As of 2022, 46 African countries have signed a memorandum of understanding to be part of the Belt and Road Initiative (BRI), which is China’s infrastructural investment push involving much of the developing world. The BRI’s influence on the continent is doubtless and involves technically complex, high-value, long-term and capital-intensive undertakings, which frequently involve substantial public and state interests. Energy generators, long-distance pipelines, ports, and railways are but a few examples. As such, BRI projects are a fertile environment for cross-border, multiparty and complex disputes.
This blog explores the evolution in the articulations of dispute resolution provisions in bilateral investment treaties (BITs) between China and African states.
China’s BITs with African states can be broadly organised into three generations. At first, dispute settlement was mostly limited to issues relating to quantum of compensation for expropriation. These narrow dispute settlement clauses still survive today in China’s BITs with BRI states and pose difficulties to Chinese investors who are involved in disputes with such countries. Subsequently, however, China signed the ICSID Convention in 1990 (ratifying it in 1993), and more recent BITs between China and African states have a broader approach to dispute settlement.
Evolution of China-Africa dispute resolution provisions within BITs
The first-generation BITs signed by China in the 1980s had a markedly limited scope for investor-state dispute settlement (ISDS), and few substantive protections. BITs from this period are notable for the absence of national treatment clauses. Recourse to international arbitration was constrained to issues relating to quantum of compensation for expropriation only. Further constraints included case-by-case consent provisions and security exceptions to dispute settlement. In certain cases, there were no ISDS provisions at all. The China-Ghana BIT (1989) is a good example of such a first-generation treaty which did not permit the arbitrability of the lawfulness of expropriation or allegations of any other violations of the few substantive protections contained in the BIT.
The second-generation BITs signed in the 1990s, such as the China-Egypt BIT (1994) made only minor changes, limiting arbitrability to quantum of compensation for expropriation but naming the ICSID Secretary General as the default appointment authority. The absence of national treatment provisions largely persisted into this period. Furthermore, while these older treaties have limited disputes to quantum of compensation for expropriation, certain tribunals, such as the tribunal in Tza Yap Shum v Republic of Peru have interpreted such treaties as nonetheless conferring a broader scope of jurisdiction.
Finally, more contemporary BITs signed between China and African states no longer contain limitations on arbitrability vis-à-vis substantive protections. The China-Tanzania BIT (2013) is a good example, as it also directly provides for ICSID arbitration, a break from previous generations. The same features can be found in other recent China-Africa BITs, such as the BITs signed with Congo (2011, not in force), Tunisia (2004) or Uganda (2004, not in force). Yet, it bears noting that while certain recent intra-African BITs, such as the Morocco-Nigeria BIT (2016), have highlighted environmental and human rights protections, not even the most recent China-Africa BITs have demonstrated such a shift.
The fact that Chinese BITs appear increasingly to provide for ISDS cuts against a historical trend whereby China has appeared to demonstrate a reluctance to see Chinese companies pursuing investment arbitration against a sovereign country. This, at least in part, may have reflected a concern among Chinese investors that bringing arbitrations may threaten the relationship with the host state, which in turn may harm prospects for future projects.
Conclusion
The foregoing demonstrates a trajectory whereby, progressively, BITs between China and African states have come to accommodate dispute resolution provisions that are wider in scope and complexity.
In considering subsequent generations of BITs between China and African states, it may be that African states increasingly demand requirements for environmental protection and the upholding of human rights in future BITs with China, as they are increasingly doing among themselves. In this respect, African states would accelerate global momentum towards the next generation of investment treatymaking.
Relatedly, with China’s investment push in Africa being noticed internationally, China may have to contend with a renewed push by other states to deepen their investment relations with the continent to compete. Such states include emerging economies, such as Turkey, which signed BITs with Angola and Congo in 2021, and the UAE, which signed BITs with Congo in 2021, Zambia in 2020, and Sierra Leone in 2019.
More traditional actors have also joined increased efforts to deepen their investment relationship with African states. Such is the case, for example, with the United Kingdom, which signed new BITs with Ghana in 2021, Kenya in 2020, and Egypt in 2020.
Whether the pressures of an increased African agency in treatymaking and broader competition from other investors pushes BITs between China and African States into a new generation of BITs will only become clear with time. Nevertheless, the deepening of BRI in Africa provides a unique set of circumstances to observe such shifts.
