Tasks Before The AfCFTA Dispute Settlement Body

By Prince Nwafuru, MCIArb (UK)

The Dispute Settlement Body (DSB) of the African Continental
Free Trade Area (AfCFTA) held its inaugural meeting on 26 April
2021 at the AfCFTA Secretariat in Accra Ghana. The DSB is composed
of the representatives of the State Parties and shall have the
power to establish Dispute Settlement Panels and an Appellate Body
responsible for settlement of disputes between the member States.
The mandate of the DSB also extends to adopting the reports of the
Panels and Appeal Body as well as monitoring and ensuring the
implementation of the ensuing decisions. In carrying out its
mandates, the DSB will work with the AfCFTA Secretariat while
maintaining its independence in the area of dispute settlement.

The inaugural meeting signals the readiness of the AfCFTA
dispute settlement infrastructure to take up any disputes that may
arise in the course of trading amongst the member States. Disputes
are inevitable in any free trade area and when any such disputes
arise under the AfCFTA, the resolution is to be in line with the
Protocol on Rules and Procedures on the Settlement of Disputes
which forms part of the Phase I Negotiation. Recognizing its
importance to the success of the trade deal itself, the Protocol
proclaims that “the dispute settlement mechanism of the AfCFTA
is a central element in providing security and predictability of
the system” and “shall preserve the rights and obligations
of State Parties under the Agreement and clarify the existing
provisions of the Agreement in accordance with customary rules of
interpretation of public international law.”

Though inspired by the World Trade Organization (WTO)’s dispute
settlement architecture, the AfCFTA framework is meant to address
some of the lapses in the WTO. In an exclusive opinion piece for
“The Africa Report”, Mr Wamkele Mene, Secretary-General of the
AfCFTA, explained how the AfCFTA will work in order to avoid the
pitfalls of other trading blocs. As noted in the report:

“The WTO’s tribunal of final instance for global trade
disputes, the Appellate Body, has been reduced to irrelevance over
disagreements on its composition. The paralysis of both the WTO’s
negotiating and dispute settlement arms means that trade disputes
between China and the United States, two of the WTO’s largest
members, have flared into open hostility.”

Drawing from the WTO experience, the African States in
negotiating the free trade treaty cherry-picked the aspects of the
WTO’s dispute settlement system that have worked and jettisoned the
problematic parts.

At the Virtual Press Conference held on 04 May 2021 to update
the public on the status of the implementation of the AfCFTA and
the progress made so far, the AfCFTA Secretary-General re-echoed
the importance of the dispute settlement mechanism to the success
of the AfCFTA while answering questions from journalists across
Africa. Commenting on the milestone achievement recorded with the
inaugural meeting of the DSB, he noted that:

“The dispute settlement is really the mechanism and is at
the heart of the African Continental Free Trade Area. And it is at
the heart of what we mean by a rule-based trading system. And at
the heart of what we mean by market certainty and predictability.
For the first time on the African continent, there is a dispute
settlement body that will have oversight over all the disputes that
arise under the agreement whether there are investments related,
trade in goods, trade in services, market access related disputes.
This body will have oversight over all of that.”

All eyes are now on the AfCFTA DSB as it shoulders the task of
ensuring that disputes between member States are resolved in an
efficient, transparent, fair and impartial manner. The starting
point is to ensure that persons appointed to be members of the
Dispute Settlement Panels and Appellate Body have the expertise and
experience in the subject matter of the dispute and are chosen
strictly on the basis of objectivity. There is even more important
corresponding duty on the State Parties when nominating persons to
be included on the indicative list or roster of individuals to
serve as Panelists to ensure that nomination is based on merit and
proven expertise on the subject matter. The member States should
eschew any nepotistic or tribal considerations in nominating State
representatives. The Nigerian government should resist the
temptation to premise its nominations on Federal Character or other
ethnic or religious considerations as we’ve seen in recent
appointments.

Recent events such as the reported discriminatory measures
against Nigerian traders in Ghana, the closure of Nigerian Border
with Benin Republic, the Xenophobic attacks in South Africa on
African businesses and the retaliatory attack on South
African-owned businesses present examples of the kind of disputes
that may come up before the AfCFTA DSB assuming that similar issues
arise in the future. Others may include disputes over conflicting
public policies, tariffs and non-tariff barriers, rules of origin,
dumping, regulatory excessiveness, standardization, trans-shipment,
taxation, market access, and consumer protection etc.

The AfCFTA dispute settlement mechanism is restricted to
State-to-State disputes. The treaty is silent on the mechanism for
the resolution of disputes between private individuals.
Notwithstanding this limitation, the private sector participants
such as the SMEs and other business entities will be able to
petition their governments to implement the rights and obligations
set out in the agreement establishing the AfCFTA. That way, the
rights of the private sector can be enforced using the State
instrument. For instance, in a situation where citizens of a member
State are being subjected to discriminatory measures in another
AfCFTA member country, the affected country may decide to refer the
case to the DSB on behalf of its citizens, after exhausting the
amicable settlement options such as Good Offices, Consultations,
Conciliation and Mediation. It is not yet clear what yardstick will
guide such referrals or to what extent such anti-free-trade
measures will impact on the citizens of the member state, before it
decides to challenge the infractions at the DSB. Whatever the case,
where a member State fails to protect the rights of its citizens,
the affected traders may seek other legal remedies available under
the national laws or within any Bilateral and multilateral
instruments applicable to the disputes.

In relation to investment disputes, the ongoing negotiation of
the AfCFTA Protocol on Investment is meant to clarify the
uncertainty around the framework for resolving investor-state
disputes. The member States in choosing to resolve their disputes
within the AfCFTA framework should be aware of the fork-in-road
provision under article 3(4) of the Protocol, which precludes a
State Party who has invoked the dispute settlement procedure under
the Protocol with regards to a specific matter from invoking
another forum for dispute settlement on the same matter.
 Another area of interest is the enforcement of decisions
reached under the AfCFTA dispute settlement process. Effectiveness
of a dispute resolution mechanism is often measured with the 3 E’s
which are efficiency, expertise, and enforceability. Challenges
will likely arise in relation to compliance with decisions under
the AfCFTA as we have seen under the WTO and other regional trade
treaties.  It is hoped that the desire to enhance investors’
confidence and the spirit of amity will spur the AfCFTA members to
comply with decisions made by the dispute settlement bodies. In the
end, the success of the AfCFTA will depend largely on the
willingness of the member States to adhere to the agreement and to
eschew any form of self-help when they perceive any breach of the
trade deal.

Prince Nwafuru, MCIArb (UK)

By Prince Nwafuru, MCIArb (UK)

The Dispute Settlement Body (DSB) of the African Continental
Free Trade Area (AfCFTA) held its inaugural meeting on 26 April
2021 at the AfCFTA Secretariat in Accra Ghana. The DSB is composed
of the representatives of the State Parties and shall have the
power to establish Dispute Settlement Panels and an Appellate Body
responsible for settlement of disputes between the member States.
The mandate of the DSB also extends to adopting the reports of the
Panels and Appeal Body as well as monitoring and ensuring the
implementation of the ensuing decisions. In carrying out its
mandates, the DSB will work with the AfCFTA Secretariat while
maintaining its independence in the area of dispute settlement.

The inaugural meeting signals the readiness of the AfCFTA
dispute settlement infrastructure to take up any disputes that may
arise in the course of trading amongst the member States. Disputes
are inevitable in any free trade area and when any such disputes
arise under the AfCFTA, the resolution is to be in line with the
Protocol on Rules and Procedures on the Settlement of Disputes
which forms part of the Phase I Negotiation. Recognizing its
importance to the success of the trade deal itself, the Protocol
proclaims that “the dispute settlement mechanism of the AfCFTA
is a central element in providing security and predictability of
the system” and “shall preserve the rights and obligations
of State Parties under the Agreement and clarify the existing
provisions of the Agreement in accordance with customary rules of
interpretation of public international law.”

Though inspired by the World Trade Organization (WTO)’s dispute
settlement architecture, the AfCFTA framework is meant to address
some of the lapses in the WTO. In an exclusive opinion piece for
“The Africa Report”, Mr Wamkele Mene, Secretary-General of the
AfCFTA, explained how the AfCFTA will work in order to avoid the
pitfalls of other trading blocs. As noted in the report:

“The WTO’s tribunal of final instance for global trade
disputes, the Appellate Body, has been reduced to irrelevance over
disagreements on its composition. The paralysis of both the WTO’s
negotiating and dispute settlement arms means that trade disputes
between China and the United States, two of the WTO’s largest
members, have flared into open hostility.”

Drawing from the WTO experience, the African States in
negotiating the free trade treaty cherry-picked the aspects of the
WTO’s dispute settlement system that have worked and jettisoned the
problematic parts.

At the Virtual Press Conference held on 04 May 2021 to update
the public on the status of the implementation of the AfCFTA and
the progress made so far, the AfCFTA Secretary-General re-echoed
the importance of the dispute settlement mechanism to the success
of the AfCFTA while answering questions from journalists across
Africa. Commenting on the milestone achievement recorded with the
inaugural meeting of the DSB, he noted that:

“The dispute settlement is really the mechanism and is at
the heart of the African Continental Free Trade Area. And it is at
the heart of what we mean by a rule-based trading system. And at
the heart of what we mean by market certainty and predictability.
For the first time on the African continent, there is a dispute
settlement body that will have oversight over all the disputes that
arise under the agreement whether there are investments related,
trade in goods, trade in services, market access related disputes.
This body will have oversight over all of that.”

All eyes are now on the AfCFTA DSB as it shoulders the task of
ensuring that disputes between member States are resolved in an
efficient, transparent, fair and impartial manner. The starting
point is to ensure that persons appointed to be members of the
Dispute Settlement Panels and Appellate Body have the expertise and
experience in the subject matter of the dispute and are chosen
strictly on the basis of objectivity. There is even more important
corresponding duty on the State Parties when nominating persons to
be included on the indicative list or roster of individuals to
serve as Panelists to ensure that nomination is based on merit and
proven expertise on the subject matter. The member States should
eschew any nepotistic or tribal considerations in nominating State
representatives. The Nigerian government should resist the
temptation to premise its nominations on Federal Character or other
ethnic or religious considerations as we’ve seen in recent
appointments.

Recent events such as the reported discriminatory measures
against Nigerian traders in Ghana, the closure of Nigerian Border
with Benin Republic, the Xenophobic attacks in South Africa on
African businesses and the retaliatory attack on South
African-owned businesses present examples of the kind of disputes
that may come up before the AfCFTA DSB assuming that similar issues
arise in the future. Others may include disputes over conflicting
public policies, tariffs and non-tariff barriers, rules of origin,
dumping, regulatory excessiveness, standardization, trans-shipment,
taxation, market access, and consumer protection etc.

The AfCFTA dispute settlement mechanism is restricted to
State-to-State disputes. The treaty is silent on the mechanism for
the resolution of disputes between private individuals.
Notwithstanding this limitation, the private sector participants
such as the SMEs and other business entities will be able to
petition their governments to implement the rights and obligations
set out in the agreement establishing the AfCFTA. That way, the
rights of the private sector can be enforced using the State
instrument. For instance, in a situation where citizens of a member
State are being subjected to discriminatory measures in another
AfCFTA member country, the affected country may decide to refer the
case to the DSB on behalf of its citizens, after exhausting the
amicable settlement options such as Good Offices, Consultations,
Conciliation and Mediation. It is not yet clear what yardstick will
guide such referrals or to what extent such anti-free-trade
measures will impact on the citizens of the member state, before it
decides to challenge the infractions at the DSB. Whatever the case,
where a member State fails to protect the rights of its citizens,
the affected traders may seek other legal remedies available under
the national laws or within any Bilateral and multilateral
instruments applicable to the disputes.

In relation to investment disputes, the ongoing negotiation of
the AfCFTA Protocol on Investment is meant to clarify the
uncertainty around the framework for resolving investor-state
disputes. The member States in choosing to resolve their disputes
within the AfCFTA framework should be aware of the fork-in-road
provision under article 3(4) of the Protocol, which precludes a
State Party who has invoked the dispute settlement procedure under
the Protocol with regards to a specific matter from invoking
another forum for dispute settlement on the same matter.
 Another area of interest is the enforcement of decisions
reached under the AfCFTA dispute settlement process. Effectiveness
of a dispute resolution mechanism is often measured with the 3 E’s
which are efficiency, expertise, and enforceability. Challenges
will likely arise in relation to compliance with decisions under
the AfCFTA as we have seen under the WTO and other regional trade
treaties.  It is hoped that the desire to enhance investors’
confidence and the spirit of amity will spur the AfCFTA members to
comply with decisions made by the dispute settlement bodies. In the
end, the success of the AfCFTA will depend largely on the
willingness of the member States to adhere to the agreement and to
eschew any form of self-help when they perceive any breach of the
trade deal.

Prince Nwafuru, MCIArb (UK)