On 29 March 2017, the Geneva Talks on Foreign Investment in Africa took place in Geneva. Organised twice a year by the University of Geneva in collaboration with the University of Lausanne, this series of talks discusses issues related to the promotion and protection of foreign investment in Africa. This spring’s talks considered the rise of investor obligations in African investment agreements.
Participants were welcomed by Professor Makane Moïse Mbengue, Associate Professor of International Law at the University of Geneva and Visiting Professor at Sciences Po Paris. There followed presentations by Nathalie Bernasconi Osterwalder, from the International Institute on Sustainable Development, Professor Mbengue, and Emilie Gonin, barrister at Doughty Street Chambers in London. The debate was moderated by Hamed El Kady from the United Nations Conference on Trade and Development (UNCTAD).
This blog is not meant to report on the highlights of the conference, but rather to build on it by reflecting further on the development and reform of the international investment agreements (IIAs) regime on the African continent.
Africa has surged in the last decade as an important investment destination. Among the factors that play a pivotal role in attracting foreign investments are a rising consumer market, positive growth performance and high rates of return on investments; not to mention its natural resources wealth. In 2013-2014, at the regional level, North Africa had the highest Foreign Direct Investment (FDI) share (27%) followed by West Africa (25%) and Southern Africa (23%).
In the twenty-first century, almost all international trade flows are governed either by bilateral or regional trade agreements, or by multilateral trade rules. Negotiating IIAs involves a delicate balance between entering into state commitments and preserving regulatory space for development. In recent years, a number of African governments have shown their commitment to seek new approaches to investment governance, with one goal in mind: placing more emphasis on the sustainability dimension of investment and the preservation of appropriate regulatory space for host states. This has resulted in the emergence of a so-called “new generation” of IIAs, which seeks to promote responsible investment, balance state commitments with investor obligations, and ensure greater transparency in investor-state dispute settlement.
It is against that background that several regional economic communities in Africa have developed regional investment instruments, such as:
- The Investment Agreement for the Common Market for Eastern and Southern Africa (COMESA) Common Investment Area.
- The Supplementary Act adopting Community Rules on Investment and the Modalities for their Implementation with the Economic Community of West African States (ECOWAS).
- The Southern African Development Community (SADC) Protocol on Finance and Investment.
The East African Community (EAC) and SADC have also developed model laws on investment, namely the EAC Model Investment Code and the SADC Model Bilateral Investment Treaty Template (SADC Model BIT).
At the continental level, the African Union is also in the process of developing a Pan–African Investment Agreement Code, with the primary objective of creating an environment to attract greater investments into Africa and facilitating intra-African cross-border investments.
The instruments listed above seek to strike a balance between protecting investors and preserving sufficient policy space for the host state to achieve its development objectives. Most importantly, these instruments spell out the rights and obligations of investors and host states. Very few would deny that including the rights and obligations of investors is not typically found in IIAs.
For instance, this is the approach of Article 13 of the Investment Agreement for the COMESA Common Investment Area. That provision obliges investors to comply with and ensure their investments comply with all applicable domestic measures of the host state. “Measures” are defined in the treaty as:
“… any legal, administrative, judicial, or policy decision that is taken by a Member State, directly relating to and affecting an investment in its territory”.
Equally, the publication in 2012 of the SADC Model bilateral investment treaty (BIT) provides a clear example of the shifting approach to investment governance in southern Africa. According to the Model BIT, preambles should recognise the contribution investment can make to sustainable development. They should also highlight the desire of the contracting parties to strengthen cooperation and promote and encourage investments. Preambles should also:
- Reflect the development goals of state parties.
- “Reaffirm the right of State Parties to regulate” in order to meet national policy objectives.
- Underscore that the treaty in question seeks to establish a balance between the rights and obligations of the contracting parties and investors.
The Model BIT also proposes that the SADC member states include in their BITs a number of specific obligations on investors. These include obligations relating to:
- Compliance with domestic law.
- The provision of information, environmental and social impact assessments.
- Environmental management.
- Minimum standards for human rights and labour.
- Corporate governance.
Finally, and echoing the observations made earlier, Chapter 3 of the ECOWAS Supplementary Act on Foreign Investment sets out a comprehensive catalogue of foreign investors’ obligations and duties. In particular, Article 12 imposes the obligation on foreign investors to conduct an environmental and social impact assessment of the potential investment, and to apply the precautionary principle. Article 13, in turn, enjoins foreign investors from getting involved in any corruption practice. Finally, under Article 14, investors have the obligation to uphold human rights in the workplace and community in which they decide to invest.
It emerges from the above that many African countries have decided to adopt a way forward, in terms of foreign investment, that seeks to ensure a greater balance between the rights of investors, and the power of host states in regulating in the public interest. Ultimately, it remains to be seen whether or not African countries will adopt the recommendations contained in these instruments and, most importantly, how prospective investors are likely to view those “new” IIAs/BITs.