Arbitration as a Means to Settle Disputes in the Wake of AfCFTA - Keynote statement
Article from: TDM 3 (2022), in Editorial
Namira Negm (Dr.), Legal Counsel of the African Union *
Ladies and Gentlemen joining us from around the world, good day.
Thanks to SOAS and CIMAC for inviting me at this 7th SOAS Arbitration in Africa Conference. It's my pleasure to be here.
The African Continental Free Trade Area (AfCFTA) needs no introduction anymore. It is arguably the African Union's biggest project since the launch of Agenda 2063 in January 2013, which constitutes the blueprint for sustainable development and economic growth of our Continent.
So, today my address will focus on Arbitration as a means to settle disputes in the wake of AfCFTA.
Is it true that The AfCFTA was borne out of the mutual desire for economic growth and fight socio-economic ailments, including the illegal migration that leads to the loss of life of many of our youth? This noble objective maybe good enough if we are in utopia. Why? Simply because:
- States have their differences;
- States are inherently selfish when it comes to their interests; and
- States are motivated by what is in it for them.
So, luckily whether for the utopian goal or for interests, AU States managed to have a brilliant treaty adopted. Yet, differences are bound to happen and disputes between States on the interpretation and application of the agreement's provisions will occur.
As a consequence, it is not only natural but rather essential that international trade agreements incorporate provisions that provide for effective dispute settlement mechanisms. AFCFTA is no different.
Article 20 of the AfCFTA establishes a Mechanism to settle disputes arising between State Parties only. The Mechanism is to be administered in accordance with the Protocol on Rules and Procedures on the Settlement of Disputes, which is part and parcel of the Agreement. This is a similar model to the World Trade Organization (WTO) dispute settlement system, which consists of a Dispute Settlement Body, Panels and an Appellate Body. So, what about arbitration?
Well, pursuant to the AfCFTA Protocol on Dispute Settlement, recourse to arbitration is a matter of choice to be made jointly by the Parties to a dispute.
Article 6(6) states that "where the parties to a dispute consider it expedient to have recourse to arbitration as the first dispute settlement avenue, the parties to a dispute may proceed with arbitration as provided for in Article 27 of this Protocol."
Based on this provision, we can safely say:
- First, within the AfCFTA process, State Parties' can choose to recourse to arbitration as a means to settle their disputes, but they are in no way under any obligation to do so;
- Second, the scope of access to arbitration is limited to the first instance only. This means that in case of unsuccessful consultations, States mutually decide to refer their dispute to the Dispute Settlement Body (DSB) created under Article 5(1) of the Protocol. Hence, the option of arbitration is taken off the table. However, the DSB must still be notified of the decision to go to arbitration.
- Third, all parties to the dispute must agree to explore the option of arbitration, so there is no room for a unilateral referral. In a way, this requirement protects smaller and poorer States from being forced to submit to the choices of the bigger and richer States.
As for the specific requirements to resort to arbitration, they are elaborated in Article 27 of the Dispute Settlement Protocol, where the parties to the dispute,
- have to mutually agree on the procedures to be followed in the arbitration proceedings. Presumably, this will include the applicable rules, such as UNCITRAL, ICC etc. as the provision is silent on such options; (Paragraph 1)
- are barred from simultaneously referring the same matter to the DSB, once they agreed to refer a dispute to arbitration. Obviously, this is to avoid a duplication of efforts; (Paragraph 2)
- are obligated to notify the DSB of their decision to resort to arbitration; (Paragraph 3)
- must also jointly agree to a joinder of third parties to their proceeding; (Paragraph 4)
- should abide by the arbitration award and they should notify the DSB of such award for enforcement; (Paragraph 5) and
- In the event of the refusal of one of the parties to cooperate, the Complaining Party shall refer the matter to the DSB for determination. (Paragraph 6)
Also, this provision states that "Arbitration awards shall be enforced in accordance with the provisions of Articles 24 and 25 of this Protocol mutatis mutandis." Now, this is where it becomes a little complex. (Paragraph 7)
But, before I move to address the enforcement mechanism, allow me to comment quickly on the requirements, I have just mentioned.
If we analyze thoroughly Article 27, it is easy to discover that emphasis was given to show that arbitration under the AfCFTA is a 'first instance mechanism' as it requires the parties that chose arbitration to conclude it before resorting to the DSB, should arbitration fail.
What is even more interesting about this provision is that while it requires the parties to abide by the arbitration award, it does not necessarily mean that such award is final. That is to say that the provision does not expressly bar any of the parties from having further recourse to another dispute settlement mechanism, in this case, the DSB.
Now, moving back to Article 24 is about "Surveillance of Implementation of Recommendations and Rulings", and Article 25 is on "Compensation and the Suspension of Concessions or any other Obligations".
Let's start with Article 24. In Paragraph 1, it stipulates that "State Parties shall promptly comply with recommendations and rulings of the DSB". This includes arbitration awards, which, as I mentioned earlier, are enforced by the DSB.
In this regard, this Article also makes provisions for circumstances where States may find it impractical to promptly comply, in which case the concerned State may be granted an extension of time to do so. The time extension can be granted on three (3) grounds, as follows:
- a period of time proposed by the concerned State Party, subject to DSB approval;
- a period of time mutually agreed upon by the parties to the dispute; or
- if the previous two fail, a period of time determined through binding arbitration within ninety (90) days after the date of adoption of the recommendations and rulings.
In this situation, recourse to arbitration is very different from the one referred to under Article 27 as it is used, not to settle a dispute arising out of the interpretation or application of the AfCFTA Agreement, rather, as an after the fact mechanism to make a determination on the time to be granted to the State against which a ruling or recommendation was already made or an arbitration award already issued.
Now moving to Article 25 on Compensation and the suspension of concessions or other obligations, we will find that the measures stated under this provision are meant to be temporary in nature. They are only made available to the aggrieved Party in the event that the recommendations and rulings of the DSB are not implemented within a reasonable period of time.
Of course, we know that if the matter gets to this point of considering the suspension of concessions or other obligations, then it must be very serious, which is why there is a strict application of the principles and procedures listed in Article 25(5) before an aggrieved State can be granted authorisation to suspend concessions or obligations under the AfCFTA Agreement.
In this circumstance, recourse to arbitration is proposed where the defaulting State objects to the granting of authorisation to the aggrieved State to suspend concessions or obligations.
The process for such arbitration is set out in Article 25 paragraphs (8) and (9) of the Dispute Settlement Protocol and like the one proposed under Article 24, it is very different from arbitration as a means to settle disputes under the AfCFTA Agreement.
In Article 27, the arbitration is used as a first instance adjudication process, while in the latter case of Article 25, The Parties to a dispute shall accept the arbitrator's decision as final and the parties concerned shall not seek a second arbitration. Yet, although Article 24, didn't expressly mention that the as a means to settle their disputes regarding the duration of the extension or in relation to the full implementation of the award, it has stated in paragraph 3 (c) that the arbitration in this case is binding.
The common factor that can easily be identified in both Articles 24 and 25 is the attempt of the negotiators to ensure that in case of disputes arising in relation to the execution of the arbitration award, their preference is to settle such disputes through the original panel. Yet, in case of difficulties they created different means to appoint arbitrators or settle the disputes. Here, the secretariat and the DSB play bigger roles than simple surveillance in the form of monitoring the implementation of awards.
Based on all this, it is fair to say that arbitration is an important means to settle disputes in the wake of the AfCFTA, however, whether disputing State Parties will choose to go down that route is a determination to be made by States on the merit of each situation. Certainly, the concerned State Parties will each weigh their options based on a number of factors including time and cost, as well as a willingness to even agree with the other party to go to arbitration.
So what does that mean for Arbitration centres, arbitrators and lawyers in Africa? I would say we have a new instruments to play with.
I personally believe that, the AFCFTA, will assist us in flourishing. African-African Arbitration that may be the outcome of transactions under the Agreement, will hopefully be managed and adjudicated within the continent. Back to the slogan of African Solutions for African Problems.
If my wishful thinking is in place, that means all of us in the international legal field, especially those who are involved in arbitration matters will need to study the ins and outs of the AfCFTA, like states obligations vs traders... etc..
In this context, we will need capacity building to ensure the proper understanding of this new text to enable the appropriate implementation and for advising our clients from both governments and incorporations to the best means to settle the disputes arising from such implementation.
This is something we have to fight for, especially, African Arbitration centres who should show case of their facilities and lists of competent arbitrators to be used by any parties who would like to resort to arbitration as means to settle their disputes. I don't see the logic of why we would leave this opportunity slip from our hands. It's a golden one that we should grab and hold on to in order to ensure that the entire process relating to the AfCFTA remains within our continent.
Thank you so much for your kind attention and I look forward to hearing your thoughts and feedback.
* Seventh SOAS Arbitration in Africa Conference co-hosted by Casablanca International Mediation and Arbitration Centre (CIMAC) 23-24 November 2021. Conference Title: Navigating the Interests of Africa States in International Arbitrational and Mediation.