Dispute Settlement Mechanism

In an era of interconnectedness, it appears that Japan’s approach towards investment liberalization is rather detrimental. Its stance hinders important causes such as safeguarding the environment and related policies that are being pursued by, both, developed and developing countries. Furthermore, while Japan’s approach towards trade and investment may not pose an immediate and significant threat to the entirety of global rules-based systems, it may cast a serious doubt on Japan’s ability to take an active role on the global stage and to foster global rules-based system.

Although the S&DT provisions relating to disputes involving LDC parties and the current state-to-state dispute settlement mechanism provided by the Agreement may seem comparatively more balanced than the mechanism of Investor-State Dispute Settlement (ISDS), nonetheless, the real extent of the effectiveness and advantages of the mechanism for the LDC parties cannot yet be inferred,

The blog posts presented in this symposium indicate that Foreign Direct Investment (FDI) in the renewable energy (RE) sector is desirable to support decarbonisation and clean energy transformation in developing countries such as Nigeria. Despite the enormous potential for RE based on the natural conditions in Nigeria, there is high level of energy poverty and low level of investments in RE sector by both government and private investors.

In order to address a scenario where a AfCFTA member might resort to the WTO and still want the dispute to be resolved under the AfCFTA’s dispute resolution protocol, then this article proposes that the latter Protocol should be amended to the effect that, matters raised in the WTO context and in AfCFTA’s context should be considered not to be the same.

The Agreement establishes a Dispute Settlement Mechanism that seeks to settle state-level disputes. Such mechanism is to be administered in tandem with the provisions of the Protocol on Rules and Procedures on the Settlement of Disputes (the Protocol). The Protocol aims at providing a ‘transparent, accountable, fair, predictable, and consistent dispute settlement process.’ Article 8 of the Protocol permits disputing state parties to voluntarily undertake conciliatory measures in a bid to amicably resolve the dispute in the event consultations, which are not strictly compulsory according to the language of Article 6(6), fail.

One would be justified in thinking that AU member states have intentionally created a court which they consciously know they would hardly use given the inertia identified above. If the reforms that would extend standing to private parties are not undertaken, there is little guarantee that Member States will suddenly change their habits. Assuming for once that they trigger the mechanism, it is also very likely that, consistent with their practice for political solutions to legal problems, they would not proceed beyond the consultation and good offices stages provided in Articles 7 and 8 of the Dispute Settlement Protocol.

Even setting aside funding issues, the failure to creatively blend the dispute settlement mechanisms that already exist at the sub-regional level with what has worked with disputes in the global trading system is perhaps the biggest handicap the new dispute settlement system established by the AfCFTA is likely to suffer. There is certainly no harm in trying to out this system, but because most of the experience and expertise in handling trade disputes and matters has been at the sub-regional level, the new AfCFTA Dispute Resolution Mechanism has a lot to learn from the sub-regional level.

The AfCFTA-DSM will be nestled in a culture of African States that does no pursue formal settlement of trade disputes before judicial or quasi-judicial bodies. Given the dearth of core economic integration disputes before the African regional economic community courts; and, the failure of previous WTO-like DSM transplanted at the regional level, what potential if any, has the AfCFTA-DSM to chart a new course? Similarly, what can we garner about the culture of African States towards trade disputes?

With 22 ratifications now guaranteed, the African Continental Free Trade Agreement, (AfCFTA), will soon enter into force. Once in force, its efficacy will depend on the political will to implement it as well as its enforcement mechanisms. The AfCFTA’s Protocol on Rules and Procedures on the Settlement of Disputes establishes a WTO-like Dispute Settlement Mechanism with Panels and an Appellate Body.