African countries have been active in concluding
international investment treaties. According to the United Nations Conference
on Trade and Development (UNCTAD), as of end 2013, 793 bilateral investment
treaties (BITs) have been concluded by African countries, representing 27% of
the total number of (BITs) worldwide. Several African countries are actively
negotiating additional agreements. For example: the Southern African Customs
Union is negotiating with India and the East African Community, including
Burundi, Kenya, Tanzania, and Uganda, are in discussions with the United
States.
However, African countries are increasingly subject to
investor-state dispute settlement (ISDS) cases, including claims that challenge
the regulatory actions of host countries in a wide range of areas, including
public services and race relations. Out of all cases registered under the
International Centre for Settlement of Investment Disputes (ICSID), Sub-Saharan
Africa accounts for 16% of these cases. In 2014, cases against Sub-Saharan
Africa amounted to 20% of the overall number of new cases brought under ICSID
during that year.
Since 2006, several African countries, including Ghana,
Congo DR, Zambia, Liberia, Zimbabwe, Guinea, Cote d’Ivoire, Malawi, Sierra
Leone, Burkina Faso, Kenya, Tanzania and Madagascar have taken actions in terms
of regulatory or institutional changes, including amending laws or initiating
the renegotiation of contracts with mining firms or indicated an intention to
take one or both steps. In the case of African countriesthe expansion of
international investment agreements could carry significant risks to policy
space and policy tools necessary for industrialization and development. In the
case of African countries, this implies risks to the potential use of sectoral
policies to support and promote African countries’ industrialization
objectives.
Much of the recent debate and controversy in regard to the
international investment protection regime have revolved around their
implications on policy space that developing countries need to promote
development. The rising number of ISDS cases revealed how the rules established
under international investment agreements, and the way they have been
expansively interpreted by private investment arbitrators, encroach on
government’s ability to regulate in the public interest.
The majority of the ISDS cases registered at ICSID are in
the gas, oil, and mining sector; out of all the ISDS cases registered at ICSID
until 2014, 26% were concentrated in the oil, gas, and mining sectors. This
figure is 35% for the year 2014 alone. By contrast, in the year 2000, there
were only three pending ICSID cases related to oil, mining, or gas.Through
resorting to investor-state dispute settlement (ISDS) mechanisms, investors are
challenging a broad range of government measures, not only challenging outright
expropriation. Investors brought cases in relation to revocations of licenses
(e.g., in mining, telecommunications, tourism), alleged breaches of investment
contracts, alleged irregularities in public tenders, changes to domestic
regulatory frameworks (gas, nuclear energy, marketing of gold, currency
regulations), withdrawal of previously granted subsidies, tax measures and
other regulatory interventions.
Similarly, ISDS have increasingly been used by investors in
the extractive industries in several African countries, challenging
governmental reform action, such as policy against speculation in the oil
industry as well as tax measures. For example, Vanoil Ltd., a Canadian oil
company, threatened to bring a case against Kenya after failure to secure
extension of a pair of production-sharing contracts for onshore oil exploration
in Kenya. African Petroleum Gambia Limited brought a case (contract-based)
against Gambia disputing termination of hydrocarbon licenses for exploration of
oil. Total E&P Uganda BV (Dutch), subsidiary of French company Total S.A.,
brought a claim in relation to a stamp duty imposed by the Uganda Revenue
Authority on the acquisition of stakes from London-listed Tullow Oil.
The problem of the investment protection regime is
multilayered and is rooted in the following deficiencies: an imbalance in the
provisions of the investment treaties (including broad definitions of
investment and investor, free transfer of capital, rights to establishment, the
national treatment and the most-favoured-nation (MFN) clauses, fair and
equitable treatment, protection from direct and indirect expropriation and
prohibition of performance requirements), which focus on the investors‘ rights
and neglect investors‘ responsibilities, while often lacking express
recognition of the need to safeguard the host states‘ regulatory authority;
vague treaty provisions, which allow for expansive interpretation by
arbitrators and for the rise of systemic bias in favour of the investors in the
resolution of disputes under investment treaty law.
Such trends are often not in line with the original intent
of the States negotiating the treaty; the investor-state dispute settlement
mechanism, which is led by a network of arbitrators dominated by private
lawyers, whose expertise often stem from commercial law. Arbitrators have
asserted jurisdiction over a wide range of issues, including regulatory
measures on which constitutional courts had made a decision in accordance with
the national law.
The way the ISDS system has operated so far generates deep
concerns in regard to democratic governance and accountability; the lack of
transparency and available public information on ISDS procedures limit the
space of public participation and accountability. Currently 608 ISDS cases are
known.
However, since most international investment agreements
allow for fully confidential arbitration, the actual number is likely to be
higher. Within this context, claims or threats by investors to bring forward a
claim against a particular state are increasing.
Several countries, both developed and developing, have been
reviewing their approach to investment treaties, including looking at ways of
reducing their legal liability under bilateral investment treaties (BITs),
especially given the surge in investor-to-state dispute cases (ISDS) from these
treaties.
According to the UNCTAD, at least 40 countries and four
regional integration organizations are currently or have been recently revising
their model of international investment agreements[5], and at least 60
countries have developed or are developing new model IIAs since 2012[6]. UNCTAD
points out that ”the question is not whether to reform or not, but about the
what, how and extent of such reform“.
Developing countries seeking to reform their approach to
investment protection treaties have reviewed their existing international
investment agreements and their implications. Some have set a moratorium on
signing and ratifying new agreements during the time of the review. Some
countries like South Africa, Indonesia, Ecuador and Bolivia chose to withdraw
from all or some treaties. South Africa chose to replace BITs with a new
national Investment Act entitled Promotion and Protection of Investment Bill,
that clarifies investment protection standards consistent with the South
African constitution. Indonesia chose to develop a new model BIT, so did
India.. Ecuador reverted to investment contracts as the main legal instrument defining
the relation with investors, including setting clear obligations on the
investor, such as performance requirements. Some states are pursuing
alternatives at the regional level, through developing model rules that take
into consideration the developmental concerns