [ICSID] any dispute that may arise in connection with the investment.”[39]

Conclusion

In conclusion, we propose a fair and equitable balance of investor rights plus countervailing investor obligations in international investment law.  It has now been recognized that adoption of investor obligations is the right thing to do; in Africa, this debate is over.  Further than this, in perhaps a rare instance, the normative motivation to do the right thing coincides with present practicality, for in this manner might one find the point of optimization and balance that may be acceptable to all.  As a policy matter, such offers the viable pathway forward in negotiation of a mega-multilateral instrument with diverse capital importing and exporting interests present, both across and within the very many African States.  At this time when the whole world casts about for a suitable model in the reform of international investment law, and at this time where we have placed our planet in peril, perhaps Africa might show the way by ensuring protections against true abuse of investors while also imposing hard investor obligations that will nurture the very most responsible business conduct, and thereby deliver what is truly a protocol on sustainable investment for Africa.

_____________________

[2] Long prior to the emergence of the Pan-African Investment Code, investor obligations were seen in numerous instruments of the various regional economic communities.  Early traces of investor obligations may be found in the 1980 Unified Agreement for the Investment of Arab Capital in the Arab States and the 1981 Agreement on Promotion, Protection and Guarantee of Investments Among Member States of the Organization of the Islamic Conference, to which some half of the States party are African.  See Unified Agreement for the Investment of Arab Capital in the Arab States, 1980, available at https://investmentpolicy.unctad.org/international-investment-agreements/treaty-files/2394/download and Agreement on Promotion, Protection and Guarantee of Investments Among Member States of the Organization of the Islamic Conference, 1981, available at https://investmentpolicy.unctad.org/international-investment-agreements/treaty-files/2399/download.  The 2006 Southern African Development Community Protocol on Finance and Investment requires investors to abide by the laws, regulations, administrative guidelines and policies of the host State.  See Southern African Development Community Protocol on Finance and Investment, 2006, available at https://investmentpolicy.unctad.org/international-investment-agreements/treaty-files/2730/download.  The 2007 Investment Agreement for the Common Market for Eastern and Southern Africa similarly requires investors to comply with all applicable domestic measures while expressly allowing for counterclaims by the host State (though it has never entered into force).  See Investment Agreement for the Common Market for Eastern and Southern Africa, 2007, available at https://investmentpolicy.unctad.org/international-investment-agreements/treaty-files/3092/download.  A 2008 Supplementary Act of the Economic Community of West African States introduces elements including investors’ obligations to conduct environmental and social impact assessments and to observe labor, human rights and corporate governance standards while expressly allowing the host State to raise a counterclaim or to initiate a unilateral claim opposable to the investor.  See Supplementary Act of the Economic Community of West African States, 2008, available at https://investmentpolicy.unctad.org/international-investment-agreements/treaty-files/3266/download.  These various provisions on investor obligations, while perhaps under-operationalized to date, are unmistakably present.

[3] Draft Pan-African Investment Code, December 2016, Article 42, available at https://au.int/sites/default/files/documents/32844-doc-draft_pan-african_investment_code_december_2016_en.pdf.

[4] See note 2 supra; see also, e.g., Reciprocal Investment Promotion and Protection Agreement Between the Government of the Kingdom of Morocco and the Government of the Federal Republic of Nigeria, 2016, available at https://investmentpolicy.unctad.org/international-investment-agreements/treaty-files/5409/download.

[5] Draft Pan-African Investment Code, December 2016, Articles 19-24, available at https://au.int/sites/default/files/documents/32844-doc-draft_pan-african_investment_code_december_2016_en.pdf.

[6] Won L. Kidane, Contemporary International Investment Law Trends and Africa’s Dilemmas in the Draft Pan-African Investment Code, The Geo. Wash. Int’l L. Rev. (2018) Vol. 50, 578.

[7] Draft Convention on Investments Abroad (Abs-Shawcross Draft Convention), 1959, available at https://www.international-arbitration-attorney.com/wp-content/uploads/137-volume-5.pdf.

[8] Treaty Between Federal Republic of Germany and Pakistan, 1959, available at https://investmentpolicy.unctad.org/international-investment-agreements/treaty-files/1387/download.

[9] See, e.g., M. Sornarajah, The International Law on Foreign Investment (Cambridge University Press, 3rd ed, 2010) 177.

[10] For a recent example of what may nonetheless be a significant success story in the domain of multilateral investment agreements, see Comprehensive and Progressive Agreement for Trans-Pacific Partnership, 2018, available at https://www.dfat.gov.au/sites/default/files/tpp-11-treaty-text.pdf. See also the China-led Regional Comprehensive Economic Partnership Agreement, 2020, available at https://investmentpolicy.unctad.org/international-investment-agreements/treaty-files/6032/download.  

[11] OECD, Draft Multilateral Agreement on Investment, 1995, available at https://www.oecd.org/investment/internationalinvestmentagreements/multilateralagreementoninvestment.htm.

[12] Organisation of African Unity Charter, 1963, available at https://au.int/sites/default/files/treaties/7759-file-oau_charter_1963.pdf.

[13] Lagos Plan of Action for the Economic Development of Africa 1980-2000, Organisation of African Unity, 1980, available at https://www.uneca.org/itca/ariportal/docs/lagos_plan.pdf.

[14] Treaty Establishing the African Economic Community (with Protocol dated 2 March 2001), signed on 3 June 1991 (entered into force on 12 May 1994), available at https://treaties.un.org/doc/Publication/UNTS/No%20Volume/55375/Part/I-55375-0800000280526ec1.pdf. 

[15] United Nations Economic Commission for Africa, How African countries are boosting intra-African investment, with a view to sharing best practices among member States (2017) 3.

[16] The Code, in its preamble, states that the member States recognize the “importance of trade and investments for the growth and development of Africa” and desire to “promote an attractive investment climate and expand trade and investment.”  Draft Pan-African Investment Code, December 2016, Preamble, available at https://au.int/sites/default/files/documents/32844-doc-draft_pan-african_investment_code_december_2016_en.pdf.  The protections and obligations that the Code extends are to African investors, and the presumed host states are the African states.

[17] Agreement Establishing the African Continental Free Trade Area, 2019, available at https://au.int/sites/default/files/treaties/36437-treaty-consolidated_text_on_cfta_-_en.pdf.

[18] United Nations Economic Commission for Africa et al, Assessing Regional Integration in Africa IX (2019) 187.

[19] On the right to regulate, see, e.g., Talkmore Chidede, The Right to Regulate in Africa’s International Investment Law Regime, Oregon Rev. of Int’l Law (2019) Vol. 20.

[20] For a fuller argument in favor of this proposition, see JD Amado, JS Kern and MD Rodriguez, Arbitrating the Conduct of International Investors (Cambridge University Press, 2018).

[21] Possible Reform of Investor-State Dispute Settlement (ISDS): Multiple Proceedings and Counterclaims, UN Doc. No. A/CN.9/WG.III/WP.193, dated 22 January 2020, available at https://undocs.org/en/A/CN.9/WG.III/WP.193.

[22] Resolution on Equality of Parties before International Investment Tribunals, Institut de Droit International, dated 31 August 2019, Preamble and Art. 2(1), available at https://www.idi-iil.org/app/uploads/2019/09/18-RESEN.pdf.

[23] Workplan to implement investor-State dispute settlement (ISDS) reform and resource requirements, UN Doc. No. A/CN.9/WG.III/WP.206, dated 21 March 2021, para. 9, available at http://undocs.org/en/A/CN.9/WG.III/WP.206.

[24] North American Free Trade Agreement, Notes of Interpretation of Certain Chapter 11 Provisions, NAFTA Free Trade Commission, 2001, available at http://www.sice.oas.org/tpd/nafta/commission/ch11understanding_e.asp.

[25] 2012 US Model Bilateral Investment Treaty, Art. 5 (“Minimum Standard of Treatment”), available at https://ustr.gov/sites/default/files/BIT%20text%20for%20ACIEP%20Meeting.pdf.  An annex on interpretation states that “[t]he Parties confirm their shared understanding that ‘customary international law’ generally and as specifically referenced in Article 5 [Minimum Standard of Treatment] … results from a general and consistent practice of States that they follow from a sense of legal obligation,” and that “[w]ith regard to Article 5 [Minimum Standard of Treatment], the customary international law minimum standard of treatment of aliens refers to all customary international law principles that protect the economic rights and interests of aliens.”  Ibid., Annex A.

[26] Investment Agreement for the COMESA Common Investment Area, 2007, Art. 14, available at https://investmentpolicy.unctad.org/international-investment-agreements/treaties/treaties-with-investment-provisions/3225/comesa-investment-agreement.

[27] Investment Agreement for the COMESA Common Investment Area, 2007, Art. 14, available at https://investmentpolicy.unctad.org/international-investment-agreements/treaties/treaties-with-investment-provisions/3225/comesa-investment-agreement (emphasis added).

[28] SADC Model Bilateral Investment Treaty Template, with Commentary, 2012, available at https://www.iisd.org/itn/wp-content/uploads/2012/10/SADC-Model-BIT-Template-Final.pdf.

[29] SADC Model Bilateral Investment Treaty Template, with Commentary, 2012, available at https://www.iisd.org/itn/wp-content/uploads/2012/10/SADC-Model-BIT-Template-Final.pdf.

[30] SADC Model Bilateral Investment Treaty Template, with Commentary, 2012, available at https://www.iisd.org/itn/wp-content/uploads/2012/10/SADC-Model-BIT-Template-Final.pdf. 

[31] Neer Claim, Mexico-US General Claims Commission, RIAA, IV (1926) 61-62, available at https://legal.un.org/riaa/cases/vol_IV/60-66.pdf.

[32] SADC Model Bilateral Investment Treaty Template, with Commentary, 2012, available at https://www.iisd.org/itn/wp-content/uploads/2012/10/SADC-Model-BIT-Template-Final.pdf.

[33] Comprehensive Economic and Trade Agreement Between Canada, of the one part, and the European Union and its Member States, of the other part, provisionally entered into force on 21 September 2017, Art. 8.10 (“Treatment of investors and of covered investments”), available at https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A22017A0114%2801%29.

[34] See JD Amado, JS Kern and MD Rodriguez, Arbitrating the Conduct of International Investors (Cambridge University Press, 2018), Chapter 5.  For a current inquiry into the anti-corruption basis identified in the ARIA IX report, see also JD Amado, JS Kern and MD Rodriguez, Elevating Corruption to an International Tort, in Investors’ International Law (J Ho and M Sattorova, eds.) (forthcoming 2021).

[35] United Nations Economic Commission for Africa et al, Assessing Regional Integration in Africa IX (2019) 198.

[36] Possible Reform of Investor-State Dispute Settlement (ISDS): Multiple Proceedings and Counterclaims, UN Doc. No. A/CN.9/WG.III/WP.193, dated 22 January 2020, available at https://undocs.org/en/A/CN.9/WG.III/WP.193 (emphasis added).

[37] JD Amado, JS Kern and MD Rodriguez, Arbitrating the Conduct of International Investors (Cambridge University Press, 2018) 87-90 and Annex, Model 6 (“Contingent Consent Clause”).

[38] JD Amado, JS Kern and MD Rodriguez, Arbitrating the Conduct of International Investors (Cambridge University Press, 2018) 90-93 and Annex, Model 7 (“Jurisdiction without Privity”).

[39] Netherlands-Indonesia Agreement on Economic Cooperation (with Protocol and Exchanges of Letters dated 17 June 1968), signed on 7 July 1968 (entered into force on 17 July 1971), 799 UNTS 13, Art. 11 (emphasis added), available at https://investmentpolicy.unctad.org/international-investment-agreements/treaty-files/3329/download. 

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

INTRODUCTION

The challenge of mediation as a dispute resolution mechanism has always been in the inability to enforce the agreements that flow from the mediation process in the event of non-compliance by parties. In some circumstances, accepting to and engaging the process of mediation is confronted by this singular challenge from the outset. This concern is particularly heightened with respect to commercial mediation.

To address this challenge in the context of disputes within national borders, many countries, Nigeria in particular have addressed this challenge using the ADR Judge within the framework of the Multi-door courthouse. Thus, there exists a legal framework for enforcement of mediation agreements. Internationally however, prior to the Singapore convention, there was no legal regime or framework under international public or private law for enforcing mediation agreements.

The Singapore convention offers that opportunity and hopefully will embolden users to engage the process of mediation for their international commercial transactions. I intend to x-ray the provisions of the convention from the perspective of its operation in the light of the willingness of parties particularly state - parties to adopt the convention by signing on to the treaty and engage in the process.

This presentation shall also focus on the implications of the convention for nation states especially as it relates to the crossroads between this convention and the domestic framework for dispute resolution.

BACKGROUND TO THE SINGAPORE CONVENTION

UNCITRAL developed the Model Law on International Commercial Conciliation (2002 Model Law) in 2002. The 2018 Model Law sought to revise this, primarily by replacing the term “conciliation” with “mediation”. It was recognized that the terms ‘mediation’ and ‘mediator’ were more widely used and changing the terminology would make it easier to promote and enhance the visibility of the Convention and Model Law.  This simply meant that the only substantive change between the Model Law of International Commercial Conciliation (2002) and the 2018 Model law, which is now known as the Singapore convention, is a change of nomenclature that prefers Mediation to Conciliation because it is of wider acceptance and usage.

In December 2018, the United Nations General Assembly adopted, by consensus, the United Nations Convention on International Settlement of Agreements Resulting from Mediation, and recommended that the Convention be known as the “Singapore Convention on Mediation” (the “Singapore Convention” or “Convention”) and authorized the signing ceremony of the Convention to be held in Singapore on 7 August 2019.

Until the introduction of the Singapore Convention, an often-cited challenge to the use of mediation in international trade and commerce was the lack of an efficient and harmonized framework for cross-border enforcement of settlement agreements resulting from mediation. It was in response to this need that the Singapore Convention was developed and adopted by the United Nations to promote mediation as a mechanism for resolution of commercial disputes, and facilitate international trade and commerce by enabling disputing parties to easily enforce and invoke settlement agreements across borders.

Businesses will benefit from mediation as an additional dispute resolution option to litigation and arbitration in settling cross-border disputes. This Convention is to Mediation what the New York Convention 1958 is to International Commercial Arbitration.

WHAT IS THE SINGAPORE CONVENTION?

The Convention is designed as an efficient and harmonized framework for the facilitation of international settlement agreements resulting from mediation, by ensuring that settlements reached by parties become binding and enforceable in accordance with a simplified and streamlined procedure. The mediated international agreements must be concluded “in writing”. The Convention however, excludes settlement agreements which:

a) have been approved by a court or have been concluded in the course of court proceedings;

b) are enforceable as a judgment in a court of that state; and

c) that have been recorded and are enforceable as an arbitral award.

The rationale for these exceptions lie in the fact that there are other widely accepted international instruments such as the New York Convention and the Hague Convention on the nature of Court judgments that specifically govern those types of settlement agreements.

The Singapore Convention will focus on circumstances where these other instruments are not applicable. It thereby contributes to strengthening access to justice and the rule of law, and provides an option, which speaks to the peculiar needs of disputing parties.

The convention defines mediation in Article 2(3) as "a process to reach amicable settlement of their dispute with the assistance of a third person or persons ('the mediator') lacking the authority to impose a solution upon the parties".

This definition is broad and deliberately encompassing to ensure that the flexibility that mediation is known for is safeguarded by the convention and its application. The import is this, any process fits this description, and even where not referred to as “mediation,” a settlement from such process will qualify as mediation for the purpose of the convention.

It is noteworthy that the convention does not provide any restrictions as to a person who may be a mediator, the qualification if any they must have, or whether it must be conducted under the auspices of an institution. This in my humble opinion is good as it safeguards the flexibility that mediation is popular for.  The primary goals of the Convention are to facilitate international trade and promote the use of mediation for the resolution of cross-border commercial disputes.

The Convention provides flexibility and autonomy to the State Parties by listing conditions to be fulfilled in order for a State to enforce a settlement agreement under the Convention rather than prescribing a specific mode of enforcement. This flexibility and autonomy is demonstrated in the provision as follows:

-       “In accordance with its rules of procedure; and

-      Under the conditions laid down in this Convention, in order to prove that the matter has been already resolved”,

According to Article 4, a party relying on a settlement agreement shall supply to the competent authority of the State where relief is sought –

a) The signed settlement agreement; and

b) Evidence that the settlement resulted from mediation.

The competent authority of the state is not defined in the convention, but it is presumed that the competent authority of the state in such a circumstance would be the national courts of the state. Thus, the national courts of the state have a very important role to play in the scheme of things. It is pertinent in that regard to ensure that Judges who man these national courts are provided the requisite training on the application of the convention.

To qualify as a settlement resulting from mediation, such settlement should include the mediator’s signature on the agreement, or document signed by the mediator confirming the mediation was carried out, or an attestation by the institution administering the mediation or any other evidence deemed acceptable to the competent authority.

The convention grants the competent authority of the State Party the autonomy to decide what evidence of the conduct of mediation in keeping with the conditions prescribed is acceptable. The Courts of a State Party to the Convention may refuse to grant relief on the grounds laid down in the Convention, including:

-       if a party to the settlement agreement was under incapacity (bankruptcy, economic recession?).

-       the settlement agreement is not clear or comprehensible

-       if the settlement agreement is not binding, null and void, inoperative or incapable of being performed under the law, which it is subjected to.

-       if there were serious breaches by the mediator of standards applicable to the mediator, without which breach that party would not have entered into the settlement agreement.

-       failure by the mediator to disclose circumstances relevant to the mediator’s impartiality or independence.

-       if granting relief would be contrary to the public policy of that party.

The last two grounds except the ground on public policy, relating to mediator conduct, align with Articles 5(4), 5(5) and 6(3) of the 2002 Model Law on International Commercial Conciliation. Of note or particular concern would be the standard by which the mediator’s conduct is assessed. In some countries, a particular behaviour may be acceptable whilst in others that may not be the case. This scenario supports my proposition that cultural nuances play a role in international mediation and more attention need be paid to such nuances.

In addition, pursuant to Article 5(2), relief may be refused where it is “contrary to the public policy” of the State in which enforcement is sought or the “subject matter of the dispute is not capable of settlement by mediation under the law of that State”.

This presents a challenge as it leaves the national courts with very wide discretion as to what amounts to public policy or subject not capable of resolution via mediation. In some countries, issues of title to land and declaration thereof are not subjectable to mediation or settlement agreements but must be resolved by the courts. This creates a basis for subjectivity in the application of an international convention.

Unlike the New York Convention (which does not specifically address reservations), the Singapore Convention expressly permits a number of reservations including in relation to whether or not the Convention would apply to the government of signatory states (Article 8).

Another exception to enforcement is the ability for parties to opt-out. Article 5 (1)(d) provides for this. The rationale here is in keeping with the right of parties to protest against a settlement agreement that does not express their clear wishes or that the relief sought is contrary to the terms of the settlement agreement.

A key distinctive feature of the Convention is the ability of a state party who is a signatory to make a reservation that the Convention will apply only to the extent that the parties to the settlement agreement have agreed to apply it. The consequence of such reservation is that parties of the signatory state may exercise the option to opt-in with respect to the enforceability or otherwise of the settlement agreement. The convention is not explicit on what the procedure for opt-in will be. It is my humble view that certain standards of practice will develop with time.

PROSPECTS

The Convention coming into effect holds great potential for us. The word ‘coming’ is used because according to article 14 of the United Nations Convention on International Settlement Agreements Resulting from Mediation, the convention comes into effect six months after 3 countries have ratified, approved, or acceded to the convention.

Many African countries, Nigeria in particular have not managed their international disputes well and it would appear that we are always holding the wrong end of the stick. The resort to arbitration has many times led to awards that are not only punitive in nature but which threaten our financial well being. This Convention no doubt provides for government and business entities out of Africa, an opportunity to engage in and utilize another mechanism for resolution of international commercial transactions without necessarily resorting to arbitration.

Mediation as mechanism for resolution of such disputes will set the stage for a greater say in the resolutions arrived at by all parties and also lead to greater compliance, as there are safety nets that avail the disputing parties, which are not apparent within the framework of public or private international law (opt-out or opt-in).

The signing of the Singapore convention presents an opportunity that all practitioners should as a matter of urgency embrace. There is a lot of international trade being currently promoted and nation states are looking to expand their horizons. Our own dear country Nigeria is not left out as we see from the efforts being put into wooing investors by the current government. A fall out of such heightened commercial activities will be trade disputes.

Worthy of mention is the Ajaokuta Steel Company dispute and the related arbitration and court processes is a case in point. I dare say that mediation would be a more effective way of resolving that impasse. Thus, the African mediator must be ready to sharpen their skills and take on the world. Opportunity knocks. Please take time to familiarize yourself with the convention. 

CONCLUSION

The Convention is significant as it facilitates, for the first time, the enforcement of international commercial settlement agreements resulting from mediation. It is a welcome development, and indeed a game changer as it will set the stage for practitioners and users to deploy mediation more frequently. Africa as a continent must not only sign onto the convention, it must accept and ratify it, and incorporate it into the legal framework of nation states. This will boost confidence in would-be-investors that Africa is a safe destination to engage in commercial transactions.

The success of the Convention will depend on how many countries sign on to it and ratify and accept it into their legal framework. A direct consequence as stated earlier will be the growth of commerce due to confidence that where a party to a mediated settlement fails to comply, enforcement can be achieved in an efficient and effective manner under the convention by going after the assets of the defaulting party in a convention country.

Another major consequence will be the raising of ethical standards. There will emerge a body of guidelines, which will seek to regulate mediator’s conduct and guide against misconduct. We must not be found wanting. This will boost great confidence in the process of mediation.

___________________

*Managing Partner, Greenfield Chambers

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

The two issues I was asked to discuss were: 

1)    The provisions at the heart of the Singapore Convention.

2)   The key controversies in the text of the Singapore Convention, both now and in the future. 

In response to the first issue, I considered the provisions at the heart of the Convention to be:

a)      Article 1 which provides that the Convention applies to international settlement agreements resulting from mediation, concluded in writing by parties to resolve a commercial dispute. 

b)    Article 1 also lists exclusions from the scope of the Convention namely, settlement agreements completed by a consumer for personal, family or household purposes, or relating to family inheritance or employment law.

c)    A settlement agreement that is enforceable as an arbitral award is also excluded from the scope of the Convention in order to avoid a possible overlap with the existing and future Conventions such as the New-York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958), the Convention on Choice of Court Agreements and the Convention on the Recognition and Enforcement of Foreign judgment in Civil and Commercial Matters (2019). 

d)    Article 3 addresses the key obligations of the parties to the Convention with respect to both enforcement of settlement agreements and the right of disputing parties to invoke a settlement agreement covered by the Convention. Each party to the Convention may determine the procedural mechanisms that may be followed where the Convention does not prescribe any requirement. 

e)    Article 4 covers the formalities for relying on a settlement agreement, namely the disputing party shall supply to the competent authority the settlement agreement signed by them and evidence that the settlement agreement results from mediation. The competent authority may require any necessary document in order to verify that the requirements of the Convention are complied with. 

f)     The grounds upon which a court might refuse to grant a request of the disputing party against which it is invoked, are defined in Article 5. The grounds are grouped in 3 main categories, those in relation to the disputing parties, the settlement agreement and the mediation procedure.

Article 5 includes two additional grounds upon which a court may, on its own motion, refuse to grant relief. These grounds relate to public policy and the fact that the subject matter of the dispute cannot be settled by mediation. 

g)  Article 8 is on reservations, the first one permits a party to the Convention to exclude from the Convention settlement agreements to which a party or to which any governmental agency is a party, to the extent specified in the declaration. 

h)    A second reservation permits a party to the Convention to declare that it will apply the Convention only to the extent that the disputing parties have agreed to its application. 

i)   The Convention is consistent with the UNCITRAL MODEL LAW on International Settlement Agreement Resulting from Mediation (2018). This approach is intended to provide States with the flexibility to adopt either the Convention, the Model Law as a standalone text or both the Convention and the Model Law as complimentary instruments of a comprehensive legal framework on mediation. 

As for the key controversies at the heart of the Singapore Convention now and in the future, I identified the following: 

1) The Singapore Convention does not take any stand on the source of mediation, for example, the parties may have resorted voluntarily to mediation instead of commencing litigation, or an attempt at mediation may have been mandatory by a legal rule or by a court. This issue has been debated in the European Union where some member States believe that the only way to resort to mediation is to make it mandatory. This is not captured anywhere in the Convention. It is worth noting that as at now, neither the European Union nor the United Kingdom has signed the Singapore Convention. They say that they are considering whether to sign as a regional economic entity/block, or whether member States need to join individually. I find this to be problematic now and in the future. 

2)How to secure the mediator’s confirmation is also bound to be problematic in future. 

For example, Article 4 of the Convention sets out the evidence to be provided to the enforcing court. This includes a copy (translated if necessary), of the settlement agreement. It also includes the requirement that the settlement agreement,” resulted from mediation.” The examples given as to what could constitute such evidence include: 

a)    “a mediator’s signature on the settlement agreement or a document signed by the mediator indicating that the mediation was carried out.”

If the mediation was organized through an institution, the evidence may take the form of an attestation by that institution. 

b)   In the absence of such forms of evidence, any other evidence acceptable to the (enforcing court) may be acceptable. 

c)    Whilst this evidentiary requirement is understandable given the scope of the Convention, the need for the mediator to make some form of attestation to be put before the court as proof stated is potentially problematic. This is so because in most jurisdictions where mediation is well trenched, the fundamental principle of mediation is underpinned by a well- accepted principle that the parties may not call a mediator to give evidence in relation to a mediation because of confidentiality. This principle is usually recorded in a mediation agreement between the mediator and the parties, and in some jurisdictions including England and Wales, it is also enshrined in the statutes or court rules. Concerns are currently being raised that this new evidentiary requirement introduced by the Convention could erode the protection currently enjoyed by mediators. It is therefore advisable for the practitioners to raise this issue with mediators during the mediation preparatory meetings. It is also important to raise it in the mediation agreement to the effect that the mediator will not be required to give evidence. It is not clear how the enforcing courts will handle this issue.

3) I note that the definition of mediation in Article 2(3) of the Singapore Convention makes no reference to the impartiality of the mediator. Despite this, however, amongst the grounds to refuse enforcement of a settlement agreement, at least two relate to possible flaws in the mediation proceeding and its development, as well as the mediator’s behaviour. This might be problematic as time goes.

____________________

*Lady Justice Joyce Aluoch, EBS, CBS, (Rtd) Judge, Certified International Mediator, Chartered Mediator, Accredited Mediator

Paper presented at the AfAA 2nd Annual International Arbitration Conference, 15th - 16th April 2021[1]

Introduction

In the recent past, African countries have found themselves more frequently before international arbitration tribunals for claims of violating their investment treaty obligations.[2] In some of these cases, African governments have been found liable and paid large awards or compensation to foreign investors; Egypt, Libya, Zimbabwe and Tanzania are among the countries recently confronted with exorbitant investor-state dispute claims.[3] Quite expectedly African countries have embarked on renegotiating and negotiating new treaty arrangements to address these amongst other challenges.  

This paper will focus on ISDS in emerging treaties in the Eastern Africa region. Despite the controversies surrounding the legitimacy of the ISDS system and rethinking its continuity, recent BITs in the Eastern Africa Region have maintained it albeit with modifications. Some of the more recent BITs signed by Eastern Africa States, and the AfCFTA, will be examined. 

1. The 2017 Triad - Natural Wealth and Resources Laws, 2017– Tanzania

With the promulgation into law of the triad, the Natural Wealth Resources (Review and Renegotiation of Unconscionable Terms) Act, 2017, the Natural Wealth and Resources (Permanent Sovereignty) Act, 2017 and the Written Laws (Miscellaneous Amendments) Act, 2017 amending the Mining Act, 2010, Tanzania unequivocally expressed a legislative departure from the ISDS framework and a preference for domestic remedies.[4] The Act reserves the adjudication of disputes to the national state legal systems i.e., the courts and other statutory authorities.

Despite these changes the 12 odd BITs that were in force before the triad laws remain enforceable unless renegotiated under those new provisions. Most of the existing BITs provide a two-tier mechanism for consultations and negotiations with a waiting period of six months before resort to either domestic courts or international arbitration. The latest China-TZ BIT[5] of 2013 follows this cafeteria approach including resort to either the domestic Courts, ICSID, UNCITRAL or other arbitral institutions.  

The robust shift in policy may be indicative of the unease often expressed by developing countries on the unequal balance of power in the 1st generation BITs. Will this be the antidote that tilts the balance to attain an acceptable equilibrium? It will be interesting to watch how these changes will shape the future of dispute resolution as pertains to Tanzania and whether other countries in the region will adopt this approach.  

2.Agreement between the Federative Republic of Brazil and the Federal Democratic Republic of Ethiopia on Investment Cooperation and Facilitation (2018)[6]

The agreement makes provision for state-to-state dispute settlement and appears to have no ISDS clause providing for direct investor-state claims.

The provisions provide that, if a Contracting Party considers that a specific measure adopted by the other Contracting Party constitutes a breach of Agreement, it shall submit a written request to the other Contracting Party, identifying the specific measure in question, and presenting the relevant allegations of fact and law and the Joint Committee shall meet within sixty (60) days from the date of the request[7] and prepare a report sixty (60) days from the date of the first meeting, extendable by mutual agreement. .[8]

In the event that the dispute is not resolved within the time frame set forth, or there is non-participation of a Contracting Party in the meetings of the Joint Committee convened, the dispute may be submitted to arbitration by a Contracting Party.[9] If the measure in question pertains to a specific investor: the initial submission shall identify the affected investor; representatives of the affected investor may be invited to appear before the Joint Committee; and a Contracting Party may refuse to discuss in the Dispute Prevention Procedure a question concerning an investment of a national of that Contracting Party in the territory of that Contracting Party.

Once the above procedures have been exhausted and the dispute has not been resolved, either Contracting Party may submit the dispute to an ad hoc Arbitral Tribunal or alternatively, the Contracting Parties may choose, by mutual agreement, to submit the dispute to a permanent arbitration institution for settlement of investment disputes.[10]

An Arbitral Tribunal shall consist of three arbitrators. Each Contracting Party shall appoint, within three (3) months after receiving the "notice of arbitration", a member of the Arbitral Tribunal. Within three (3) months of the appointment of the second arbitrator, the two members shall appoint a national of a third State with which both Contracting Parties maintain diplomatic relations, who, upon approval by both Contracting Parties, shall be appointed chairperson of the Arbitral Tribunal. The appointment of the Chairperson must be approved by both Contracting Parties within one (1) month from the date of his/her nomination. The decision of the Arbitral Tribunal is final and binding to the Contracting Parties.[11] 

3. Agreement between the Government of the Republic of Singapore and the Government of the Republic of Rwanda on the Promotion and Protection of Investments (2018)[12]

In case of a dispute between a party and an investor of the other party, parties are to seek to resolve the dispute by consultations and negotiations[13].Where the dispute cannot be resolved within 6 months from the date of a written request for consultations and negotiations, then, unless the disputing parties agree otherwise, the disputing investor may submit the dispute to arbitration.[14]Arbitration can be conducted:

(a) under the ICSID Convention and the ICSID Arbitration Rules, provided that both the respondent Party and the Party of the disputing investor are parties to the ICSID Convention.

(b) under the ICSID Additional Facility Rules, provided that either the respondent Party or the Party of the disputing investor is a party to the ICSID Convention.

(c) under the UNCITRAL Arbitration Rules; or

(d) to any other arbitral institutions or under any other arbitration rules, if the disputing parties so agree.[15]

Any dispute submitted to arbitration must take place within 3 years of the time at which the disputing investor became aware, or should reasonably have become aware, of the breach.[16]

Unless agreed otherwise, the arbitral tribunal shall be composed of three arbitrators, who shall not be nationals or permanent residents of either Party, each disputing party is to appoint one arbitrator and the disputing parties shall agree upon a third arbitrator, who shall be the chairman of the arbitral tribunal.[17] If an arbitral tribunal has not been established within 90 days from the date of claim submission to arbitration, the Secretary-General of ICSID, upon request of either disputing party, shall appoint, at his own discretion, the arbitrator or arbitrators not yet appointed.[18] If the Secretary-General is a national or permanent resident of either Party, or he or she is otherwise unable to act, the Deputy Secretary-General, who is not a national or permanent resident of either Party, may be invited to make the necessary appointments.[19]

Any arbitral award by the tribunal is final and binding upon the disputing parties.[20] A tribunal is required, before issuing a decision or award on liability to transmit its proposed decision or award to the disputing parties; the parties may then within 60 days submit written comments to the tribunal concerning any aspect of the proposed decision or award.[21] The tribunal shall consider any such comments and issue its decision or award not later than 45 days after the expiration of the 60-day comment period.[22] 

4.    Agreement between the Government of the Republic of Turkey and the Government of the Republic of Burundi Concerning the Reciprocal Promotion and Protection of Investments (2017)[23]

When it comes to ISDS, the agreement applies to disputes between one Contracting Party and an investor of the other Contracting Party concerning an alleged breach of an obligation of the former, which causes loss or damage to the investor or its investments.[24] In case of a dispute, a party should be notified in writing and the parties should endeavor to settle these disputes by consultations and negotiations in good faith.[25] If these disputes, cannot be settled in this way within six (6) months following the date of the written notification, the disputes can be submitted, as the investor may choose, to:

(a)   the competent court of the Contracting Party in whose territory the investment has been made or;

(b)   ICSID or;

(c)   an ad hoc arbitral tribunal established under the UNCITRAL Arbitration Rules; or

(d)   any other arbitration institution or any other arbitration rules if the disputing parties so agree.[26]

In deciding whether an investment dispute is within the jurisdiction of ICSID and competence of the tribunal, the arbitral tribunal shall comply with the notification submitted by the Republic of Turkey on March 3, 1989 to ICSID in accordance with Article 25 (4) of ICSID Convention, concerning classes of disputes considered suitable or unsuitable for submission to the jurisdiction of ICSID, as an integral part of the Agreement.[27] The arbitral tribunal shall take its decisions in accordance with the provisions of the Agreement, the laws and regulations of the Contracting Party involved in the dispute on which territory the investment is made, and the relevant principles of international law as accepted by both Contracting Parties.[28] The arbitration awards shall be final and binding for all parties in dispute.[29]

5.  Proposed Economic Partnership Agreement between the Republic of Kenya and the United Kingdom of Great Britain and Northern Ireland (Kenya - UK EPA) (2020)[30] (Ongoing for formal Ratification)

The effective Kenya-UK BIT has been and continues to be in force since 1999 with an existing ISDS mechanism -typical of the 1990s BITs with an exclusive and automatic recourse to arbitration after three months of failure of local remedies or other means to resolve a dispute.

However, it is worthy of note to comment on the Kenya-UK EPA covering trade in goods etc. Although it is not typically an investment protocol but rather a trade agreement it is significant that some of its features may illuminate recent thinking. As a post-Brexit measure the negotiations for the Kenya-UK EPA begun in August 2020 based on the EAC-EU EPA text.[31] Of relevance here is the State-to-State dispute avoidance and settlement mechanism which proposes a tiered framework for dispute resolution through alternative means of consultation, with a fork in the road option for mediation, or arbitration. The EPA was eventually approved by the respective Parliament of Kenya[32] on 9th March 2021 and UK now awaiting formal ratification and depository procedures anticipated to take place in March 2021.

Although these provisions are typical of this kind of agreement it might be interesting to see whether some of the thinking behind adoption of an elaborate alternative dispute resolution framework and arbitration may translate to future BIT contexts with focus on investments. The dispute avoidance and settlement provide for the following mechanism:

i)             Consultation

In case of a dispute, parties are to enter consultations.[33] A Party seeks consultations by means of a written request to the other Party, copied to the Committee of Senior Officials, identifying the measure at issue and the provisions of the Agreement that it considers the measure not to be in conformity with.[34] 

Ideally, consultations are to take place, in the territory of the Party complained against (unless agreed otherwise) and are to be held within twenty (20) days of the date of the receipt of the request and shall be deemed concluded within sixty (60) days of the date of the receipt of the request of the Party complained against, unless the Parties agree to continue consultations.[35] All information disclosed during the consultations shall remain confidential.[36] Consultations on matters of urgency, including those regarding perishable or seasonal goods shall be held as soon as is practically possible and in any event within fifteen (15) days of the date of the receipt of the request, and shall be deemed concluded within thirty (30) days of the date of the receipt of the request, unless the Parties agree to continue consultations.[37]

ii)           Mediation

If consultation fails, parties may by agreement seek recourse through mediation.[38] Where parties are unable to agree on a mediator within fifteen (15) days of the date of the agreement to request mediation, the Chairperson of the Committee of Senior Officials[39], or his or her delegate, shall select by lot a mediator from the pool of individuals who are on the list referred to in Article 125 and are not nationals of either Party[40]  within twenty-five (25) days of the date of the submission of agreement to request mediation and in the presence of a representative of each Party.[41] The mediator will convene a meeting with the Parties no later than thirty (30) days after being selected.[42] The mediator shall receive the submissions of each Party no later than fifteen (15) days before the meeting and notify a non-binding opinion no later than forty-five (45) days after having been selected.[43] The mediation proceedings are to remain confidential.[44]

iii)          Arbitration

However, there is a fork in the road situation presenting between consultation and the choice of either mediation or arbitration. Should parties not wish to go through mediation, they can move to arbitration after consultation.[45] Where consultation and/or mediation failed to resolve the dispute, the complaining Party may give notice to initiate the procedure for the establishment of an arbitration panel,[46]the notice for establishment of an arbitration panel is to be made in writing to the Party complained against and to the Committee of Senior Officials.[47]

An arbitration panel is to be composed of three arbitrators.[48] Within ten (10) days of the date of the submission of the notice for the establishment of an arbitration panel to the Committee of Senior Officials, the Parties shall consult in order to reach an agreement on the composition of the arbitration panel.[49] In the event that the Parties are unable to agree on the composition of the arbitration panel within the timeframe stipulated, each Party will select an arbitrator from the list of arbitrators established under Article 125[50] within five (5) days.[51] If any of the Parties fails to appoint its arbitrator, upon request of the other Party, the arbitrator shall be selected by lot by the Chairperson of the Committee of Senior Officials, or the Chairperson's delegate from the sub-list of that Party established under Article 125.[52]

According to Article 115(1)(a) of the Kenya – UK BIT, the arbitration panel is required to notify its ruling to the Parties and to the Committee of Senior Officials within one hundred and twenty (120) days from the date of its establishment. However, even if a delay is occasioned, under no circumstances shall the ruling be notified later than one hundred and fifty (150) days from the date of its establishment.[53]

The arbitration panel is supposed to make every effort to ensure that any decision is by consensus, where a decision cannot be adopted by consensus, the matter at issue shall be decided by majority vote.[54] The arbitration panel ruling is final and binding on Parties.[55]

6. The proposed Kenya - USA Free Trade Agreement Kenya-US (Negotiations Ongoing)

On 6th February 2020, US Former President Trump announced that the United States intends to initiate trade agreement negotiations with Kenya following a meeting at the White House with Kenyan President HE Uhuru Kenyatta.[56] The bilateral negotiations commenced on 7th July 2020.[57] In an attempt to determine how the dispute resolution clauses and ISDS provisions under the agreement may look like, some of the BIT provisions on dispute settlement and ISDS that USA is party to were considered.

Possible outlook of the Kenya-US BIT

From an analysis of the USA-BIT with Uruguay and Rwanda and the USMCA, there are several things we are most likely to see in the Kenya-USA BIT. They include:

(a)   ISDS and State - State dispute settlement - both Rwanda and Uruguay BIT with the USA have provisions for both ISDS and State-State dispute settlement.

(b)   Provisions that require disputes to be submitted to consultations and negotiations before the commencement of arbitral proceedings – both Rwanda and Uruguay have provisions requiring that disputes be submitted to consultations and negotiations before arbitration. There is a possibility for the same provisions to find their way to the Kenya-USA BIT.

(c)   Absence of mediation – in both BITs (Uruguay and Rwanda) there are no provisions for mediation. It is likely that the Kenya-USA BIT will also not have mediation provisions. However, the USMCA advocates for alternative methods of dispute resolution, such as good offices, conciliation, mediation, and arbitration, it is therefore possible that these mechanisms will find their way to the Kenya-USA BIT.

(d)   Consent to arbitration – By signing the BIT with USA, Uruguay and Rwanda consent to arbitration meaning there is no need to seek for consent to arbitration, once negotiations and consultations fail to bear fruits, the claimant can automatically submit the dispute for arbitration. However, USMCA seems to lie more on dispute resolution via a panel. It is interesting to see which form of dispute settlement will be preferred by the Kenya-USA BIT since the USA considers the USMCA as its 21st Century, high standard agreement.[58]

(e)   The claims are likely to be submitted:

(i)  under the ICSID Convention and the ICSID Rules of Procedure for Arbitration Proceedings, provided that both the respondent and the non-disputing Party are parties to the ICSID Convention.

(ii)  under the ICSID Additional Facility Rules, provided that either the respondent or the non-disputing Party is a party to the ICSID Convention.

(iii)  under the UNCITRAL Arbitration Rules.

(iv)  if the claimant and respondent agree, to any other arbitration institution or under any other arbitration rules.

(v)  Joint panel committee established between Kenya and the USA.

(f)Selection of arbitrators - it is likely that just like the two BITs a tribunal will consist of 3 arbitrators, each party will appoint one and they shall both appoint a chair to the tribunal.

(g)   Place of arbitration - it is likely that the disputing parties will be allowed to agree on the legal place of any arbitration If they fail to reach an agreement, the tribunal may be empowered to determine the place of arbitration.

(h)   Applicable law - the tribunal is likely to decide on issues in dispute in accordance with the BIT and applicable rules of international law. In USMCA, the panel is required to interpret the Agreement in accordance with customary rules of interpretation of public international law, as reflected in Articles 31 and 32 of the Vienna Convention on the Law of Treaties, 1969.[59]

(i)Decisions of the arbitral tribunal - the decisions of the arbitral tribunal are likely to be final and binding to all parties.

7.     African Continental Free Trade Area (AfCFTA)

AfCFTA is a flagship project of Agenda 2063 of the African Union (AU). By December 3, 2020, thirty-six countries, including three East African Community (EAC) countries (Kenya, Rwanda, and Uganda) had ratified the AfCFTA and its trade operations were set to commence in January 2021.[60]

On 1st January 2021, African countries opened their markets under the AfCFTA based on the  Assembly decision made on 5 December 2020.[61]

      i.        AfCFTA and Dispute Settlement

According to Article 4(f) AfCFTA one of the objectives of the Agreement is to establish a mechanism for the settlement of disputes concerning the rights and obligations of State Parties. The AfCFTA Dispute Resolution Protocol stipulates a State-to-State dispute mechanism to resolve differences arising out of the AfCFTA.[62] The Agreement creates a continental dispute settlement body(DSB) which establishes the Protocol on Rules and Procedures on the Settlement of Disputes.[63]

The DSB is empowered to interpret and apply all AfCFTA legal instruments (Protocols, Annexes and Appendices) and determine state parties’ rights and obligations under those legal instruments. Pursuant to article 20 of the AfCFTA  and Article 3(1) of the Protocol on the Settlement of Disputes, the protocol will only: apply to disputes arising between State Parties concerning their rights and obligations under the provisions of the Agreement[64].

     ii.        AfCFTA and ISDS

The future of ISDS in the architecture of the AfCFTA is presently unclear. There is, however, a strong possibility that ISDS will be present in AfCFTA. First, most African countries appear to be in favor of ISDS. There is currently in existence at least 30[65] in-force intra-African BITs utilizing, an additional 120 intra-African BITs have been signed but not ratified not mention the existence of numerous ‘in force’ BITs between African States and third states that also provide for ISDS. Furthermore, more than half the Continent have also ratified the New York Convention.

Secondly, the presence of weak legal and regulatory frameworks existing in many member states is another compelling reason that may lead to the integration of the ISDS within the context of the AfCFTA. According to the World Justice Project (WJP) Rule of law Index 2019, where good governance, transparent, effective, and accountable institutions were concerned, African Nations ranked last. This could translate into a lack of investor confidence generally as member states need to be assured of a robust legal structure to facilitate the process of trading across borders. In fact, it was reported that more than half of the countries in Africa are found in the bottom quartile of the World Bank Group’s Doing Business 2019 rankings[66]. Given the weak regulatory environment, countries may see a need to use ISDS as it is a mechanism praised for its - predictability.

Thirdly, is the need for predictability. Predictability is one of the bedrock principles of the AfCFTA[67] Also, one of the specific objectives of the AfCFTA is to “establish a mechanism for the settlement of disputes concerning their rights and obligations”.[68] For this reason, ISDS is most likely going to find its way in AfCFTA.

However, there is still a possibility that ISDS may never find its way to AfCFTA. First, is the cost of ISDS claims. The amounts at stake in investment treaty arbitration are usually astronomical. The average claim in investor–state arbitrations based on BITs and other international investment agreements (IIAs) is about US$492 million[69] and multibillion-dollar claims are increasingly common. In ISDS claims, countries have real financial implications in terms of monetary awards, legal costs, and accrued interests to consider. For example, in Unión Fenosa Gas, S.A. v. Arab Republic of Egypt,[70] an award of over 2 billion US Dollars was made. In Process and Industrial Developments Ltd. v. The Ministry of Petroleum Resources of the Federal Republic of Nigeria,[71] Nigeria had to appeal a 9-billion award to Irish backed company over a failed gas deal.

Secondly, is the lack of consistency in the tribunal decisions of ISDS cases. Countries like Nigeria[72] and Egypt[73] have both suffered numerous inconsistent awards and these concerns are related to unjustifiably inconsistent interpretations of investment treaty provisions especially where it provides for principles afforded to foreign investors from the Most Favored Nation and National Treatment clauses. Limited devices available to address inconsistency and incorrectness of decisions has been exemplified by, for example,  the inadequacies of the ICSID annulment mechanism and domestic court procedures.

Thirdly, ISDS has been criticized for the lack of appropriate diversity amongst decision makers specifically where it pertains to gender and geographical diversity. Throughout the history of investment arbitration, African arbitrators have been underrepresented even in cases involving an African state. According to The ICSID Caseload – Statistics (Issue 2019 – 2),[74] although Sub-Saharan Africa contributes 15 percent of all ICSID cases by State Party involved, the region only accounts for 2 percent of arbitrators, conciliators and ad hoc Committee members appointed in ICSID cases.[75] By contrast, Western Europe contributes 8 percent of all ICSID cases by State Party involved but account for a staggering 48 percent of arbitrators, conciliators and ad hoc committee members appointed in ICSID cases. North America (Canada, Mexico, and U.S.) contributes 4 percent of all ICSID cases by State Party involved but account for 20 percent of arbitrators, conciliators and ad hoc committee members appointed in ICSID cases.[76]

Conclusion

Until recently, BITs have formed the key framework for ISDS, but gradually, East African countries are reviewing these treaties to make them fit for their modern purposes and address the challenges facing the nations. From the examples of the treaties discussed above, most provide for both ISDS and State-State dispute resolution. This allows investors to seek speedy resolution of their disputes and allows states to also have a say in how these treaties are being interpreted by arbitral tribunals and other forums to create consistency in interpretations of treaties. However, there is a need for more clarity as pertains to the application of the same. For example, can an investor seek the interpretation of a section of a treaty or must the same be done only by the State via State-State dispute settlement.

More scholarly research should be conducted to inform models that can be applied uniformly and shape state practice in negotiations for intra-regional and multilateral agreements involving States within the region. Some of the BITs examined above include exhaustion of local remedies, at least one has incorporated domestic courts and tribunals and a majority have resorted to arbitration after failure of other means. From the sample above of the more recent BITs in the region the generic trend is a preference for tiered ISDS framework with fork in the road clauses and the cafeteria style approach with on choice of arbitration institution/forum.

_______________________

*Registrar/CEO Nairobi Centre for International Arbitration

[1] This Paper has been prepared with research assistance of Ms. Victoria Kigen (Case Counsel-NCIA). LLB CUEA Univ. LLM Univ. of Miami.

[2] tralacBlog, “Investor-state dispute settlement in Africa and the AfCFTA Investment Protocol” <https://www.tralac.org/blog/article/13787-investor-state-dispute-settlement-in-africa-and-the-afcfta-investment-protocol.html>  accessed on February 16, 2021.

[3] Ibid.

[4] https://www.madini.go.tz/wp-content/uploads/2017/12/Natural-Wealth-and-Resources-Permanent-Sovereignty-Act-2017.pdf Accessed 18th March 2021.

[5] https://investmentpolicy.unctad.org/international-investment-agreements/treaties/bilateral-investment-treaties/990/china---united-republic-of-tanzania-bit-2013- accessed on 17 Mar 2021. The Treaty was signed on 24th March 2013 and entered into force on 17th April 2014. 

[6] The agreement was signed on 11/04/2018 but has not yet been ratified.

[7] Article 23(2(a) of the Agreement between the Federative Republic of Brazil and the Federal Democratic Republic of Ethiopia on Investment Cooperation and Facilitation. Available at <https://investmentpolicy.unctad.org/international-investment-agreements/treaty-files/5717/download> accessed on March 2, 2021.

[8] Article 23(2) (b)&(c) of the Agreement between the Federative Republic of Brazil and the Federal Democratic Republic of Ethiopia on Investment Cooperation and Facilitation.

[9] Article 23(2) (d) Id.

[10] Article 24(1) Id.

[11] Article 24(9) Id.

[12] The agreement was signed on 14/06/2018 but has not yet been ratified.

[13] Article 11(1Id.

[14] Article 11(2) Id.

[15] Id.

[16] Article 11(3)(a) of the Agreement between the Government of the Republic of Singapore and the Government of the Republic of Rwanda on the Promotion and Protection of Investments. 

[17] Article 12(1) Id.

[18] Id.

[19] Id.

[20] Article 16(2) Id.

[21] Article 16(4) Id.

[22] Id.

[23] The agreement was signed on 14/06/2017 but has not yet been ratified.

[24] Article 10(1) of the Agreement Available at <https://investmentpolicy.unctad.org/international-investment-agreements/treaty-files/5838/download>  accessed on March 3, 2021.

[25] Article 10(2) of the Agreement.

[26] Article 10(3) Id.

[27] Article 10(5) Id.

[28] Article 10(6) Id.

[29] Article 10(7) Id.

[30] The agreement is in the process of ratification. It has been presented to the Parliament by the Secretary of State for Foreign, Commonwealth and Development Affairs by Command of Her Majesty December 2020. The UK Parliament voted in favour of the agreement in March 2021 while the Kenyan Parliament approved it on 9th March 2021.

[31] Ministry of Industrialization, Trade and Enterprise Development, “Memorandum to Parliament on Economic Partnership Agreement between the Republic of Kenya and the United Kingdom of Great Britain and Northern Ireland” < http://www.parliament.go.ke/sites/default/files/2021-01/ECONOMIC%20PARTNERSHIP%20AGREEMENT%20BTN%20UK%20%26%20KENYA%281%29.pdf> accessed on March 2, 2021.

[32] http://www.parliament.go.ke/sites/default/files/2021-03/Hansard%20Report%20-%20Tuesday%2C%209th%20March%202021%20%28E%29.pdf accessed 18th March 2021.

[33] Article 110(1) of the Economic Partnership Agreement between the Republic of Kenya and the United Kingdom of Great Britain and Northern Ireland. Available at <https://investmentpolicy.unctad.org/international-investment-agreements/treaty-files/6047/download> accessed on March 2, 2021.

[34] Article 110(2) of the Economic Partnership Agreement between the Republic of Kenya and the United Kingdom of Great Britain and Northern Ireland.

[35] Article 110(3) Id.

[36] Id.

[37] Article 110(4) Id.

[38] Article 111(1) Id.

[39] The Committee of Senior Officials is established under Article 106(1) and shall be composed of Permanent Secretaries or Principal Secretaries, as the case may be, from the EAC Partner State(s) and representatives from the UK at Senior Official level.

[40] Article 111(3) Id.

[41] See note 13.

[42] Id.

[43] Id.

[44] Id.

[45] Article 111(2) Id.

[46] Article 112(1) Id.

[47] Article 112(2) Id.

[48] Article 113(1) Id.

[49] Article 113(2) Id.

[50] Article 125 is on the list of arbitrators. The list shall contain at least 15 people who are willing to serve as arbitrators. The list shall be composed of three sub-lists: one sub-list for each Party to serve as arbitrators; and one sub-list of individuals that are not nationals of either Party and who shall act as Chairperson to the arbitration panel. Each sub-list shall include at least five (5) individuals.

[51] Article 113(3) Id.

[52] Article 113(3) Id.

[53] Id.

[54] Article 124(1) Id.

[55] Article 124(3) of the Economic Partnership Agreement between the Republic of Kenya and the United Kingdom of Great Britain and Northern Ireland.

[56] African Growth and Opportunity Act (AGOA), “The proposed Kenya - USA Free Trade Agreement” <https://agoa.info/bilaterals/kenyausa.html> accessed on March 3, 2021.

[57] Id.

[58] See, USMCA (trade.gov), accessed on March 3, 2021.

[59] Article 31.13.4 Id.

[60] Id.

[61] African Union, “African Business Council Applauds the Start of Trading on the Basis of the AfCFTA” <https://au.int/en/pressreleases/20210104/african-business-council-applauds-start-trading-basis-afcfta> accessed on March 2, 2021.

[62] African Union, “Training on the Settlement of Disputes: The African Continental Free Trade Area.” <https://au.int/en/newsevents/20190513/training-settlement-disputes-african-continental-free-trade-area#:~:text=The%20AfCFTA%20Dispute%20Resolution%20Protocol,to%20that%20of%20the%20WTO.> accessed on February 15, 2021.

[63] Part VI, Article 20 of the AfCFTA.

[64] Article 3 (1) of the AfCFTA.

[65]Maximizing investment protection in Africa: the role of investment treaties and investment arbitration, China Law insight blog, (July 2 2015) See: <https://www.lexology.com/library/detail.aspx?g=1e540917-3888-460f-9b0c-298c52ad864e> accessed on February 15, 2021.

[66] World Bank Group, Doing Business 2019, See: <https://www.doingbusiness.org/content/dam/doingBusiness/media/Annual-Reports/English/DB2019-report_web-version.pdf> Pg. 5 accessed February 15, 2021.

[67] Preamble of the AfCFTA Agreement.

[68] Article 4(f) of the AfCFTA Agreement.

[69] D Rosert, ‘The Stakes Are High: A review of the financial costs of investment treaty arbitration’ (July 2014) See: <https://www.iisd.org/sites/default/files/publications/stakes-are-high-review-financial-costs-investment-treaty-arbitration.pdf> accessed on February 15, 2021.

[70] Unión Fenosa Gas, S.A. v. Arab Republic of Egypt, ICSID Case No. ARB/14/4.

[71] Process and Industrial Developments Limited (P&ID) v. Federal Republic of Nigeria [Ad Hoc Arbitration] See: <https://www.irishtimes.com/business/energy-and-resources/nigeria-to-appeal-9-billion-award-to-irish-backed-company-over-failed-gas-deal-1.3991155> accessed on February 15, 2021.

[72] Process and Industrial Developments Limited (P&ID) v. Federal Republic of Nigeria [Ad Hoc Arbitration].

[73] Unión Fenosa Gas, S.A. v. Arab Republic of Egypt, ICSID Case No. ARB/14/4.

[74] ICSID, Caseload Statistics. (Issue 2019-2), <https://icsid.worldbank.org/sites/default/files/publications/Caseload%20Statistics/en/The%20ICSID%20Caseload%20Statistics%20%282019-2%20Edition%29%20ENG.pdf> accessed on February 15, 2021.

[75] Id.

[76] Id.

Paper presented at the AfAA 2nd Annual International Arbitration Conference[1], 15th - 16th April 2021 

Introduction

The International Centre for Settlement of Investment Disputes (“ICSID” or the “Centre”) started its operations with the entry into force of the ICSID Convention. Since then, its Rules have effectively served to advance the Centre’s purpose of “provid[ing] facilities for conciliation and arbitration of investment disputes”[3] in the “cause of economic development.”[4] At the same time, ICSID has historically taken the pragmatic approach of always improving and updating its Rules. In keeping with this approach, ICSID launched its latest rule amendment project in 2016 and is collaborating with the UNCITRAL Secretariat on a draft Code of Conduct for Adjudicators in Investor-State Dispute Settlement.[5]

This paper provides 1) a description of the Rule amendment process at ICSID from a historical perspective, 2) a status update on the current amendments, and 3) a discussion of some of the main recommendations made in the current amendments. 

Background on Amendments at ICSID

ICSID’s current rule amendment process is its most ambitious and far reaching.  Questions like how the amendment process works at ICSID and what amendments the Centre has made in the past rightly spark interest.

The ICSID Convention came into force on October 14, 1966.  According to its Article 66, amending the ICSID Convention is a two-step process which requires, first, that two-thirds of the members of the Administrative Council decide to circulate a proposed amendment to all Contracting States, and second, that the Contracting States unanimously adopt the proposed amendment.[6] The stringent nature of these requirements explains why the ICSID Convention has not been amended yet. The task is not impossible, but it is difficult because it requires the totality of the Contracting States—currently 155—to agree.[7] 

The ICSID Arbitration Rules came into force on September 25, 1967.  Article 6(1) of the ICSID Convention tasks the Administrative Council with the adoption of rules of procedure for conciliation and arbitration proceedings and provides that such decisions are to be made by a majority of two-thirds of the members of the Administrative Council. According to Article 4 of the ICSID Convention, the Administrative Council consist of one representative of each Contracting State. Thus, amending the Arbitration Rules is a much simpler process than amending the ICSID Convention and, as the Convention’s drafting history suggests, this was intentional.[8]

The ICSID Additional Facility Rules came into force on September 27, 1978. They were designed to allow the Centre to administer conciliation, arbitration and fact-finding proceedings for certain disputes that did not fulfill the jurisdictional requirements of the ICSID Convention.  Based on Regulation 7(1) of ICSID’s Administrative and Financial Regulations (“AFR”), amending the Additional Facility Rules only requires approval by a majority of the votes cast.[9]

In its 55-year history, ICSID has amended its Rules and Regulations three times: on September 26, 1984; January 1, 2003; and April 1, 2006.[10]  Cumulatively, these amendments have touched the Arbitration Rules and the Administrative and Financial Regulations under the ICSID Convention and Additional Facility and the Institution Rules under the ICSID Convention. While the 1984 and 2003 amendments only addressed a limited number of issues, the 2006 amendments were rather forward-looking.

-        With respect to the Centre’s Administrative and Financial Regulations, the 1984 amendments saw the alignment of the fees paid for lodging different proceedings, made applicants responsible for the payment of advances in annulment proceedings, and removed the requirement that the secretary of the commission, tribunal or ad hoc committee attend all meetings of that body.[11] Regarding the Arbitration Rules, the 1984 amendments touched Rule 21 on holding pre-hearing conferences; introduced Rule 39(5) on seeking provisional measures from local courts; and revised Rule 48(4) on publishing excerpts of the legal reasoning of tribunals.[12] 

-        The 2003 amendments eliminated differences between the Additional Facility Rules and ICSID Rules that “were unnecessary and needlessly complicated the task of the ICSID Secretariat.”[13] Also, the Additional Facility AFRs were dropped and the relevant provisions of the ICSID AFRs were made applicable to Additional Facility proceedings.[14] Other changes concerned Institution Rule 7 reminding parties that the registration of requests is without prejudice to the powers and functions of conciliation commissions and arbitral tribunal with respect to jurisdiction, competence, and the merits; Rule 1(3) and (AF) Rule 7 on the nationality of arbitrators; Institution Rule 2 and (AF) Rule 3 about evidence of the steps taken by juridical entities to authorize the initiation of proceedings; Rules 4 and 9 on adding flexibility to the deadlines on the appointment and disqualification of arbitrators; and Rule 46 on the time limit for the preparation of awards.[15]  

-       The 2006 amendments concerned Rule 6 and (AF) Rule 13(2) on expanding the scope of arbitrator disclosures; Rule 32(2) and (AF) Rule 39(2) on opening hearings to the public; Rule 37(2) and (AF) Rule 41(3) introducing submissions by non-disputing parties; Rule 39 providing for the expedited filing of requests for provisional measures; Rule 41(5) and (AF) Rule 45(6) introducing the manifest lack of legal merit objection; and Rule 48(4) and (AF) Rule 53(3) making mandatory the prompt release of excerpts of the legal reasoning of tribunals. The amendments also concerned AFR 14 clarifying that requests for increases in the rates applicable to commission, tribunal and ad hoc committee members could only be made in exceptional circumstances and submitted through the Centre.[16]

The Current ICSID Rule Amendment: Process and Scope

On October 7, 2016, at the 50th Annual Meeting of its Administrative Council, ICSID advised its Member States that it would commence a consultation process to consider potential amendments to its Rules.[17]  ICSID also invited its Member States to suggest amendment topics.[18]  On January 25, 2017, ICSID invited members of the public to file suggestions for Rule amendment.[19] Accompanying these invitations, ICSID published a list of topics for potential amendment.[20]  Subsequently, ICSID produced a first working paper (“Working Paper # 1” or “WP#1”) in August 2018, integrating numerous comments received from States and the public. The purpose of WP#1 was “explain the basis for a proposed change, note relevant considerations, and suggest the potential wording or structure of amendments.”[21]  ICSID held a Consultation Meeting with States in September 2018 and, subsequently, received further comments from States and the public on WP#1.  ICSID compiled these and published them on the website in March 2019.

Since March 2019, ICSID has produced three additional working papers,[22] held two more Consultation Meetings with States, and published three further compendia of State and public comments. A detailed timeline of the amendments is provided in the table below. With the publication of WP#4 in February 2020, ICSID invited comments on the latest proposals and planned an in-person Consultation Meeting with States.  The Consultation Meeting was cancelled, however, due to the COVID-19 pandemic. The number of outstanding issues to be addressed has narrowed considerably, and the ICSID Secretariat is currently preparing WP#5 that addresses these issues, to be published in the late Spring of 2021. 

Timeline of the amendments[23]

Date |  Step in the process

Oct. 2016 | Contracting States invited to suggest topics for rule amendment

Jan. 2017    | Public invited to suggest topics for rule amendment
Aug. 3, 2018    | Working Paper #1
Sept. 27–28, 2018     | First Consultation Meeting with States
Oct. 2018          | Further online and in-person consultations
Mar. 15, 2019      | Compendium of State and public comments on WP#1
Mar. 15, 2019      | Working Paper #2
Apr. 7-10, 2019  | Second Consultation Meeting with States 
June 28, 2019    | Compendium of State and public comments on WP#2
Aug. 16, 2019    | Working Paper #3
Nov. 2019            | Third Consultation Meeting with States
Feb. 27, 2020    | Compendium of State and public comments on WP#3
Feb. 28, 2020    | Working Paper #4
Sept. 17, 2020  | Compendium of State and public comments on WP#4
Mar. 23, 2021    | Compendium of State comments on proposed amendments to ICSID Rules

As depicted in the table below, the current amendments cover the AFRs, Conciliation Rules and Arbitration Rules both under the ICSID Convention and the Additional Facility. Moreover, they cover the Institution Rules under the ICSID Convention and Fact-Finding Rules under the Additional Facility. Finally, they introduce new Mediation Rules under the Additional Facility.[24]

Scope of ICSID’s proposed amendments

ICSID Convention Proceedings	Additional Facility Proceedings
AFR	(Additional Facility) Rules
Institution Rules	(Additional Facility) AFR
Conciliation Rules	(Additional Facility) Conciliation Rules
Arbitration Rules	(Additional Facility) Arbitration Rules
	Fact-Finding Rules
	(Fact-Finding) AFR
	Fact-Finding) AFR
	Mediation Rules
	(Mediation) AFR

Main Recommendations

According to the ICSID Secretariat:

The overarching goals of the rule amendments are to modernize, simplify, and streamline the rules, while also leveraging information technology to reduce the environmental footprint of ICSID proceedings. The process draws on the lessons learned from hundreds of ICSID cases.[25]

The core objectives of the current amendments have been described as to: 1) reduce the time and cost of proceedings at ICSID, 2) expand the range of dispute settlement options offered by ICSID, and 3) continue to balance the interests of States and investors at ICSID.[26] What follows is a discussion of a selection of proposed rules exemplifying each of the core objectives. 

Reduce the time and cost of proceedings

Expedited arbitration

Expedited arbitration (“EA”) is one of the proposals made in response to comments received from various stakeholders that “investment arbitrations are too long and too costly.”[27] The proposal focuses on reducing the length of time taken by the three phases of the proceeding that last the longest: the constitution of tribunals, exchange of written pleadings, and preparation of the award.[28] ICSID’s EA is an opt-in model that will be available for arbitration and post-award remedy proceedings both under the ICSID Convention and Additional Facility. EA may be especially practical in facilitating the access of small and medium enterprises (“SMEs”) to international arbitration, especially in cases involving smaller scale claims. It may also be an attractive option in cases involving fewer factual or legal disputed issues.[29] 

As stated by ICSID, EA “provides less flexibility to change time frames, but more certainty as to the timing of the process.”[30] Thus, in terms of time frames, the process is designed to take 18 months or less from the registration of the request for arbitration until the issuance of the award. Proposed Rule 77 provides for a sole arbitrator to be appointed by default if the parties fail to notify the ICSID Secretary-General in writing of their election for a three-member tribunal within 30 days of consenting to the expedited process. Whether the tribunal is to consist of one or three arbitrators, there is a 60-day time frame from the date of consent to EA for concluding the tribunal constitution process. Proposed Rule 80 cuts in half (from 60 days in the normal process to 30 days) the time frame within which a first session is to be held from the constitution of the tribunal and makes holding it by telephone or other electronic means of communication the default, with an in-person meeting being an option if both parties and the tribunal agree. Proposed Rule 81 provides deadlines for the filing of all written submissions (60 days for the memorial and counter-memorial each and 40 days for the reply and rejoinder each) and page limits for these submissions (200 pages for the first round and 100 for the second round). The hearing is to be held within 60 days of the last written pleading and statements of costs submitted 10 days thereafter. The tribunal must render its award no later than 120 days from the date of the hearing.            

In terms of process, the expedited nature of the proceeding requires a few “compromises”[31] in order “to strike a balance between an expedited procedure under commercial arbitration rules and a realistic schedule for investment disputes.”[32] For example, jurisdictional objections can be raised but for consideration with the merits and not examined in a separate, bifurcated phase. It is possible to file various applications, such as provisional measures, but their consideration runs in parallel with the procedural calendar without suspension. The parties’ consent to EA extends to the post-award remedy phase, such that for an award rendered under the EA process, any post-award remedy proceedings will fall under that process. Parties can opt out of EA by agreement or a decision of the tribunal at the request of either party. The schema below illustrates the steps and time frames of EA.    

Click to view EA procedural steps and timelines[33]

Time Limits

With the amendments, ICSID has made concrete proposals to reduce the time frames taken to accomplish various steps in a proceeding, starting with a new general duties provision. This provision makes it a shared burden for tribunal and parties to ensure that the process is timely and cost-effective,[34] as shown in the box below. ICSID proposes a similar provision in conciliation proceedings under the ICSID Convention (Conciliation Rule 25) and in arbitration, conciliation, and fact-finding proceedings under the Additional Facility (Arbitration (AF) Rule 11, Conciliation (AF) Rule 33, and Fact-Finding Rule 13, respectively).

Rule 3 General Duties

(1) The Tribunal and the parties shall conduct the proceeding in good faith and in an expeditious and cost-effective manner.[35]

In addition, numerous rules now specify exact and/or reduced times for procedural steps. Generally, time limits may be extended, but both parties must agree, or the tribunal must find that the extension is justified by special circumstances. In particular, time limits prescribed by the Convention or the Rules may be extended, but only by agreement of the parties or decision of the tribunal that special circumstances exist that justify the failure to meet a time limit. Otherwise, procedural steps taken after the expiry of a time limit shall be disregarded (proposed Rule 11(2)).  Time limits fixed by the tribunal or the ICSID Secretary-General may be extended, but only by agreement of the parties or by a decision of the tribunal or Secretary-General based upon a reasoned application submitted by either party before the expiry of the time limit. Otherwise, a procedural step taken after the expiry of the time limit shall be disregarded, unless the parties agree otherwise or the tribunal (or Secretary-General) finds that special circumstances exist that justify the failure to meet a time limit (proposed Rule 11(3)). 

The call for heightened efforts to reduce the time and costs of proceedings is also made to tribunals. Under proposed Rule 12(1), the tribunal must make best efforts to meet time limits. If the tribunal cannot meet a time limit due to special circumstances, it must so advise the parties before the expiry of the time limit and provide the reason for it and anticipated length of the delay (proposed Rule 12(2)). ICSID also proposes Rule 31 (corresponding to proposed Arbitration (AF) Rule 40) to allow tribunals to convene case management conferences “[w]ith a view to conducting an expeditious and cost-effective proceeding” to identify uncontested fact, narrow issues in dispute, or address other issues relating to the resolution of the dispute.[36]  

Arbitration Rule 38 on the closure of proceedings is eliminated along with the 120-day time limit for issuing awards. This is because tribunals have developed a practice of not closing the proceeding until the award is ready, which means that Rule 38 does not perform the function it was meant to of reducing the time it takes to issue awards.[37] Instead, ICSID proposes Rule 58 which, in a more impactful way, provides actual time limits that are pegged to specific procedural steps for the issuance of the award:

• 60 days after the latest of the constitution of the tribunal, last written or oral submission for award rendered based on a manifest lack of legal merit;  
• 180 days after the filing of the last written or oral submission for award rendered on a preliminary objection in a bifurcated proceeding; and
• 240 days after the last written or oral submission in other matters.

Expand ICSID’s range of dispute settlement options

The dispute settlement options offered by ICSID consist of arbitration, conciliation and fact-finding.  The amendments propose to expand the current options and add new ones.

Additional Facility

Currently, Article 2 of the Additional Facility Rules authorizes ICSID to administer conciliation and arbitration proceedings where either the dispute arises out of an investment but the State party to the dispute or the State whose national is a party to the dispute is not an ICSID Contracting State, or the dispute does not arise out of an investment but the State party to the dispute or the State whose national is a party to the dispute is an ICSID Contracting State.  Article 2 also authorizes ICSID to administer fact-finding proceedings.  

Proposed Article 2, whose text is provided in the box below, now only focuses on arbitration and conciliation. ICSID proposes to continue to administer fact-finding proceedings under the Additional Facility but under a new set of stand-alone Rules.

Article 2 Additional Facility Proceedings

(1) The Secretariat is authorized to administer arbitration and conciliation proceedings for the settlement of legal disputes arising out of an investment between a State or an REIO on the one hand, and a national of another State on the other hand, which the parties consent in writing to submit to the Centre if:

(a) none of the parties to the dispute is a Contracting State or a national of a Contracting State;

(b) either the State party to the dispute, or the State whose national is a party to the dispute, but not both, is a Contracting State; or

(c) an REIO is a party to the dispute.[38]

Proposed Article 2 expands the scope of current Article 2 with respect to arbitration and conciliation in two ways. First, Proposed Article 2 makes it possible for any State and the national of any other State to be parties to conciliation and arbitration proceedings under the Additional Facility, regardless of whether either State is an ICSID Contracting State. This inclusion accommodates some trends already observed in certain BITs[39] that allow disputes to be brought under the Additional Facility if both parties agree, where neither party is/comes from an ICSID Contracting State.[40] The requirement that the dispute arise out of an investment is kept because in the Centre’s experience, no disputes have been filed that did not arise out of an investment.[41]

Second, the disputants in conciliation and arbitration proceedings under the Additional Facility are no longer restricted to being a State and a national of another State. A Regional Economic Integration Organization (“REIO”) can be a party as a claimant or a respondent, and the proceeding can be between a State or REIO on the one hand and a national of another State on the other. The inclusion of REIOs in Additional Facility proceedings as parties is driven by the fact more and more REIOs, such as the European Union, are concluding in their own names international investment agreements (“IIAs”) that contain with dispute settlement provisions.[42] In addition, this sets the stage for an amendment of the ICSID Convention to include REIOs as ICSID Contracting Parties.[43] The fact that an REIOs can be parties to Additional Facility proceedings extends to the fact-finding and mediation rules. Rule 2(1) of the Fact-Finding Proceedings provides “[t]he Secretariat is authorized to administer fact-finding proceedings that relate to an investment, involve a State or an REIO, and which the parties consent in writing to submit to the Centre.” There is a similar provision at Rule 2(1) of the proposed Mediation Rules.

Mediation

As indicated above, ICSID is proposing a new set of stand-alone Mediation Rules under the Additional Facility as part of the amendment process. According to the ICSID Secretariat, the impetus for the Mediation Rules is that “[t]hey respond to the requests of stakeholders to provide greater mediation capacity. They complement new bilateral and multilateral treaties providing for mediation and more generally, the objective of the Centre to provide parties with a greater breadth of dispute resolution tools.”[44] Mediation, as a dispute settlement mechanism, is party-driven, informal, flexible, confidential, and cost-effective.

Under the ICSID Mediation Rules, the dispute would need to pertain to an investment but, as indicated above, the proceeding would be open to any State or REIO on the one hand and the national of any other State on the other hand, regardless of whether the relevant States are ICSID Contracting States.[45] Parties can undertake mediation on the basis of a pre-existing agreement or on an ad-hoc basis, and they can end the process anytime, by agreement of the parties or withdrawal of a party.[46] The process starts upon the filing of a request for mediation. Upon registration of the request by the ICSID Secretary-General, the parties can agree on the appointment of a mediator or co-mediators. Failing an agreement, the ICSID Secretary-General can make the appointment.[47] The parties have 15 days from the appointment of the mediator(s) to file their respective initial statements, and the mediator has 15 days thereafter to hold the first session for the determination of the mediation protocol.[48]  During the mediation, the mediator can meet with each party alone or with both parties together. The process can accommodate a hearing or exchange of documents akin to document production in arbitration. Information or documents exchanged cannot be used outside of the mediation process.[49] The process can end upon the withdrawal of a party, if the mediator(s) determine that it is unlikely to succeed, or if a settlement agreement is reached. If a settlement is reached, it can call for enforcement under the Singapore Convention on the enforcement of settlement agreements.[50]  The steps in the mediation process are depicted in the schema below.          

Click to view steps in an ICSID mediation proceeding[51]

Continue to balance the interests of States and investors

Third-party funding

Proposed Rule 14 on third-party funding (“TPF”) is new in arbitration proceedings under the ICSID Convention.  It is also proposed in arbitration under the Additional Facility (Arbitration (AF) Rule 23), conciliation under the ICSID Convention (Conciliation Rule 12), and conciliation under the Additional Facility (Conciliation (AF) Rule 21.  The Rule states, in part:

Rule 14 Notice of Third-Party Finding

(1) A party shall file a written notice disclosing the name and address of any non-party from which the party, directly or indirectly, has received funds for the pursuit or defense of the proceeding through a donation or grant, or in return for remuneration dependent on the outcome of the proceeding (“third-party funding”). [52]

First, the Rule provides a definition of TPF as ‘the direct or indirect receipt of funds to pursue or defend a proceeding, where such funds are provided by donation, grant or in return for remuneration that hinges on the outcome of the proceeding.’ The main obligation that arises under the Rule is one of disclosure which is satisfied by a party filing a written notice indicating whether it receives TPF and, if so, the name and address of the funder. The notice must be filed with the ICSID Secretary-General upon the registration of the request or, if the arrangement is made at a later date, immediately upon its conclusion. The party receiving TPF has a continuing obligation to notify the Secretary-General of any subsequent changes to the information contained in the notice.  This information is then provided to prospective or appointed arbitrators.  Finally, Rule 14 allows the tribunal to order the disclosure of information beyond what is contained in the notice of TPF at any stage of the proceeding if it deems necessary.

TPF is more and more commonly used in international dispute settlement not only by claimants to prosecute claims but also by respondents to defend them. The main reason for regulating TFP in ICSID proceedings is to avoid conflicts of interest between funders and arbitrators which, in turn, reinforces the legitimacy of the process. Correspondingly, the arbitrator and conciliator declarations of independence and impartiality contain an express requirement to disclose any relationship with a third-party funder.[53] 

Security for costs

Proposed Rule 53 is also new in arbitration proceedings under the ICSID Convention, and it is also proposed in arbitration under the Additional Facility (Arbitration (AF) Rule 63).  Rule 53 states, in part:   

Rule 53 Security for Costs

(1) Upon request of a party, the Tribunal may order any party asserting a claim or counterclaim to provide security for costs.

[…]

(6) If a party fails to comply with an order to provide security for costs, the Tribunal may suspend the proceeding. If the proceeding is suspended for more than 90 days, the Tribunal may, after consulting with the parties, order the discontinuance of the proceeding. [54]

As explained by ICSID, a security for costs “is intended to cover the costs that one party incurs in defending a claim asserted by the other party.”[55]  Under proposed Rule 53, any party asserting a claim or a counterclaim has the possibility to request, and the tribunal has the authority to order, security for costs.[56] The Rule lays out the applicable procedure, including a calendar for making submissions on a request for security for costs. The Rule also specifies relevant circumstances that a tribunal must consider when deciding the request. These include a party’s ability and willingness to comply with an adverse decision on costs, the effect that providing security for costs may have on the party’s access to justice, and the parties’ conduct (e.g., any abuse of procedure, the assertion of frivolous claims, or the non-payment of advances on costs).[57] The list is non-exhaustive, but the factors in it represent common practice.[58] The fact that a party may be impecunious or has TPF alone is not enough for the tribunal to order that that party provide a security for costs, although this consideration may be taken into account by the tribunal. The tribunal’s decision is rendered in the form of an order and not a recommendation. Compliance is mandatory, and non-compliance can result in the suspension of the proceeding until security is provided or a discontinuance if security is not provided within 90 days. The tribunal has the power to modify or revoke its order on its own initiative or at the request of a party.

Conclusion

This paper has provided a cross section of the ICSID amendment process and proposals, based on the wealth of materials, in particular the working papers, prepared by the Staff of the ICSID Secretariat from the launch of the amendments in 2016 until today.

As discussed above, ICSID amends its Rules in order to improve and update them and, ultimately, to continue to effectively serve its purpose. The extensiveness of the current amendments is, in a way, a testimony to the Centre’s success in this regard.  The explosion of its caseload has allowed ICSID to test its rules and, drawing from its rich experience and working with its Member States and members of the public, make the proposals currently under consideration. Given the experience with the on-going amendments, it is entirely foreseeable that future amendments might finally take on the ICSID Convention.

___________________________

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

1. INTRODUCTION

The conclusion, signing and ratification of a Bilateral Investment Treaty (BIT) is usually celebrated with measured pomp and pageantry as it is usually seen as a step that heralds an expectation of enhanced business and investment relations among investors of the Treaty Parties. With the BIT comes the expectation of the comfort and protection required to meet the profit expectations of investors on the one hand and an expectation of fulfillment of the investment expectations and possibly, economic development of the Host States, on the other hand.

In reality, whether or not the BITs meet the expectations of all involved is arguable, especially in relation to developing countries. The general notion is that the old generation BITs were designed essentially to give investment protection and comfort to investors to attract investments from capital-exporting countries, thereby meeting their profit expectations. In recent times, it is becoming apparent that in developing States, the profit expectations of the investors may have been met at the expense of the developmental objectives of the Host State, with sometimes harmful environmental and labour practices, ironically creating great poverty in areas of the greatest wealth.

The texts of the first-generation treaties, which centered primarily around investment promotion and protection appeared to have been designed to woo investors at any cost, no matter how much. They were a means through which capital importing countries do and sign whatever it took to attract investors and investments into their countries. Conversely, capital exporting countries sought to gain as much protection as the treaty could give to meet their profit expectations. It appears that the capital importing countries did not give much thought to the consequences of the loosely drafted provisions of such treaties beyond the optics of having signed a document that appeared to encourage inflow of investments.

Broadly drafted and unclear provisions such as definitions, fair and equitable treatment, full protection and security, pre-establishment, prohibition of performance requirements, expropriation and failure to circumscribe Most Favoured Nation (MFN) and National Treatment (NT) articles, devoid of ambiguities that enable broad interpretation of the text, are a few of the triggers of Investor- State Dispute Settlement (ISDS) cases.

The first generation treaty texts show a clear asymmetry between the rights and obligations of the investor, with the former far outweighing the latter. The treaties also included unbridled access to ISDS, which is at the core of investment protection policies implemented by host States to attract investors and is arguably the most important provision of International Investment Agreements (IIAs) to the investors, giving them the most comfort. Many still consider it scandalous that individual investors can commence commercial or investment arbitral proceedings against sovereign States, especially when the claims concern measures taken by the host State to achieve public policy objectives.

Overtime, there appears to have been a paradigm shift in that mindset as a result of a number of factors including the fact that the line between capital importing and capital exporting countries is fast fading or blurred. It also has not helped to see that a definite correlation between the signing of Bilateral Investment Treaties (BITs) and increase in FDI inflows is still a subject of debate.[1] Furthermore, some capital-importing countries have realized that even where the proliferation of treaties have attracted FDI, the investments attracted fall short of the right quality required to meet the economic growth expectations and developmental objectives of such host States.

Arbitral awards against developing countries heightened the concerns and fears of those who considered the text of the treaties and the system to be skewed against host States.  Some recent awards against developing host States have brought this previously latent concern to the fore. A case in point is the 2017 award ordering Nigeria to pay P&ID $6.6 billion plus interest amounting to a total of over $9 billion for a project that was yet to take off.[2] Another example is the 2018 International Centre for the Settlement of Investment Disputes (ICSID) award ordering Pakistan to pay $5.9bn to mining firm Reko Diq,[3] an amount that is about two times the total Foreign Direct Investment (FDI) attracted by Pakistan in 2018.  Some of these cases were brought on the basis of broadly drafted standards found in older IIAs that limit the right of host States to regulate investment in their territories, and that expose them more openly to investor–State disputes.[4]

Of further concern is the fact that in 2018, the majority of the new ISDS cases were brought by developed country investors against developing countries and transition economies.[5]

It is against this background that some developing countries such as Nigeria, which previously were capital importers and are now capital exporters, especially regionally, have commenced far reaching reforms to their IIA regimes. The focus of this short paper is to share Nigeria’s current approach in the negotiation of innovative content of BITs to meet not only the profit expectations of investors, but also the developmental objectives of the country.

2.    NIGERIA’S REFORM-ORIENTED APPROACH TO NEGOTIATION OF BILATERAL INVESTMENT TREATIES (BITs)

With the global wave of reforms, largely informed by an increase in the number of ISDS cases, and the growing dissatisfaction of host States in the old order of IIAs, which were clearly disconnected from the achievement of their developmental objectives, Nigeria commenced holistic and far-reaching national and bilateral reforms of its IIA regime. The reforms were structured to mirror UNCTAD’s three phases of IIA reform found in its Reform Package for the International Investment Regime (2018 edition)[6].

Phase 1 was a national effort in the development of a new model BIT. Phase 2 centers around a national review of the existing stock of old generation BITs and a bilateral effort at modernizing the treaties that fall short of the quality required to attract responsible, inclusive, and sustainable investments.  Phase 3 will entail an alignment of the bilateral reforms with the national laws to achieve cohesion at both levels.  The reform process is driven by Nigeria’s Investment Promotion Agency (IPA), the Nigerian Investment Promotion Commission (NIPC) established under the provisions of the Nigerian Investment Promotion Commission Act.[7]

2.1 New Model BIT

The national reforms in Nigeria’s investment treaty regime commenced in 2015 with the development of a new model BIT in pursuit of sustainable development, balance of investors’ rights and obligations, preservation of Nigeria’s policy space, expansion of investment facilitation dimension of the treaties and more importantly, the insertion of safeguards to seemingly unrestricted access to Investor State Dispute Settlement (ISDS).

The model was developed by an Inter-Ministerial IIA team comprising core economic Ministries and Agencies, including the Federal Ministry of Justice as Chair, Nigerian Investment Promotion Commission as Technical Lead, the Federal Ministry of Industry, Trade and Investment and a practicing Arbitrator in the academia.  The team was largely reflective of Nigeria’s standing Inter-Ministerial IIA team chaired by the Federal Ministry of Industry, Trade and Investment with Nigerian Investment Promotion Commission as technical lead/ Chief Negotiator.

The model, which became effective in February 2016 captures the national policy in innovative and modern provisions that set the tone for the attraction of RIBBS investments i.e Responsible, Inclusive, Balanced, Beneficial and Sustainable investments. Careful efforts were made to include well thought out definitions of key terms such as “investment” and “investor” to ensure that the protections and benefits of BITs only cover actual investments already established in Nigeria and determine in clear terms, who can access ISDS.

Other issues covered in the model, among others, were innovative provisions:

• introducing circumscribed NT and MFN articles;
• ensuring that BITs promote Nigeria’s sustainable development objectives including specifically addressing issues relating to the environment, human rights, health, labor, safety and anti-corruption;
• preserving Nigeria’s policy space and the right of Nigeria to regulate in the public interest;
• balancing the asymmetry in investor’s rights and obligations;
• inserting temporary safeguard measures;
• insertion of investment facilitation provisions to proactively assist investors with information and promote transparency of the legal and regulatory framework as well as transparency in arbitral proceedings;
• including dispute prevention as a key component of the treaty;
• establishing a Joint Implementation Committee to monitor the implementation of the treaty, share information on investment projects and serve as a de-escalation and mediation mechanism;
• Inserting pre-conditions to accessing ISDS and safeguards to curb seemingly unrestricted exposure to international arbitration.

3.  THE NIGERIA- MOROCCO BIT

In December 2016, the new model was used to successfully conclude negotiations and sign a BIT between the Federal Government of Nigeria and the Kingdom of Morocco. The Nigeria - Morocco BIT,[8] with its reform-oriented provisions, featured prominently in United Nations Conference on Trade and Development (UNCTAD)’s 2017 World Investment Report (WIR) and was cited as an example of a balanced “new generation” investment treaty, which other developing countries and emerging economies should emulate[9].

The Treaty captured virtually all the innovative reform-oriented provisions in Nigeria’s new model in addition to other critical investment protection provisions typically found in such treaties.

Though a number of its innovative provisions are yet to be tested, it seems safer to embed them in the treaty text with the chance of achieving the required objectives with them if and when they are tested as against not having them at all in the treaty text.

3.1 Dispute prevention, dispute de-escalation and mediation

Care was taken to word innovative provisions in the treaty to address some current global concerns on ISDS and the substantive provisions leading up to those concerns.  One major issue addressed nationally in the model BIT and bilaterally in the treaty is dispute prevention, dispute de-escalation and mediation.

The Nigeria-Morocco BIT establishes a Joint Implementation Committee, which among other things, is a dispute prevention mechanism, to “…seek to resolve any issues or disputes concerning Parties’ investment in an amicable manner”.[10] The Committee also serves as a mediation and dispute resolution mechanism, to resolve disputes submitted under specified timelines, by an investor within 6 months from the date of the written request for consultations and negotiations, failing which “…the investor may, after the exhaustion of local remedies or the domestic courts of host State, resort to international arbitration mechanisms”.[11]

These provisions and the Joint Implementation Committee mediation provide ready solutions at a bilateral level to concerns on the improvement of time efficiency for ISDS, enhancing treaty Parties’ involvement and control over their instruments, dispute prevention and mitigation, exhaustion of local remedies and mediation, which are being considered at multilateral engagements at the ICSID Rules (Amendment) Process and UNCITRAL Working Group III.

At the national level in Nigeria, the OSIC Lab, an administrative dispute prevention and resolution mechanism has been established in the country’s Investment Promotion Agency: Nigerian Investment Promotion Commission to support the country’s efforts at dispute prevention and de-escalation and other forms of mediation.

Unlike the discussions at the multilateral level, the treaty text at the bilateral level has the added advantage of reflecting a mutually agreeable time efficiency template that takes cognizance of the developmental realities and constraints of the treaty partners, thereby addressing the issue very quickly.

In similar national and/or bilateral efforts to address some ISDS concerns, Argentina and the United Arab Emirates have included a ban of Third Party Funding (TPF) in their 2018 BIT.[12] The United States has also restricted TPF of domestic claims against the federal government.[13] Similarly, Egypt’s Investment Law No.72 of 2017 provides “…multitiered mechanisms for the settlement of investment disputes, including domestic litigation, amicable settlement and alternative dispute resolution (ADR)…”[14] Essentially, it is indicative of the fact that Egypt seeks to develop an effective and flexible mechanism for the settlement of investment disputes. Such are similar bilateral efforts to treat other identified concerns raised under the ICSID Rules Amendment Process and UNCITRAL WG III. 

4.    REFORMING THE OLD GENERATION BITS

In 2017, Nigeria commenced Phase 2 of the reform process, which entails reforming the existing stock of old generation BITs that are still in force despite their potentially injurious provisions that expose Nigeria to the needless risk of international arbitration. Inspired by a table in UNCTAD’s 2017 World Investment Report, which analysed IIAs on the basis of 11 reform-oriented provisions,[15] Nigeria came up with 20 critical and reform-oriented parameters. On the basis of the 20 parameters, which included critical considerations for the IIA reform,[16]of the key investment protection, facilitation and promotion provisions of most of the 29 BITs signed by Nigeria prior to the adoption of the new model, were assessed.  The exercise revealed that a large percentage of the BITs fell short of the provisions needed to attract RIBBS quality investments. Validation of the work done on the assessment of Nigeria’s BITs was received from UNCTAD, the World Bank and Nigeria’s IIA team.

In 2019, practical steps commenced on the renegotiation and modernization of older BITs and concluded treaties that do not align with the current policy direction on Nigeria’s BITs. With guidance from UNCTAD, Nigeria recently undertook a country-specific analysis of each BIT in force with country by country proposals on the next steps to be taken to proactively modernize each BIT. The analysis highlights:

a)   scores of each Treaty based on the 20 critical and reform-oriented parameters used for the assessment;

b)   tenures and current status of each Treaty (since a large number of them are already expired but are automatically renewed along with the potentially injurious provisions);

c)    next dates for the possible unilateral termination of the Treaties; and

d)   tenure of the survival clause (during which the treaty provision will still be in effect even after the Treaties are terminated).

Similar country-specific analysis of concluded but yet-to-be-ratified BITs was undertaken with specific focus on the availability of quality safeguards to ISDS and the absence of pre-establishment provisions.

Engagements with some treaty partners has commenced on modernization of some treaties. 

5.    ALIGNMENT AND COHESION IN NATIONAL AND BILATERAL EFFORTS

To ensure cohesion of the reforms at the national, regional and bilateral levels, Nigeria has commenced preliminary work on Phase 3 of the reform process that entails the review of critical investment protection, facilitation and promotion provisions of the national investment law, the Nigerian Investment Promotion Commission Act,[17] which contains a number of unqualified protections, in addition to a seemingly unrestricted unilateral offer of Investor-State Dispute Settlement by international arbitration to foreign investors.

The objective is to ensure that the national investment law and other related legislations largely align with reforms undertaken at the bilateral level so that the gains made in the model BIT are not lost through the current provisions of the legislations.

Similar efforts at cohesion are being replicated at regional and multilateral negotiations including discussion on the AfCFTA Investment Protocol for Africa, the ICSID Rules Amendment Process, UNCITRAL Working Group III on the reform of ISDS and the formulation of Guiding Principles on Investment policymaking for D-8 countries developed jointly with UNCTAD. [18]The non-binding Guiding Principles provide guidance for investment policymaking with a view to: promoting inclusive economic growth and sustainable development; promoting coherence in national and international investment policymaking; fostering an open, transparent and conducive global policy environment for investment; and aligning investment promotion and facilitation policies with sustainable development goals. These initiatives aligns with Nigeria’s key IIA reform pillars, including sustainable development, right to regulate and preservation of policy space, balancing the asymmetry between investors rights and obligations and encouraging international cooperation on investment-related challenges in addition to mitigating investment disputes through the use of Ombudspersons or similar institutions. 

6.   CLOSING THOUGHTS

As the impact, negative and sometimes costly implications of loosely worded treaty provisions grow on treaty partners, the importance of carefully wording of such provisions and inclusion of reform-oriented provisions cannot be over-emphasized. It therefore behooves such treaty partners to formulate and embrace innovative tailor-made provisions that meet their policy objectives in order to ensure that the treaty meets a balance of expectations of both the investors and the Host States.

While the desirability of reforms in treaty negotiation is increasingly gaining ground, attention must be given to other success factors in the negotiation of such treaties, prominent among which are skilled treaty negotiators and having like-minded treaty partners, with complementary objectives around the table.

Forums such as the AfAA Conference provide an opportunity to share experiences and interrogate issues that help build the capacity of treaty negotiators and expose countries to the need to embrace the wide range of reforms in their investment treaty regimes. This, in my view, is a critical first step in enhancing the possibility of concluding even more reform-oriented treaties, which over time can change the “face” of BIT networks across the world.

____________________

* Deputy Director and Legal Adviser of Nigerian Investment Promotion Commission and Chief Negotiator of Nigeria’s International Investment Agreements team

[1] https://investmentpolicy.unctad.org/uploaded-files/document/unctad-web-diae-pcb-2014-Sep%2024.pdf (09 March 2020)

[2]https://jusmundi.com/en/document/decision/en-process-and-industrial-developments-ltd-v-the-ministry-of-petroleum-resources-of-the-federal-republic-of-nigeria-part-final-award-friday-17th-july-2015  (03 March 2020)

Process and Industrial Development Ltd. v. The Ministry of Petroleum Resources of the Federal Republic of Nigeria. 

[3]Tethyan Copper v. Pakistan https://www.thefreelibrary.com/Barrick+Gold+Corporation+(TSE%3a+ABX)+-+Barrick+Announces+Reko+Diq...-a0595353574 (03 March 2020)

[4] Hamed EL-KADY and Mustaqeem DE GAMA, The Reform of the International Investment Regime: An African Perspective, ICSID Review, (2019), pp. 1–14.

[5] https://investmentpolicy.unctad.org/publications/1202/fact-sheet-on-investor-state-dispute-settlement-cases-in-2018   (04 March 2020)

[6] https://investmentpolicy.unctad.org/publications/1190/unctad-s-reform-package-for-the-international-investment-regime-2018-edition- (04 March 2020)

[7] http://www.nigeria-law.org/Nigerian%20Investment%20Promotion%20Commission%20Act.htm

[8]https://investmentpolicy.unctad.org/international-investment-agreements/treaties/otheriia/3711/morocco---nigeria-bit-2016- (03 March 2020) https://www.iisd.org/itn/2017/09/26/the-2016-morocco-nigeria-bit-an-important-contribution-to-the-reform-of-investment-treaties-tarcisio-gazzini/ (03 March 2020)

[9]https://issuu.com/unpublications/docs/world_investment_report_2017/68 Pages 120-123 and 140 (03 March 2020)

[10] Article 4(4)d

[11] Article 26

[12]Agreement for the Reciprocal Promotion and Protection of Investments between the Argentine Republic and the United Arab Emirates, signed April 16, 2018 (03 March 2020) https://investmentpolicy.unctad.org/international-investment-agreements/treaties/bilateral-investment-treaties/3819/argentina---united-arab-emirates-bit-2018- (02 March 2020)

[13]  31 USC 3727 (United States Anti-Assignment of Claims Act). https://www.iisd.org/itn/2019/06/27/third-party-funding-and-the-objectives-of-investment-treaties-friends-or-foes-brooke-guven-lise-johnson/ (02 March 2020)

[14]Moataz HUSSEIN https://www.iisd.org/itn/2018/10/17/new-egyptian-investment-law-eyes-on-sustainability-and-facilitation-moataz-hussein/ (03 March 2020)

[15]https://issuu.com/unpublications/docs/world_investment_report_2017/68 Page 121 (04 March 2020)

[16] The parameters include reference to sustainable development, inclusion of enterprise-based definition of investment, inclusion of temporary safeguard measures, inclusion of transparency and investment facilitation clauses, among others.

[17]Nigerian Investment Promotion Commission Act No. 16 of 1995 (see earlier reference to this Act) http://www.nigeria-law.org/Nigerian%20Investment%20Promotion%20Commission%20Act.htm (03 March 2020)

[18] The D-8 Organization for Economic Cooperation, also known as Developing-8, is an organization for development co-operation among the following countries: Bangladesh, Egypt, Nigeria, Indonesia, Iran, Malaysia, Pakistan, and Turkey. Text of the principles available at: https://investmentpolicy.unctad.org/publications/1221/joint-d-8-organization-for-economic-cooperation---unctad-guiding-principles-for-investment-policymaking (04 March 2020)

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

This paper, which follows my presentation, provides an overview of the Belt and Road Initiative (the "BRI"), its aims, objectives and progress to date. It also discusses the impact and implications that the BRI will have on/for Africa within the broader context of African efforts to develop, industrialise and foster trade and investment on the continent.  Moreover, this paper also looks at some of the challenges which arise, including how and when these can lead to disputes, and the role that the African dispute resolution community can play in resolving and mitigating such disputes when they arise.

Scope of the BRI

Launched at the end of 2013, the BRI is a globe-spanning network of sea and land trade routes originating in China, and funded by vast sums of Chinese capital.  At its heart, the BRI is an infrastructure initiative (90% of BRI projects are linked to ports, rail and road, mineral processing or energy (oil, gas and renewables)) – albeit on a vast scale. Africa is a central element of the BRI; as the second-largest recipient of BRI investment, after Asia. 

Infrastructure and interconnectivity: planning and projects

Africa's infrastructure challenge remains the most significant and persistent hurdle to industrialisation and intra-African trade.  Approximately US$ 68-108 billion is required to meet Africa's infrastructure financing needs. 

China is the largest funder of infrastructure in Africa, and the BRI of course comprises a significant influx of capital for infrastructure.  China has so far invested in over 40 African countries under the BRI.  Notable projects include the following:

• US$1.6bn – Nigeria. The railway between Lagos and Ibadan, opened in January 2021. This is part of  the larger proposed US$ 11.1bn 2,733km railway line between Lagos and Kano.
• US$589.5m – Uganda.  The Isimba Hydroelectric Power Station, a 183.2 MW hydroelectric power station was commissioned on 21 March 2019 (funded by the Export-Import Bank of China), construction began in 2015.
• US$3.4bn – Ethiopia/Djibouti.  The modernisation of the railway from Addis Ababa to Djibouti (and associated construction of an industrial park in south Addis Ababa), completed in January 2021.

Despite the increase in high-profile projects, the question remains as to whether the BRI is a purely economic construct to enhance international cooperation (as China claims), or a geopolitical tool to enhance China's global strategic influence (as its strategic competitors suspect).  Regardless of the true position, the challenge for African countries is to align China's ambitions with their own needs and objectives, and therefore effectively take advantage of the synergies and opportunities that undoubtedly exist.

What are the biggest opportunities for Africans presented by the BRI, and are there any challenges?

Funding & Infrastructure

There is undoubtedly a vast and unprecedented influx of funding into major infrastructure projects in Africa as a consequence of the BRI.  The influx has the potential to help address long-overdue gaps and shortcomings in national infrastructure, and also to provide for more effective and efficient links within sub-regions of the continent.  However, funding often comes with conditions.  These can serve to limit the opportunities for Africans to participate.  For instance, the Standard Gauge Railway project (the "SGR Project") in Kenya (linking Mombasa with Nairobi, and originally planned to extend to Uganda) was funded on the condition that it be constructed by Chinese entities.  Such restrictions are not uncommon on BRI projects.  The conditions surrounding the SGR project are not uncommon, given that a third of major infrastructure projects undertaken in Africa are constructed by Chinese entities. Statistics show that while the labour constructing African BRI projects is increasingly African, more senior staff on projects are usually Chinese.  This restricts the opportunity for knowledge transfer and capacity-building. Opportunities for participation by African contractors are often limited (though may yet remain significant additional opportunities further down the supply chain).

It must therefore be kept in mind that challenges remain.  The SGR Project in Kenya, serves as an example of how BRI projects ultimately remain subject to China's aims and objectives, as the funding party.  In the project the objective to continue the line through to Uganda (therefore providing and important link, facilitating trade between two key regional economies) was abruptly dropped when China declined to fund the next phase of the line's development.  This is likely a consequence of the Chinese Government's recent steps (against the background of the global COVID-19 Pandemic and a changing global financial landscape) to scale back BRI investment, and shift away from more low-cost and less commercial funding.  As such, we have seen a drop in the levels of BRI investment over the course of 2020.

Outside of funding, there are opportunities brought by the infrastructure assets themselves.  A clear potential benefit is the increase of connectivity across Africa, and its potential to boost intra-African trade, economic activity and development.

Disputes

African parties involved in BRI projects, be they states, contractors or suppliers, must appreciate the risk that a divergence between their interests and the interests of China, could very likely lead to a fundamental change in the project structure, a dispute or a stalled project.  By way of example, the Beijing Everyway Traffic and Lighting Co Ltd v Ghana claim (brought under the Ghana-China BIT, in February 2021) provides an example of Chinese companies becoming more assertive in relation to pursuing and protecting their perceived rights in relation to projects and investments in Africa.

As regards advice and disputes, there are clear opportunities for African lawyers and consultants.  Infrastructure projects on a 'mega-project' scale inevitably give rise to disputes, at all levels.  Such projects will require a robust and efficient mechanism to address disputes as they arise in the course of the project itself (e.g. a DAB or DRB).  Further, more significant and project-critical disputes may need to be resolved by arbitration (and other ADR methods, such as mediation, can also play a role).  This underlines the importance of the work of bodies such as AfAA – in promoting knowledge of arbitration and dispute resolution in Africa.

The potential for dispute work is vast, and disputes are not necessarily confined to Sino-African companies and states. Other international actors are likely to be involved as contractors, suppliers and funders.

How can the opportunities presented by the BRI be taken advantage of?

We have seen arbitral institutions take specific steps to improve their ability to service BRI-related disputes, and to address related issues and considerations that arise.  Examples include the ICC's "Belt and Road Commission" and the HKIAC's "Belt and Road Advisory Committee".  Further, arbitral institutions (such as the CAJAC) are now in existence which aim to cater specifically to disputes in relation to Sino-African projects.

African arbitral institutions have an important role to play in taking steps to upskill domestic legal sectors (e.g. by developing skills and sharing their experience of complex cross-border arbitration with arbitrators, judges, lawyers, clerks etc.), thereby developing knowledge and capacity.

Against the background of the COVID-19 Pandemic and travel restrictions which we have all had to become familiar with, investing in, developing and adapting technology to support the conduct of arbitration has become, and will continue to be, more important.

The African Continental Free Trade Area

This year has seen the coming into being of the African Continental Free Trade Area ("AfCFTA").  This is the largest free trade agreement since the creation of the WTO.  It serves to enhance economic integration and cooperation in an economic area worth US$ 3.4 trillion, with a population of 1.2 billion people, and offers a further vital potential force for Africa's further development.  The AfCFTA has as its objective the deepening of economic integration amongst African states by creating a unified market for goods and services and, in the process, to drive Africa's industrialisation and structural transformation.

The aforementioned infrastructure gap, and shortcomings in key areas such as power capacity and availability and data connectivity, present obstacles to the achievement of the objectives of AfCFTA.  Indeed, as important as the removal of trade barriers, which AfCFTA provides for, is the alleviation of these physical barriers and bottlenecks which hinder the capacity for trade between, and within, African countries.

The BRI therefore has what is potentially a highly important role to play in working towards maximising the opportunities presented by AfCFTA – specifically by making available such a considerable (and vital) volume of funding to be directed towards infrastructure projects.  Such projects can, in turn, deliver infrastructure assets through which increased trade, unlocked by the AfCFTA, can flow. 

Concluding remarks

With such a volume of capital being committed, to such major projects, this undoubtedly presents opportunities – and infrastructure investment is a clear and pressing African need. However, as can fully be expected, in committing such investment, China understandably has its own objectives and aims (including expanding Chinese access to new markets and facilitating Chinese strategic global expansion) foremost in mind.  Africans will need to be astute, and aware of their legal and commercial rights and how to protect them, if they are to take best advantage of this once-in-a-generation opportunity.  An approach that might be summarised as "belt and braces", for the Belt and Road. 

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* Partner, Mayer Brown International LLP

AfAA 2nd Annual International Arbitration Conference - Reform and Innovation in International Dispute Resolution: African Perspectives, 15th - 16th April 2021

1. Salutations and Opening

• The President of the African Arbitration Association and former Attorney-General and Minister of Justice of the Federal Republic of Nigeria, Chief Bayo Ojo;
• The Secretary-General of the African Arbitration Association, Dr Rukia Baruti;
• The Board of Directors and Members of the African Arbitration Association;
• Distinguished speakers and participants;
• Colleagues, ladies and gentlemen.

I am delighted to join you on the occasion of the second annual conference of the African Arbitration Association to take stock of the growth of the association so far and to deliberate on the conference theme – Reform and Innovation in International Dispute Resolution: African Perspectives. 

I am even more pleased to be delivering the keynote address of the conference as this signifies the importance of the partnership between the ALSF and the AfAA. As many of you know, the ALSF supported the establishment and preliminary launch of the AfAA in Abidjan in 2018 - not least because both our organisations acknowledge and seek to promote legal capacity and processes and their utilisation or contribution towards sustainable development in Africa. This includes addressing the asymmetry of legal capacity between African countries and investors, ensuring balance and fairness in contracts and dispute resolution, and providing innovative solutions to various legal issues. 

2. Outline of Address

Ladies and gentlemen, it is on that last point, which is also reflected in the theme for the conference, that I wish to focus this address. I will begin by rehashing the slew of issues in need of reform and innovative solutions; Next, I will discuss some interesting developments that are speaking to or could address these issues; And then, Mr President, you will no doubt – on account of seniority privileges at the bar – permit me to offer some snap proposals in conclusion. 

3. Issues in need of reform and innovative solutions in Africa

These issues are known to all of us. But for the purpose of this address, I shall categorise them as follows: 

Issues	Examples/Causes
i.	Legal capacity and accessibility issues	Dearth of expertise in or exposure to cutting-edge areas of law; Wide dispersion of cutting-edge legal expertise; Sub-standard trainings in some cases; Exclusive outsourcing of legal work to international non-African firms; Limited range of local law firms; Cross-jurisdictional practice limitations; High costs of legal training; Inadequate relevant physical infrastructure and facilities; Poor organisation and promotion; Non-selection of qualified persons for transactions, arbitrations;
ii.	Legal rules and processes	Lopsided investment treaty and contract provisions, and dispute resolution frameworks; Lack of or weak harmonisation across borders - within RECs and continentally; Non-qualitative frameworks for law and rule-making;
iii.	Gender inequality	I believe the matter speaks for itself! Increasing female enrolments and qualifications are not commensurate with senior and leadership roles, or arbitration appointments; Marginalisation from large transactions;
iv.	Cultural and customary issues	Disregard for cultural and customary norms; Inadequate documentation or recognition of cultural and customary norms – especially in large-scale land-based transactions;
v.	Inter-disciplinary collaborations & Data issues	Inadequate understanding or connections with non-traditional disciplines and emerging areas, e.g., technology, e-commerce, blue economy, space, data sciences, etc.; Poor data collection, interpretation, and analysis for effective decision and rule-making;
vi.	IP protections	Insufficient knowledge or understanding of creators of IP issues; Ease of IP registrations; Inadequate attention to IP issues in complex commercial transactions;

These issues are by no means exhaustive. Nor are they mentioned in any particular order. In highlighting and attempting to categorise them, one hopes to instigate the process of analyses and clarification necessary for the more enterprising and progressive ones among us to begin considering and innovating solutions to the issues.

4. Some interesting developments 

Ladies and gentlemen, it is not all doom and gloom. If the issues I just mentioned evoked despair, then the recent developments I am about to share should give us hope and inspire further efforts to overcome the challenges. In the interest of time, I will only share 3 or 4 of such developments: 

  i.          The ALSF Academy

Allow me, Mr President, to lead with and expatiate on a flagship innovation of my own organisation – the ALSF Academy virtual capacity building platform. Long before the pandemic we recognised that it would take innovative solutions to achieve our vision of ensuring sustainable legal capacity for Africa. The ALSF Academy therefore utilises technology to address some of the issues I mentioned earlier, especially the legal capacity and accessibility issues. The platform enables us to provide training and skills in the key sectors of our operations – extractives, power, infrastructure and sovereign debt; as well as in relevant soft skills – while also ensuring that we will have access to an expanding pool of qualified experts to advice on complex commercial transactions. The training materials, which include video presentations, slides, and course handbooks, are complemented by other sector publications and online resources developed or supported by or accessible to the ALSF. The materials and resources are being developed through our partnership with various legal entities including - ABLFA (African Business Law Firms Association), CIFAF (International Training Centre in Africa for Francophone Lawyers), EALS (East Africa Law Society), ILFA, SADC-LA (SADC Lawyers Association), ERSUMA (Regional High School of Magistracy of OHADA), and Strathmore Extractives Industry Centre (SEIC). To this end, we are also working with the AfAA to expand on the arbitration resources available to enhance the skills and practice of African lawyers. 

The merits of the ALSF Academy online portal include sustainability, knowledge transfer, and continuous improvement: 

• Sustainability: The online portal provides all-round access to skills and information complementary to in-person trainings and that can be readily updated or upgraded.
• Knowledge transfer: The training provided through the portal enhances the capacity of African lawyers especially in key learning areas in line with international best practices.
• Evaluation and improvement: The ALSF can monitor and improve the effectiveness of the training through the analysis of data on who has accessed the portal and which sections have been viewed and utilised.

Since the launch of the online portal in 2019, more than 7,000 new users have been registered and 223 users have completed various levels of training on the platform. We expect to register more users as we develop more content and introduce more interactive features. In time, the ALSF Academy should coordinate all relevant legal resources and training for African lawyers. The ALSF Academy is available at: WWW.ALSF.ACADEMY.

              ii.          Other law and tech platforms - The Lawyers Hub / LawTrella / I-Arb Africa / Arbitration in Africa Surveys / AfAA Arbitration Law Atlas

The next set of innovations are also technology-based and speak to a number of the issues I mentioned earlier, i.e., legal capacity and accessibility issues, legal rules and processes, interdisciplinary collaborations & data issues, IP protections, and gender inequality.

Mr President, I recently had the pleasure of participating in the Pan African Lawyers Union (PALU) conference panel on Legal Technology and Continuing Legal Education in Africa and was introduced to some amazing work by some young African lawyers. That they are women alone I believe goes a long way in resolving the gender inequality issues! 

One of the enterprising young women was involved in the creation of the Lawyers Hub – a legal-technology policy organisation that provides technology-driven solutions to policy making, legal practice, and access to justice. Their policy hub brings together lawyers, tech professionals, civil society, academia and public policy professionals to develop technology driven options for governance, including in emerging areas such as internet governance, digital trade, digital ID, and digital inclusion, as well as the interface with more traditional concepts such as human rights and sustainability. They are also engaged in the use of technology to improve dispute resolution processes and are exploring artificial intelligence and machine learning technology to improve access to and efficient delivery of justice. Another of the women innovators has created LawTrella, an online platform that uses technology to facilitate continuous professional development, networking, co-working and client interaction. 

Mr President, I have more initiatives by women to speak about. The SOAS Arbitration in Africa Surveys (which the ALSF has supported), contribute to resolving the data issues mentioned earlier, for more effective decision making. The I-Arb Africa website features useful information on African countries’ accession to various arbitration centres, eligible African arbitrators, an international directory of arbitrators, arbitration schedules and events, awards involving African participation, and analyses of awards and developments in the arbitration space. Of course, the AfAA’s own online platform provides a directory of its members and their expertise and hosts and provides links to various arbitration resources including an atlas of African arbitration laws (supported by the ALSF) – which should facilitate reviews and analyses and harmonisation or convergence of arbitration rules and processes across borders.

iii.          Reforms in the international investment regime

According to the UN Conference on Trade and Development (UNCTAD)’s 2019 World Investment Report, out of 29 International Investment Agreements concluded in 2018, 27 contained various innovative features – including provisions espousing sustainable development objectives, gender equality, preservation of regulatory space, enhanced investment dispute settlement provisions or none at all. 

And, regarding Investor State Dispute Settlement (ISDS) reforms, the ongoing processes for reform of ISDS frameworks – notably the ICSID and UNCITRAL regimes – are well known. The issues being considered for reform are relevant to us and wide ranging, including proposals relating to third-party funding, whether to have an ad hoc or standing advisory centre, review or appellate mechanisms, cost-effectiveness of proceedings, electronic processes, selection of arbitrators, arbitrators’ code of conduct and ethics, exhaustion of local remedies, frivolous claims, security for cost, and dispute prevention and mitigation. But perhaps more can still be done to coordinate African perspectives and articulate them more forcefully. 

I note that two great panels will be discussing the reforms in the international investment regime in more detail this afternoon, so I will say no more than that it is refreshing that the ongoing reviews are open and inclusive. 

5. Conclusions 

Mr President, I will now conclude this address with a few thoughts for our consideration. 

i.  A proposal for virtual hearing management services

The objective will be to provide a simple and quick to deploy virtual infrastructure for participation in virtual hearings by African countries (especially fragile countries with technological and infrastructural challenges) by leveraging or utilising the resources of AfAA members or affiliates across the continent. While it is derived from a similar service by the American Arbitration Association, the design must be distinct if it is to be responsive to the needs of African clients. Some of the unique features of this platform could include local language translation services; “demystification” of the locus the subject matter of the investment dispute; access to relevant cultural information, and secure meeting rooms. 

ii.  A feedback loop

As advisors to African governments on transactions that could potentially end up in disputes, the ALSF is interested in utilising the lessons learned in ISDS outcomes or awards to enhance transactions by our regional member countries. The AfAA is therefore encouraged to consider developing its analyses frameworks to support this process. 

iii.  Illicit Financial Flows (IFFs) and Climate Change

Africa loses about US$90 billion in illicit capital flight every year – that is nearly 4% per cent of the continent’s GDP. And the solution mainly lies in improving national capacities and governance/regulatory systems, negotiating better investment and taxation agreements, cooperating home countries, and transparency of the global financial system. But the international arbitration regime has a part to play in curbing this criminality. If investors can challenge taxation in international arbitration on the grounds of expropriation or violation of national treatment, most-favoured nation treatment and fair and equitable treatment, then investors must also be accountable for their international financial crimes. Thus, the international arbitration regime can contribute to exposing unscrupulous activities such as nationality planning, money laundering, transfer misprising, and other tax evasion or corrupt practices, without violating the notion of non-arbitrability of tax. This will require arbitrators to be well-informed and vigilant in this ever-evolving field; as well as appropriate reforms in international dispute resolution. 

Also, while climate change has worse repercussions for Africa, our continent’s legal systems are yet to develop the legal frameworks to fully confront this issue. As the laws and regulations play catch up, our arbitrators need to be vigilant and use their roles in defending against the impact of some of the investments on climate change in Africa. 

Finally, I wish to end with news of collaboration between the ALSF and the AfAA. Further to our support of the Africa Arbitration Legislation Atlas, we are planning to collaborate on more projects aimed at creating knowledge products, capacity building, and promoting arbitration in Africa. The details of the projects are yet to be finalised, but I am hopeful that we can realise our common objectives if all of us members and partners continue to work together.

Mr President, ladies and gentlemen, congratulations on your second annual conference. I look forward to a lively and rewarding experience.

Thank you. 

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* Director & CEO, African Legal Support Facility (ALSF)