ARTICLE
25 March 2022

Dispute Resolution Protocols In African Continental Free Trade Area: Reviewing Existing Protocols And Rules

MC
Marcus-Okoko & Co

Contributor

Marcus-Okoko & Co logo
Marcus-Okoko & Co is a full-service International law firm committed to providing a wide variety of topnotch legal services to clients within and outside Nigeria. Our areas of expertise cover a broad range of corporate and commercial legal services amongst which include Corporate and Commercial Law and practice; Arbitration; Litigation; and other forms of ADR such as Legal and Regulatory Compliance; Mergers & Acquisitions; Competition & Antitrust; Project Management and Capital Markets.
The African Continental Free Trade Area (AfCFTA) Agreement arose as a result of the decision by the African Union to concentrate on the process of fostering continental economic integration through trade integration.
Nigeria International Law
To print this article, all you need is to be registered or login on Mondaq.com.

Introduction

The African Continental Free Trade Area (AfCFTA) Agreement arose as a result of the decision by the African Union to concentrate on the process of fostering continental economic integration through trade integration. At the 2012 AU Summit, Heads of State and Government adopted a Decision (Assembly/AU/Dec.394 (XVIII)) on the Establishment of a Continental Free Trade Area (CFTA) by the indicative date of 2017 and endorsed the Action Plan on Boosting Intra-Africa Trade (BIAT) which identifies seven areas of cooperation namely:

  • Trade policy
  • Trade facilitation
  • Productive capacity
  • Trade related infrastructure
  • Trade finance
  • Trade information and
  • Factor market integration.

Then in June 2015, at the twenty-fifth Summit of the African Union, held in South Africa, African Heads of State and Government agreed to launch negotiations on the creation of the CFTA by 2017 through negotiations on the liberalization of trade in goods and services. This initiative presents major opportunities and challenges to boost intra-African trade. In order to multiply the benefits of the CFTA and promote developmental regionalism in Africa, a comprehensive vision of trade and development needs to be in place.

Expanded markets for African goods and services, unobstructed factor movements and the reallocation of resources should promote economic diversification, structural transformation, technological development and the enhancement of human capital. The CFTA must be ambitious in dismantling barriers and reducing costs to intra-African trade and in improving productivity and competitiveness. It must provide for governments to involve nonstate actors, especially private sector, civil society and academia, in the discussions on the intent, content and design of CFTA so that the resulting agreement can create opportunities for businesses to exploit and bring about benefits to ordinary citizens.1

This paper will discuss what the AfCFTA agreement is all about and its protocols. It will also throw more light on the relevance of the Dispute Resolution protocols in African Continental Free Trade Area Agreement; its working framework and a review of the existing protocols and rules governing the African Continental Free Trade.

The African Continental Free Trade Area- An Overview

The African Union (AU) member states been desirous to implement the decision of the Assembly of Heads of State and Government during its Eighteenth Ordinary Session held in Addis Ababa, Ethiopia from 29th -30th January, 2012 (Assembly/AU/Dec. 394(XVlll) set out the Framework, Road Map and Architecture for Fast Tracking the establishment of the African Continental Free Trade Area and the Action Plan for Boosting Intra-African Trade;

The AU member states, was cognisant of the launch of negotiations for the establishment of the Continental Free Trade Area aimed at integrating Africa's markets in line with the objectives and principles enunciated in the Abuja Treaty during the Twenty-Fifth Ordinary Session of the Assembly of Heads of State and Government of the African Union held in Johannesburg, South Africa from 1415 June 2015 (Assembly/AU/Dec).

The AU member states were determined to strengthen its economic relationship and build upon its respective rights and obligations under the Constitutive Act of the African Union of 2000, the Abuja Treaty and, where applicable, the Marrakesh Agreement Establishing the World Trade Organization of 1994. Having regard to the aspirations of Agenda 2063 for a continental market with the free movement of persons, capital, goods and services, which are crucial for deepening economic integration, and promoting agricultural development, food security, industrialisation and structural economic transformation.

The AU member states were conscious of the need to create an expanded and secure market for the goods and services of State Parties through adequate infrastructure and the reduction or progressive elimination of tariffs and elimination of non-tariff barriers to trade and investment. It was also conscious of the need to establish clear, transparent, predictable and mutually-advantageous rules to govern Trade in Goods and Services, Competition Policy, Investment and Intellectual Property among State Parties, by resolving the challenges of multiple and overlapping trade regimes to achieve policy coherence, including relations with third parties; To recognize the importance of international security, democracy, human rights, gender equality and the rule of law, for the development of international trade and economic cooperation; To reaffirm the right of State Parties to regulate within their territories and the State Parties' flexibility to achieve legitimate policy objectives in areas including public health, safety, environment, public morals and the promotion and protection of cultural diversity; To further reaffirm its existing rights and obligations with respect to each other under other agreements to which they are parties; and To acknowledge the Regional Economic Communities (RECs) Free Trade Areas as building blocks towards the establishment of the African Continental Free Trade Area (AfCFTA).2

An important feature of the AfCFTA is the Protocol on Dispute Settlement which provides for the rules and procedures for the settlement of disputes within the AfCFTA. Unlike the majority of the African regional economic community courts that are modelled after the Court of Justice of the European Union, the AfCFTA Dispute Settlement Mechanism (AfCFTA-DSM) is modelled after the World Trade Organization Dispute Settlement Understanding.3 This is not the first time that an African trade dispute mechanism has been modelled after the WTO model.4 The Tripartite Free Trade Area Agreement between three regional economic communities in Africa – COMESA, EAC and SADC – preceded the AfCFTA. Its DSM is also based on the WTO model. While there is nothing inherently wrong in the transplantation of dispute systems such as the WTO model, the success of such transplants depends on the extent of the adaptation to the socio-political realities of the destination. In Africa, whether the model was transplanted from the European Union or the WTO, the experience reveals a strong discontent and apathy towards a highly legalized and formal trade dispute system. In relation to the Economic Community of West African States (ECOWAS), the Southern African Development Community (SADC) and the East African Community (EAC), the discontent has manifested in one form of backlash or the other with varying success.5 While the conundrum that has arisen from the discontent remains, the shift towards a more rules-based dispute mechanism under the AfCFTA exacerbates this problem.

A Review of the existing protocol and rules; The AfCFA Agreement6

The World Trade Organisation (WTO) deadlock has not only resulted in the proliferation of traditional trade agreements but has seen the emergence of agreements extending sometimes beyond the current WTO mandate. These have been given the name of mega-regional trade agreements. The rise of mega-regionals is one of the most striking contexts to study African regional trade agreements. A mega-regional is considered to be a trade agreement that is negotiated by three or more countries or regional groupings, whose members collectively account for 25% or more of world trade, and the substance of which goes well beyond current WTO disciplines. It bears noting, however, that while other mega-regional trade agreements such as the Transatlantic Trade and Investment Partnership (TTIP) and the Trans-Pacific Partnership (TPP), launched with great publicity, had come to a standstill in recent years, whereas the negotiations on the AfCFTA have been relatively straightforward.

As hinted above, the objectives of the AfCFTA are to create a single market for goods, services, facilitated by the movement of peoples and capital, which will lay the foundations of a continental customs union. While relying on liberalizations achieved in the regional economic communities (RECs), the AfCFTA also sets as its goal to 'resolve the challenges of multiple and overlapping memberships' in those RECs.7 Indeed, overlapping memberships has been one identified as an obstacle for African regional trade agreements.

Pursuant to Article 6 of the Agreement, the AfCFTA covers trade in goods, trade in services, investment, intellectual property rights and competition policy. While the Protocols on trade in goods and on trade in services are concluded, alongside the Dispute Settlement Protocol, investment, intellectual property and competition policy are the subject matters of Phase II, which began immediately after the conclusion of the AfCFTA Agreement.8

It is important to note that the while the above-mentioned Protocols are now in force, negotiations on parties' schedules of concessions/commitments (in goods9 and services10) and other issues (such as rules of origin11) necessary to give impetus to the agreements are still underway.12 Upon adoption, these annexes to the particular protocols will form part of their respective protocols,13 and eventually form part of the AfCFTA Agreement more broadly.14

Institutionally, the AfCFTA's implementation is entrusted on four main entities. The first is the Assembly, which, composed of Heads of States and Government of the AU, is the highest decision-making organ. The role of the Assembly is to 'provide oversight and strategic guidance on the AfCFTA' and adopt authoritative interpretation of the AfCFTA Agreement.15

The second organ is the Council of Ministers.16 The latter is composed of Members' Ministers in charge of trade and has a large mandate to oversee the effective implementation and enforcement of the AfCFTA. This is also de facto the legislative organ in that it tasked, among others, to make regulations, issue directives, deal with budgets, and recommend authoritative interpretation to the Assembly.

The Committee of Senior Trade Officials is the third institution which is composed of Permanent or Principal Secretaries of each State Parties with the main role to implement the decisions of the Council of Ministers.17

The fourth entity is the Secretariat, which, pending its establishment, is hosted by the African Union Commission.18 Upon its operationalization, it will be an autonomous institutional body within the African Union system with an independent legal personality.

The Dispute Resolution protocol in the AfCFTA

Dispute settlement systems play a key role in international economic integration. An active, independent, efficient and reliable Dispute Settlement Mechanism (DSM) is essential to not only settling disputes between the state parties in upholding a rules-based regime; but also, critical to developing relevant jurisprudence that will guide the single market economy objective of the constituent trade agreement. In the AfCFTA context, the DSM will also be important for the purpose of interpreting areas of overlap or conflict with other former judicial orders in Africa.

Article 20 of the AfCFTA establishes the DSM. The DSM shall be administered in accordance with the Protocol on Rules and Procedures on the Settlement of Disputes ("Dispute Protocol"). The Dispute Protocol establishes a Dispute Settlement Body (DSB) and provides for the settlement of dispute in a transparent, accountable, fair, and predictable way that is consistent with the provisions of the establishing agreement.19

The procedure for the settlement of disputes under the AfCFTA consists of Consultations; Good Offices, Conciliation or Mediation; Panels; and an Appellate Body. Disputing parties can explore arbitration at first instance as a means to settling their disputes. The Dispute Protocol applies to disputes between State Parties relating to their right and obligations thereunder, subject to such special and additional rules and procedures on dispute settlement contained in the AfCFTA. To guard against forum shopping, where a State Party has initiated a proceeding under the Dispute Protocol regarding a specific matter, the State Party shall not invoke another forum for dispute settlement on the same matter.

Analyzing the AfCFTA-DSM in Context

As stated above, unlike the regional courts regime that are mostly modelled after the European Union, the AfCFTA-DSM is modelled after the WTO-DSM. The AfCFTA-DSM is not the first time that African states have adopted a WTO-styled dispute system. At the regional level, African States have drawn inspiration from the WTO dispute settlement system. Some examples include, the Southern African Development Community (SADC), the Common Market for Eastern Africa and Southern Africa (COMESA) and the Tripartite Free Trade Area (TFTA) Agreements.

According to the AfCFTA's principles, State Parties commit not only to using the Regional Economic Communities (RECs) as the building blocks for the AfCFTA but also to draw on their best practices while simultaneously addressing the perennial challenge of overlapping membership. The first arena for potential challenge with the similarly styled DSM at the regional level relates to overlapping and conflicting provisions.

Article 19 which relates to "Conflict and Inconsistency with regional agreements" directly addresses this issue. In the event of any conflict or inconsistency between the provisions of the AfCFTA and any regional agreement, the provisions of the AfCFTA shall prevail in respect of the specific inconsistency. However, where a REC, customs unions or regional trade arrangement has achieved a higher level of integration that under the AfCFTA, the higher levels shall prevail among themselves.20 While this is an important provision for a seamless co-existence of the AfCFTA-DSM with other similar mechanisms, a major lacuna remains the wholesome reliance of the AfCFTA-DSM on the WTO without capitalizing on any of the burgeoning experience at the regional levels.21

Conclusion: Towards an Active and Relevant AfCFTA-DSM

A safe landing to the above analysis would be to state that, the drafters of the AfCFTA who transplanted the WTO-DSM should not be equated with failure but be seen as a window of opportunity that can be utilized to amend the dispute protocol in order to reflect the judicial attitude of African states towards trade dispute settlement, while also expanding the pool of actors to include private businesses who are the primary users of the system.

In this regard, the AfCFTA can learn both from the experience of the WTO's dispute settlement system as much as from the non-litigious settlement of disputes from Africa's sub-regional systems. In addition, the experience and expertise of the sub-regional courts in Africa should inform how the AfCFTA's dispute settlement system develops and evolves.

Footnotes

1. See for further discussion, The Continental Free Trade area: Making it work for Africa, UNCTAD Policy Brief No. 44, December 2015.

2. Preamble: The African Continental Free Trade Area Agreement, 2018

3. See, James Thuo Gathii, "Evaluating the Dispute Settlement Mechanism of the African Continental Free trade Agreement", Afronomicslaw Blog, April 10, 2019; Online: http://www.afronomicslaw.org/2019/04/10/evaluatingthe-dispute-settlement-mechanism-of-the-african-continental-free-trade-agreement/; Karen J. Alter, "The Global Spread of European Style International Courts", (2012) 35 West European Politics, pp. 135-154.

4. For an analysis of the SADC Trade Tribunal and its overlap with the WTO dispute settlement system, see, Joost Pauwelyn, "Going Global, Regional, or Both? Dispute Settlement in the Southern African Development Community (SADC) and Overlaps with the WTO and other Jurisdictions", (2004) 13 Minn. J. Global Trade, pp. 231-304

5. Karen J. Alter, Laurence Helfer, and James Thuo Gathii, "Backlash against International Courts in West, East and Southern Africa: Causes and Consequences", (2016), European Journal of International Law, Vol. 27 No. 2, 293– 328

6. Regis Yann Simo, The African Continental Free Trade Area in a Decaying Multilateral Trading System: Questioning the Relevance of the Enabling Clause @https://ssm.com/abstract=3501539 (10-11)

7. Article 3(h) of the AfCFTA Agreement.

8. See Article 7 of the AfCFTA Agreement

9. See Article 8 of the AfCFTA Agreements' Protocol on Trade in Goods. See also Annex 1 of the Protocol on Trade in Goods.

10. See Article 22 of the AfCFTA Agreement's Protocol on Trade in Services.

11. See Article 13 of the AfCFTA Agreements' Protocol on Trade in Goods. See also Annex 2 of the Protocol on Trade in Goods.

12. For the AfCFTA Agreement framework, see Figure 2.

13. See Articles 22(4) and 28 of the AfCFTA Agreement Protocol on Trade in Services, Articles 3 and 8(1) of the Protocol on Trade in Goods

14. See Articles 1 and 8 of the AfCFTA Agreement.

15. Articles 9 and 10 of the AfCFTA Agreement

16. Articles 9 and 11 of the AfCFTA Agreement.

17. See Articles 9 and 12 of the AcFTA Agreement

18. Articles 9 and 13 of the AcFTA Agreement

19. The DSB that will comprise of the representatives of the AfCFTA State Parties. The DSB shall have a Chairperson to be elected by the State Parties. The DSB has authority to establish Dispute Settlement Panels and an Appellate Body; adopt Panel and Appellate body reports, maintain surveillance of implementation of the rulings and recommendations of the Panels and the Appellate Body; and authorize the suspension of concessions and other obligations under the Agreement. Decisions to be taken by the DSB shall be by consensus. The Chairperson of the DSB shall be elected by the State Parties and will meet as often as necessary to discharge its functions.

20. 46 Article 19 (1-2)

21. Olabisi D. Akinkugbe, Dispute Settlement under the African Continental Free Trade Area Agreement: A Preliminary Assessment @https://ssm.com/abstract=3403745 (6)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

ARTICLE
25 March 2022

Dispute Resolution Protocols In African Continental Free Trade Area: Reviewing Existing Protocols And Rules

Nigeria International Law

Contributor

Marcus-Okoko & Co logo
Marcus-Okoko & Co is a full-service International law firm committed to providing a wide variety of topnotch legal services to clients within and outside Nigeria. Our areas of expertise cover a broad range of corporate and commercial legal services amongst which include Corporate and Commercial Law and practice; Arbitration; Litigation; and other forms of ADR such as Legal and Regulatory Compliance; Mergers & Acquisitions; Competition & Antitrust; Project Management and Capital Markets.
See More Popular Content From

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More