Kluwer Arbitration Blog | 16 January 2020
The BIT footprints of emerging market economies in Africa: What do they portend for ISDS?
by Uche Ewelukwa Ofodile (University of Arkansas School of Law)
In a 2015 publication Investment Policies and Bilateral Investment Treaties in Africa: Implications for Regional Integration, the United Nations Economic Commission for Africa opined that for countries in Africa:
“[o]pportunities for signing BITs with non-African partners have largely been exhausted because new southern partners such as China and India prefer other modalities for engaging with Africa.”
However, a careful review of all publicly available bilateral investment treaties (BITs) concluded since 2014 suggests that when it comes to the BIT footprint of emerging market economies in Africa, the landscape is a bit more complicated. Although countries like India and South Africa are rethinking their approach to investment treaty making, others appear to be moving in the opposite direction. Indeed, a survey of recent BIT practice of countries like Turkey, the United Arab Emirates (UAE), and Brazil reveals a decidedly African orientation.
What about China? Although the pace of the conclusion of China-Africa BITs has slowed down, China has concluded more BITs with countries in Africa than most of Africa’s traditional partners.1) The growing number of BITs between countries in Africa and emerging market economies raise questions about the role of emerging markets economies in international investment law rule-making and about future trends in investment treaty arbitration.
BITs Between African States and New Southern Partners: The Emerging Landscape
A review of the BITs that countries in Africa have concluded since 2014 suggests that countries like Turkey, Brazil, and the UAE are concluding BITs with countries in Africa at a significant rate. Overall, the record shows that:
Emerging Market Economies, African States and ISDS: Key Questions
BITs between countries in Africa and emerging market economies outside the continent raise questions about the role of emerging economies in the development of international investment law and in investor-State dispute settlement (ISDS) in particular. For example:
Emerging Market Economies, African States and ISDS: Emerging Trends
A review of the BIT footprint of some emerging market economies in Africa reveals that regarding ISDS, although ISDS is still very popular, emerging market economies are not adopting a monolithic approach, but are carving their own respective paths. Overall, several conclusions can be drawn.
First, all recent BITs between Turkey, UAE, China and countries in Africa provide for ISDS.2)
Second, regarding Brazil, none of the five recent BITs between Brazil and countries in Africa provide for ISDS. For example, the Brazil-Malawi BIT does not provide for ISDS but rather creates a Joint Committee that is responsible for the administration of the agreement. One of the tasks of the Joint Committee is to:
‘[r]esolve any issues or disputes concerning Parties’ investments in an amicable manner’.
Third, emerging market investors appear to welcome ISDS and are not shying away from utilizing ISDS. In their dealings with States in Africa, ISDS has been triggered by numerous investors including investors from South Africa (e.g. AngloGold Ashanti (Ghana) Limited v. Republic of Ghana), UAE (e.g. DP World v. Djibouti) and Mauritius (e.g. LTME Mauritius Limited and Madamobil Holdings Mauritius Limited v. Republic of Madagascar.
Fourth, competition between emerging market economies for influence in Africa will intensify in the coming years and resort to dispute settlement mechanisms will likely increase as well. Already emerging market multinationals (EMNCs) are beginning to compete amongst themselves for lucrative contracts in Africa, as demonstrated by ongoing legal battles over who gets to control port terminals in Djibouti. The case of D.P. World v. Djibouti discussed here, pits Middle East port giant, DP World, against the government of Djibouti and a Chinese conglomerate, China Merchants Port Holdings Company. When Djibouti terminated a concession agreement with DP World to operate a port terminal, DP World filed claims with the London Court of International Arbitration. The same case is also playing out in Hong Kong’s high court (discussed here and here).
The global corporate landscape is going through a fundamental transformation thanks to emerging market multinational companies (“EMNCs). According to a 2015 report Playing to win: The new global competition for corporate profits (“Playing to Win”), since 1990, emerging economies have launched more than 17,000 large companies. Moreover, by 2025, EMNCs will account for more than 45 percent of the Fortune 500. Significantly, EMNCs are not content with operating in their home markets but are going overseas.
According to Playing to win:
“[i]n the past decade, the 50 largest firms from emerging economies have doubled their share of revenue from overseas activity from 19 percent to 40 percent.”
In the Asian Development Outlook 2011: South-South Economic Links, the Asian Development Bank declared that:
“prospects are bright for the South to promote growth and productivity by improving market-oriented links that facilitate the exchange of goods and services as well as capital investment flows and transfers of technology.”
The increased role of emerging market partners in Africa was noted in the African Economic Outlook 2011: Africa and Its Emerging Partners.
The role of emerging market economies in the global economic system is shifting from that of capital-importers to that of both capital-importers and capital-exporters, and their interests (both defensive and offensive) are changing as well. The shifting and changing role of emerging market economies in the global economy raises important questions about the continued relevance of the fundamental principles that underpin the South-South Cooperation discourse such as the principles of respect for national sovereignty, independence, equality and equity, mutuality of benefit, mutual respect, and partnership.
These principles can be found in instruments such as the Joint Declaration of the Seventy-Seven Developing Countries (1964), the Buenos Aires Plan of Action for Promoting and Implementing Technical Cooperation among Developing Countries (1978); the Havana Declaration and the Programme of Action of the First South Summit (2000); and the Marrakech Framework for the Implementation of South-South Cooperation (2003).
Despite debates about crisis in investment treaty arbitration, most emerging market economies are concluding BITs that provide for ISDS and EMNCs appear to welcome ISDS. Significantly, recent BITs between emerging market economies and other developing countries tend to be modelled on traditional BITs and do not generally reflect core principles that underpin the South-South Cooperation agenda.
With the changing role of emerging market economies in the global economy and pressures from their own domestic constituencies, commitment to South-South cooperation is clearly waning. In the future, we are likely to see challenges to the notion of South-South cooperation, attempts to redefine and reimagine South-South cooperation principles, a gradual erosion of South-South cooperation agenda, as well as a weakening of the mechanisms for promoting South-South cooperation.
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