HARNESSING AFRICA’S FREE TRADE AGENDA – AFCFTA PROTOCOL ON THE SETTLEMENT OF DISPUTES
This is the sixth in a series of articles on the African Continental Free Trade Area (AfCFTA) agreement. The aim of the series is to unpack the agreement’s various protocols and related matters and highlight:
- key opportunities and potential inhibitors for businesses to consider in undertaking a regional growth strategy;
- the roles of legal advisors in navigating the AfCFTA institutions and member states in supporting a regional trade or investment strategy; and
- avenues for the private sector to influence the trajectory of the implementation of the AfCFTA instruments.
One of the protocols established under the African Continental Free Trade Area (AfCFTA) agreement is the Protocol on Rules and Procedures on the Settlement of Disputes (Disputes Protocol). It is modelled along the lines of the World Trade Organization’s Dispute Settlement Understanding (DSU) and sets out the framework within which State Parties to the AfCFTA agreement may seek to resolve disputes arising under the agreement.
Salient aspects of the Disputes Protocol are outlined below.
Dispute resolution organs
- Dispute Settlement Mechanism: Article 20 of the AfCFTA agreement establishes a Dispute Settlement Mechanism (DSM) to determine disputes arising between State Parties. It further provides that the DSM shall be administered in accordance with the Disputes Protocol. The DSM was operationalised during the inaugural meeting of the Dispute Settlement Body (DSB) in April 2021 and is only accessible to State Parties.
- Dispute Settlement Body: A Dispute Settlement Body (DSB) is established under the provisions of the Disputes Protocol. The DSB is composed of representatives of State Parties and has the authority to establish a Dispute Settlement Panel (Panel) and an Appellate Body. In addition, the DSB is mandated to adopt Panel and Appellate Body reports, observe the implementation of rulings and recommendations of the Panels and Appellate Body, and to authorise the suspension of concessions and other rights/obligations under the AfCFTA agreement.
- Panel: The Panel will consider the dispute and make findings. These findings assist the DSB in making recommendations and rulings. The Panel shall thereafter prepare an interim report for comments from the affected State Parties before it prepares a single report reflecting the views of the majority of the panellists. The Panel will forward a final report to the DSB, the parties and any interested Third-Party State Party. On receipt of the Panel report, the DSB will consider it for adoption unless a party has notified the DSB of an intention to appeal.
- Appellate Body: A standing Appellate Body is established to hear appeals from Panel cases. The Appellate Body will be composed of seven people, three of whom shall serve on any one case. The Appellate Body may uphold, modify or reverse the legal findings and conclusions of the Panel.
How a dispute is instituted
A Complaining Party must first attempt to resolve the dispute amicably. This can be done either through what the Disputes Protocol terms ‘good offices, conciliation, or mediation’. In addition, State Parties may request the Head of Secretariat, headquartered in Accra, Ghana, to facilitate the specific process. These deliberations are confidential and without prejudice.
If there is no resolution within 60 days, the Complaining Party must notify the DSB by requesting for the composition of a Panel. The composition of the Panel will be dependent on the number of disputing State Parties. Where there are two disputing State Parties, the Panel shall comprise three members. Where there are more than two disputing State Parties, the Panel shall comprise five members.
Enforcement of decisions
The Disputes Protocol requires State Parties to fully implement the recommendations and rulings of the DSB. Failure to implement rulings of the DSB within the agreed timeframe will result in the guilty party paying compensation or having concessions suspended for an interim period. The Disputes Protocol provides for various grievance procedures by which a Complaining Party can seek to further pursue enforcement, including instituting arbitration proceeding for that purpose.
The DSB - where are we now?
Since its inaugural meeting in April 2021, there have been no updates on any meetings by the DSB.
The Disputes Protocol and the annexes to it (Annex 1 Working Procedure of the Panel, Annex 2 Expert Review Groups and Annex 3 Code of Conduct for Arbitrators and Panellists) are silent on the case management aspects, electronic filing of documents, and hours of sitting. It is expected that rules of procedure will be developed to assist parties on procedural aspects of accessibility to the registry.
Overlapping jurisdiction between Regional Economic Communities (RECs) and AfCFTA
There may be instances of overlapping jurisdiction between the Disputes Protocol and regional agreements. In such cases, an aggrieved State Party will need to assess a host of legal and practical considerations.
- Locus standi: For instance, the Disputes Protocol does not allow private parties to bring suits before the DSB. Conversely, RECs such as the Treaty for the Establishment of the East African Community (EAC Treaty) under Article 30 allows natural and legal persons to file proceedings at the East Africa Court of Justice (EACJ). The Treaty Establishing the Common Market for Eastern and Southern Africa (COMESA Treaty), under Article 26, also allows for reference by natural and legal persons to the COMESA Court of Justice. An investor within the EAC and COMESA faced with a dispute may consider filing a dispute with the EACJ or the COMESA Court of Justice as opposed to making a complaint through their State under the AfCFTA agreement.
- Duplicity of suits: The Disputes Protocol prohibits forum shopping by precluding a State Party that has invoked the jurisdiction of the DSB from litigating in another forum.
- Subject matter of disputes: Both the COMESA Treaty and the EAC Treaty allow a Member State to challenge the legality of another Member’s State’s legislative provision or executive directions on grounds that it violates the respective founding treaties. There is no such provision under the Disputes Protocol. We note that the EAC Treaty is broader in scope compared to the Disputes Protocol. While the AfCFTA agreement is limited to disagreements between State Parties regarding the application/ interpretation of the AfCFTA agreement, the EAC Treaty also captures human rights. In this regard, Article 28 of the EAC Treaty provides that: ‘The Court shall have such other original, appellate, human rights and other jurisdiction as will be determined by the Council at a suitable subsequent date.’
- Appeals: The scope of appellate jurisdiction varies under the REC treaties. Both the EAC Treaty and COMESA Treaty have a wider scope of appellate jurisdiction than the Disputes Protocol. The Disputes Protocol limits appellate jurisdiction to points of law whilst the COMESA Treaty (Article 23) and the EAC Treaty (Article 35A) provide that appellate jurisdiction shall lie on (a) points of law; (b) grounds of lack of jurisdiction; or (c) procedural irregularity.
- Finality of decisions: The COMESA Court of Justice has the power to determine every reference made to it and deliver a judgment which, subject to review by it, is final with no room for appeal. The Disputes Protocol on the other hand, allows for appeals to the Appellate Body.
AfCFTA Initiative on Guided Trade
Kenya is among the countries selected to participate in the pilot phase of trading under AfCFTA pursuant to the Initiative on Guided Trade (GTI). Under the GTI framework, Kenya exported locally made Exide batteries to Ghana.
As at the date of this article, there has been no report of a dispute among the countries participating in the GTI. It is anticipated that the pilot phase will test the efficacy of the legal and institutional framework under AfCFTA, including the dispute resolution mechanisms therein.