DISPUTE SETTLEMENT MECHANISM (DSM) FRAMEWORK IN THE AFRICAN CONTINENTAL FREE TRADE AGREEMENT (AFCFTA)
By Chidimma Onyiaorah LL.M, MCIArb
- EFFECTIVENESS OF THE AFCFTA DISPUTE SETTLEMENT MECHANISM
Implementing a dispute settlement mechanism comes with both historical underpinnings and the practicability of the mechanism but such implementation must have measurable points. These three indicators define the how effective the system can be measured:
- Legal remedies: what legal remedies are available to State parties that approach either the informal or formal procedure for settlement of disputes?
- Party Participation: would necessary third-party States and private actors have access to the DSM, and will this access allow for fairness and justice manner?
- Enforcement: will decisions from the adjudicatory process be enforceable on the parties and in the region?
- LEGAL REMEDIES
As with every adjudicatory process, the goal is to find an amicable solution that will allow parties to continue respecting their respective rights and obligations. The dispute resolution process for a trade agreement should enable parties to continue trading in terms of the agreed rules. Legal remedies in rule-based systems like the WTO are essential to be provided for because the availability of legal remedies provide legal certainty and predictability. Such inter-state trade-related disputes usually attract legal remedies that often involve more than monetary compensation to the complaining party. To better understand this issue of remedies, the question is simple: what will happen when the dispute settlement body i.e., either the panel or AB, decides that a party involved in a dispute has acted in violation of the AfCFTA Agreement?
Article 23 of the Dispute Protocol provides the available legal remedy that a panel of AB may order where a measure has been inconsistent with the AfCFTA Agreement. It provides that the recommendation should be given for such a state party to bring the measure into conformity with the Agreement. Further, the Panel or AB may suggest ways in which the concerned state party could bring the measure into accordance with the AfCFTA Agreement and hence implement the recommendations of the DSB. Although temporary measures, there are other legal remedies like compensation and suspension of concessions or other obligations that may be ordered where DSB’s recommendations or rulings are not implemented within a reasonable period. Compensation is not an obligatory remedy and when granted must be consistent with the AfCFTA Agreement. Also, by the provisions of Article 25, the suspension of concessions or other obligations are temporary and must be consistent with the AfCFTA Agreement. It must be noted that these remedies are available until the breach or violation is removed or if the state party complained against implements the recommendations of the DSB.
Moreover, disputing parties may dispense with these remedies when a mutual solution is reached. These legal remedies are different from the trade remedies provided for in the Protocol on Trade in Goods of the AfCFTA Agreement. The AfCFTA does not currently pose any challenge in provision for remedies. What may be a threat or weakness is the ability to enforce such remedies as will be treated below.
- PARTY PARTICIPATION
It is an obvious fact that the AfCFTA will bring together a number of state actors that are at varying degrees of economic development and industrial exposures and capabilities. Two issues arise from this. Firstly, as posited by Onyejekwe and Ekhator, ‘a major weakness of the AfCFTA-DSM is that it does not provide access to non-state actors such as businesses, individuals, or members of the informal sector to bring claims to it.’ Secondly, is the protection of third parties that may have interests in final outcome of dispute settlement processes, and rightly so as a result of potential domestic infant industry protections that may be in violation of the AfCFTA.
On the first point, the AfCFTA DSM provides that its scope of application is to disputes arising between State Parties concerning their rights and obligations under the AfCFTA agreement. This establishes the WTO base of state-state dispute settlements and not the Investor-State Dispute System. Ofodile, argues that investors may prefer such alternative or complementary state to state dispute systems to the investor-state systems as the ISDS is losing its popularity especially in BITs. But when juxtaposed with other scholarly arguments about the low and non-litigious nature of African states from a historical perspective, there might be the need to rethink the position of the AfCFTA.
Onyejekwe and Ekhator as mentioned above recommend that the AfCFTA DSM will work better if it mirrors the aspect of party access as in the ECOWAS Court of Justice which allows for investor-state dispute systems- wherein investors, individuals, NGOs, CSOs and governments alike will have access to redress. This can be supported by the fact that the implementation of the Protocol on Trade in Goods will definitely have these non-State actors involved in rights and obligations. But the WTO-DSM has been largely successful in other regions where it has been adopted. Also, the AfCFTA does not provide for the formal adjudication as the first instance for dispute settlement. At the Consultation stage, such parties may be involved. It is the view of this research that the right political will and some level of involvement of both state and non-state actors will be most appropriate for the AfCFTA-DSM.
As member States try to protect their infant industries that may be affected by decisions of the DSB, Article 13 of the Dispute Protocol adequately provides for the rights protecting such third parties. A third party is defined as a state party with a substantial interest in the dispute. By written submissions to the Panel, the Dispute Protocol makes it possible for third parties to participate in dispute settlement proceedings. There are however two prerequisites to be met for third parties to participate in the dispute settlement proceedings. Notification is the first requirement, while acceptance by disputing parties is the second requirement. The third party must notify the DSB of its substantial interest in writing. Similar to the Article 10 of the WTO Dispute Settlement Understanding, the Dispute Protocol makes it a requirement for substantial interest to be established before such a third party can participate in the formal panel proceedings.
The first issue here is that ‘substantial interest’ is not defined in the Dispute Protocol even though the term also appears in Article 11 of the Protocol on Trade in Goods concerning modification of schedule of tariff concessions. The other requirement that the disputing parties should agree that the claim of substantial interest is well founded also runs into problem without a definition. Without an objective standard, parties to a dispute may object to participation of third parties if they are not satisfied that the third party has sufficient substantial interest. In the WTO, where disputing parties object to participation of third parties, a Panel may be requested to decide this issue as a preliminary point. The AfCFTA DSB may also adopt same method.
On the point of disputing parties agreeing to third party participation in the consultations, the Dispute Protocol provides a solution. Where the disputing parties refuse to join a third party on the ground that it does not have sufficient ‘substantiate trade interest’ or the interest is not well founded, the third party may request separate consultations with the disputing state party.
The Protocol further provides for the participation of third parties in the bilateral consultations between disputing state parties. Third party participation in bilateral consultations is significant because being in the room during pre-litigation negotiations ensures that a State will not be cut out of any possible settlement that is mutually agreeable. Another benefit to third party participation is that it prevents discriminatory private settlements and will ultimately increase member participation in dispute settlement.
- ENFORCEMENT OF JUDGMENT
This is arguably the major pillar of effectiveness with regards to dispute settlement from a logical standpoint. The question to understand this issue is: are there any guarantees that decisions or recommendations from the dispute settlement body will be obeyed, recognized or enforced? There may be no need to get access to justice, when justice cannot be served with the enjoyment of the rewards of the judgment. When a competent municipal or domestic court has passed a final and binding decision, recognition and enforcement of the judgment follows according to municipal laws. Although, this can be catered to by national systems, implementation of decisions or rulings made by an international or regional judicial body is intricate. The enforcement and implementation complexities are exacerbated where a dispute involves two or more sovereign states.
It should ordinarily be an underlying principle that where a state party signs and ratifies an international instrument of this nature, it intends to be bound by the obligations therein – in this case the enforcement of decisions and orders made by competent authorities established by the instrument. It is sacrosanct that obeying the DSB’s rulings or recommendation is an obligation of any state that submitted to its jurisdiction to settle disputes. As for the AfCFTA Agreement, the Panel or AB may recommend bringing a measure into conformity with the Agreement. As such, implementation may also entail repealing or amending a trade policy measure found to be inconsistent with the AfCFTA Agreement.
The Protocol on dispute settlement mechanism provides for a system of monitoring implementation of rulings and recommendations of the DSB. Article 24 stipulates that a state party shall promptly comply with recommendations and rulings of the DSB and inform the DSB of its intentions in respect to the implementation of the recommendations and rulings within thirty days after the date of adoption of the report by the Panel or the Appellate Body. This system creates a monitoring system to ensure compliance with the decisions of the DSB. This should eliminate the possibility of having rulings that will not be implemented or enforced. The DSB will have powers to authorise the suspension of concessions and obligations in favour of an aggrieved party. These are, however, temporary measures which can only be invoked where the DSB’s recommendations are not implemented within a reasonable time. Where the concerned state party is unable to implement the rulings and recommendations within a reasonable time, concerned parties may mutually agree on the time within which implementation should be affected. In the absence of such an agreement, an arbitrator may be appointed to determine a binding time. The implementation and monitoring system adopted for the AfCFTA Agreement is also similar to the existing WTO regime. However, the adoption of that system begs for apt concerns since African countries have not made use of the WTO dispute settlement mechanisms as alluded to above on the basis of a non-litigious culture and preference for diplomacy and consultations.