AfCFTA and the Upcoming Protocol on Investment: What Can Investors Expect?

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In 2012, African states set out with the ambition to establish an unprecedented ‘Continental Free Trade Area’. [1] Negotiations were launched under the aegis of the African Union with the primary objective of ‘boosting intra-Africa trade’. [2] The agreement would give rise to the creation of an impressive single market for goods and services of 1.2 billion people with a combined GDP of more than US$2.2 trillion. [3]

On 30 May 2019, the African Continental Free Trade Agreement (AfCFTA) became a reality. [4] To date, it has been signed by 54 states (Member States) [5] and ratified by 28. [6]

Under the AfCFTA, Member States will work to progressively eliminate tariffs and non-tariff barriers to both ‘trade and investment’. [7] Member States have the further ambition to create a continent-wide customs union providing for the free movement of capital and persons. [8]

This chapter explores the future possible traits of the AfCTA’s Protocol on Investment (Investment Protocol), currently under negotiation, which is highly anticipated to follow the model of new generation investment protection instruments.

Implementing the AfCTFTA

The AfCFTA’s implementation is comprised of two phases.

Phase I, which pertains to the liberalisation of trade in goods and services, is well underway. So far, Member States have adopted a Protocol on Trade in Goods, [9] a Protocol on Trade and Services, [10] a Protocol on the Settlement of Disputes between Member States and an annex on Rules of Origin. Member States are still negotiating a schedule of tariff concessions and schedules of specific commitments. In theory, these negotiations should come to a close in the coming months, in time for the commencement of preferential trading across the territories of the AfCFTA Member States, which has been slated for 1 July 2020. [11]

Natural persons and corporate entities have no right of recourse under the AfCFTA. Similar to what the World Trade Organization has instituted, the protocols only provide for a state-to-state dispute resolution mechanism. In other words, traders and investors wishing to seek recourse against a Member State under the AfCFTA may only do so by seeking diplomatic protection. [12]

For these reasons, intra-African investors are now casting their eyes on the Phase II negotiations, which include the negotiation of an Investment Protocol. However, negotiations are behind schedule. The deadline for the completion of the Phase II negotiations has been postponed to June 2020 [13] and is likely to be further postponed to December 2020. [14]

Investors eagerly await the contents of the Investment Protocol, both in terms of the substantive protections it will offer and the rights of recourse that will be made available to them.

Negotiating the Investment Protocol

The ongoing discussions between Member States on the Investment Protocol have not been made public. However, investors will look to recent developments in the field of investment protection, in particular on the African continent, for an indication of what to expect.

There has been a sharp rise, in recent years, in the number of investment protection instruments in Africa. In October 2017, the African Union Commission adopted the first harmonised Draft Pan-African Code on Investment (the PAIC). Although this instrument is not binding, it provides clear insights into the pan-African approach to international investment protection.

Likewise, Africa’s numerous regional economic communities (RECs) [15] have adopted legal frameworks to encourage the development of intra-African investments. In 2008, the Economic Community of West African States (the ECOWAS) enacted the Supplementary Act adopting Community Rules on Investment and the Modalities for their Implementation (the ECOWAS Supplementary Act). More recently, in 2016, the Southern African Development Community (the SADC) amended the annex relating to the Cooperation on Investment of the Protocol on Finance and Investment (the SADC FIP).

The approach undertaken by the RECs in developing these instruments will undoubtedly be of influence in the negotiations of the Investment Protocol under the AfCFTA. The RECs are officially considered as the ‘building blocks’ of the AfCFTA, [16] which aims to ‘preserve the acquis’ and allow Member States to build upon these prior regional initiatives. [17] In particular, the AfCFTA sets out to preserve the ‘higher levels of regional integration’ achieved by these RECs. [18]

Additionally, African states have entered into numerous bilateral investment treaties (BITs) in recent years, which shed light on the views taken by Member States on investment protection. The Investment Protocol is widely expected to reflect these views.

In light of these developments, this chapter considers the rights and obligations that are likely to arise under the AfCTA’s Investment Protocol for African investors engaged across the continent.

Joining the line of second-generation BITs

The first generation of BITs, negotiated for the most part throughout the 1980s and 1990s, are

short bilateral treaties, providing little detail. They may simply require the government to provide covered foreign investors with ‘fair and equitable treatment’, for example, without further specification as to the nature or breadth of the obligation or the consequences of its breach. [19]

First-generation BITs focus on investors’ rights and account for the majority of treaties in force today.

Second-generation BITs, which have emerged since the turn of the new century, intend to restrict investors’ rights and impose obligations upon them. [20]

There exists a clear trend in Africa in favour of second-generation BITs. The PAIC, ECOWAS Supplementary Act, SADC FIP and the recently-concluded BITs (such as the 2016 Morocco–Nigeria BIT) all place strict obligations on investors, reflecting this shift.

It is strongly expected that the future Investment Protocol will follow this line of second generation BITs and include, in their footsteps, provisions:

  • preserving state’s rights to regulate;
  • limiting the rights of investors with respect to the substantive investment protection standards;
  • imposing strict obligations on investors; and
  • limiting the right of access to investor-state arbitration.

Preserving African states’ rights to regulate

Second-generation investment instruments expressly carve-out a state’s rights to regulate in key areas, such as the preservation of public health or the environment. These general exceptions clauses entitle host states to enact measures that would otherwise be inconsistent with their substantive obligations towards investors under investment agreements. [21]

The PAIC, for instance, contains a series of ‘exceptions’ to the substantive protection standards of most-favoured nation treatment, national treatment and expropriation, based on the state’s right to ‘protect or enhance legitimate public welfare objectives, such as public health, safety and the environment’. [22]

The PAIC more generally preserves the right of a state to:

adopt or enforc[e] measures relating to the protection of human, animal or plant life or health, or to the maintenance of international peace and security, or to the protection of its national security interests, subject to the requirement that these measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between investors in like circumstances or a disguised restriction on investment flow. [23]

Equally, article 22.1 of the Common Market for Eastern and Southern Africa (COMESA) Common Investment Agreement provides that:

[s]ubject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between investor where like conditions prevail, or a disguised restriction on investment flows, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any Member State of measures: (a) designed and applied to protect national security and public morals; (b) designed and applied to protect human, animal or plant life or health; (c) designed and applied to protect the environment; or (d) any other measures as may from time to time be determined by a Member State, subject to approval by the CCIA Committee.

A number of African BITs also include similarly-worded provisions [24] .

It is clear from the language of the preamble to the AfCFTA that the Member States will pursue the same approach under the Investment Protocol. Indeed, the preamble to the AfCFTA expressly reaffirms

the right of State Parties to regulate within their territories and [their] flexibility to achieve legitimate policy objectives in areas of public health, safety, environment, public morals and the promotion and protection of cultural diversity. [25]

In particular, the Investment Protocol may reproduce the specific and general exception clauses set out under the PAIC. It may further set out specific exceptions, such as article 38 of the ECOWAS Supplementary Act or article 21.3 of the SADC Model BIT, which guarantee a state right to regulate to protect or support ‘categories of persons disadvantaged by long-term historic discrimination’.

Imposing strict obligations on investors

There has been a clear shift in second-generation investment instruments towards imposing strict obligations on investors, in particular with respect to the fight against corruption, the preservation of the environment, the protection of human rights and compliance with labor standards.

The PAIC, for instance, devotes an entire chapter to investor obligations, including socio-political obligations such as the non-interference in internal political affairs and the obligation not to exploit or use the host state’s natural resources to the detriment of the rights and interests of the host state. [26]

The ECOWAS Supplementary Act sets out a series of obligations on investors, including to ‘comply with and maintain national and internationally accepted standards of corporate governance for the sector involved, in particular for transparency and accounting practices’. [27]

Similarly, the COMESA Common Investment Agreement and the SADC FIP both provide for extensive obligations, such as the obligation to make ‘provisions for the continued improvement of environmental management technologies and practices […] [which] shall strive to exceed legally applicable standards’. [28]

As regards to bilateral treaties, under the Morocco–Nigeria BIT, investors (in addition to compliance with domestic laws and mandatory prior assessments of environmental and social impacts of the intended investment) must ‘meet or exceed national and internationally accepted standards of corporate governance for the sector involved’. [29]

Investors who fail to comply with these obligations run the risk of losing the benefit of the protections afforded by the investment protection instrument and are at risk of liability towards the host state. [30]

The Investment Protocol is widely expected to include similar sets of obligations on investors.

A new standard of fair and equitable treatment?

Investment treaties frequently impose an obligation on host states to accord foreign investments fair and equitable treatment (FET). This standard of protection is generally meant to protect investors against arbitrary, discriminatory or abusive conduct by states.

However, FET clauses rarely provide a clear delineation of the corresponding standard of protection, such that their ‘exact meaning has to be determined’. [31]

Tribunals have not always agreed on the exact scope of this standard of protection, thereby causing some uncertainty. However, there exists a large body of arbitral decisions interpreting the language of such FET clauses broadly. In the words of the tribunal in the case of Waste Management v Mexico:

the minimum standard of treatment of fair and equitable treatment is infringed by conduct attributable to the State and harmful to the claimant if the conduct is arbitrary, grossly unfair, unjust or idiosyncratic, is discriminatory and exposes the claimant to sectional or racial prejudice, or involves a lack of due process leading to an outcome which offends judicial propriety—as might be the case with a manifest failure of natural justice in judicial proceedings or a complete lack of transparency and candour in an administrative process. In applying this standard it is relevant that the treatment is in breach of representations made by the host State which were reasonably relied on by the claimant. [32]

Some commentators argue for the adaptation or removal of FET clauses from investment protection instruments because of these broad interpretations and a corresponding lack of predictability for the host state.

There appears to be no consensus between the Member States on this issue. The PAIC and SADC FIP do not include any FET provision whatsoever. The Drafting Committee of the SADC Model BIT was of the view that the FET standard should not be included because of the broad interpretations adopted by a number of arbitral tribunals. [33] Rather, it suggested an alternative version of the FET clause aimed at restraining a perceived ‘creativity’ of arbitrators to amplify the intended meaning of such provisions. [34] The ‘Fair Administrative Treatment’ standard suggested under the SADC Model BIT thus prescribes that the:

administrative, legislative, and judicial processes [of the host State] do not operate in a manner that is arbitrary or that denies administrative and procedural [justice][due process] to investors of the other State Party or their investments [taking into consideration the level of development of the State Party]. [35]

The COMESA Investment agreement also provides that account must be taken of the level of development of its members in the acceptation of the FET standard. [36]

Notwithstanding these approaches aimed at restricting the ambit of the FET standard, some African states, through their numerous BITs with non-African counterparts, have adopted standard FET clauses without specific limitations. Nigeria and Tanzania, for instance, both ratified BITs that provide a minimum standard of treatment as guaranteed under customary international law. [37]

In light of these differing approaches, the question of whether the Investment Protocol will include an FET provision and, if so, what scope of protection it may offer, remains open.

Investor-state arbitration

Despite the widespread criticism of investor-state dispute settlement, most African states continue to offer foreign investors the option to bring proceedings before an arbitral tribunal in the event of an alleged breach of an investment treaty standard. [38]

Only a minority of African states have chosen to remove entirely an investor’s right of recourse to investor-state arbitration. For example, South Africa precludes the use of investor-state arbitration [39] and requires foreign investors to seek the diplomatic protection of their home state. Tanzania’s 2017 Natural Wealth and Resources Act excludes the possibility for the resolution of disputes arising from extraction, exploitation or acquisition and use of natural wealth and resources of the country, before courts of tribunals located outside of the country. [40]

The PAIC took note of this divergence between African countries and the right of each of its Member States to exercise discretion to accept or refuse investor-state dispute settlement. [41]

As the negotiation of the Investment Protocol is based on consensus, [42] it is likely that the Investment Protocol will also adopt this approach and leave the Member States to opt-in or opt-out of any investor-state dispute settlement mechanism.

Yet, such access to an investor-state dispute settlement mechanism could be conditional under the Investment Protocol. Some African states already limit the access of foreign investors to arbitration by imposing additional requirements, such as the consent in writing to arbitration of the host state or the prior exhaustion of local remedies. [43]

At the regional level, besides the SADC FIP, which removed entirely investor-state dispute settlement, the RECs favour a cautious approach to ISDS. [44] The ECOWAS Supplementary Act, the ECOWAS Protocol on Energy, the COMESA Common Investment Agreement and the SADC Model BIT all impose conditions to submit a claim to arbitration thereby strengthening the use of the amicable settlement mechanisms in those agreements. [45]

Under the RECs’ investment protection instruments, investors seeking to initiate arbitration proceedings must issue a notice of intention to initiate arbitration and observe a minimum period of three to six months after the date the notice of intention before initiating proceedings. During this period, the parties involved must also make efforts to reach an amicable settlement of their dispute. [46]

Additionally, the COMESA Common Investment Agreement and the SADC Model BIT impose a time limitation of three years, from the date on which the investor first acquired knowledge of the breach to submit a claim to arbitration. [47] Under the PAIC and the SADC Model BIT, foreign investors must also exhaust local remedies before having recourse to arbitration. [48]

Another singular feature of the RECs’ investment protection instruments is the transparency of arbitral proceedings. All procedural and substantive oral hearings are made available to the public under the ECOWAS Supplementary Act. [49] The COMESA Common Investment Agreement and the SADC Model BIT also render the arbitral proceeding transparent and made available to the public, with specific provisions on the publication of all pleadings, evidence and decisions and rendering the oral hearings open to the public. [50]

The Morocco–Nigeria BIT (2016) also has integrated a limited approach to investor-state arbitration and requires consultations and negotiations by the state parties’ joint committee before initiating arbitration proceedings, as well as the prior exhaustion of local remedies. [51] Also under the BIT, the arbitral record (specifically all pleadings and the decisions of the tribunal) must be made available to the public and the hearing itself must also be open to the public. [52]

In these circumstances, it is unlikely that the African states will find a consensus on whether to use or prohibit investor-state arbitration. It is likely, however, that in any event the Investment Protocol will limit the availability of investor-state arbitration, provide for full transparency and put greater focus on amicable settlement mechanisms.

Risks of discrepancies between the various regimes?

A continental harmonised investment regime begs the question of its relationship with the numerous BITs that already exist between the Member States of the AfCFTA.

Maintaining all the pre-existing BITs would defeat the purpose of the AfCFTA to resolve the challenges of multiple and overlapping trade and investment protection regimes. [53] For these reasons, the drafters of the Investment Protocol might want to consider whether Member States would be willing to agree that the Investment Protocol would prevail in case of divergence with pre-existing intra-African BITs, if these are not separately terminated.


The AfCFTA was negotiated for the purpose of increasing intra-African trade and create a thriving common African market. As such, the Investment Protocol should create a regime that welcomes investments and contributes to the development of trade within Africa.

Bearing in mind that the negotiations of the Investment Protocol are carried out in a global context of the reform of international investment agreements, it is very likely that the new investment regime will implement the consensus announced by the RECs and Member States in their pre-existing investment protection instruments. [54]

Prospective investors in Africa, therefore, should expect a text that strikes a fresh and welcome balance between the facilitation of cross-border investments within Africa and the promotion of the sustainable development of the host state.

The authors would like to thank Ms Alexandra Esmel, intern at DLA Piper, for her valued contribution to the preparation of this chapter.


[1] Decision of the African Union Assembly on Boosting Intra-African Trade And Fast Tracking The Continental Free Trade Area, 31 May 2012, Assembly/AU/Dec. 394(XVIII), page 1, available at

[2] Ibid.

[3] UNCTAD World Investment Report 2019 – Africa, p. 54 on 237 : The elimination of tariffs under the Agreement could support market-seeking FDI, as foreign investors venture to tap into a market of 1.2 billion people with a combined GDP of more than US$2.2 trillion. Available at

[4] African Union Press release, AfCFTA Agreement secures minimum threshold of 22 ratification as Sierra Leone and the Saharawi Republic deposit instruments, April 29th, 2019, available at

[5] Out of all 55 African Union Member States, Eritrea is the only state which has not signed the AfCFTA. The current Member States of AfCFTA are: Algeria, Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cabo Verde, Central African Republic, Chad, Comoros, Congo, the Democratic Republic of Congo, Cote d’Ivoire, Djibouti, Equatorial Guinea, Egypt, Eritrea, Ethiopia, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau. Kenya, the Kingdom of Lesotho, Liberia, Libya, Madagascar, Malawi, Mali, Mauritania, Mauritius, Morocco, Mozambique, Namibia, Niger, Nigeria, Rwanda, Saharawi Arab Democratic Republic, Sao Tome and Principe, Senegal, Seychelles, Sierra Leone, Somalia, South Africa, South Sudan, Sudan, Kingdom of Swaziland, Tanzania, Togo, Tunisia, Uganda, Zambia and Zimbabwe. See AfCFTA Preamble and Article 1.

[6] See the Status list of countries which have signed and ratified the AfCFTA, available at

[7] AfCFTA, Preamble.

[8] AfCFTA, Article 3.

[9] The Protocol contains a number of annexes: Annex 1 on Schedules of Tariff Concessions; Annex 2 on Rules of Origin; Annex 3 on Customs Cooperation and Mutual Administrative Assistance; Annex 4 on Trade Facilitation; Annex 5 on Non-Tariff Barriers; Annex 6 on Technical Barriers to Trade; Annex 7 on Sanitary and Phytosanitary Measures; Annex 8 on Transit; and Annex 9 on Trade Remedies. Available at

[10] The Protocol on Trade and Services comports two annexes: an Annex on MFN Exemption and Annex of Air Transport.

[11] African Union, Operational Phase on the African Continental Free Trade Area Launched, available

[12] AfCFTA, Article 20 and Protocol on Rules and Procedures on the Settlement of Disputes, Article 3.

[13] Assembly of the Union (Assembly/AU/4(XXXII)), Report on the African Continental Free Trade Area by H.E. Mahamadou Issoufou, President of the Republic of Niger and Leader on AFCFTA 32nd Ordinary Session 10 – 11 February 2019 and Report to the Specialised Technical Committee on Trade, Industry and Minerals: Progress on the African Continental Free Trade Area (AfCFTA) for the period from May 2016 to December 2018, available at

[14] See statement of Ambassador Alber Muchunga dated 12 February 2020, available at

[15] The Regional Economic Communities (RECs) are regional groupings of African states created to facilitate regional integration within the continent. The African Union recognizes eight RECs: the Arab Maghreb Union (UMA), the Common Market for Eastern and Southern Africa (COMESA), the Community of Sahel–Saharan States (CEN–SAD), the East African Community (EAC), the Economic Community of Central African States (ECCAS), the Economic Community of West African States (ECOWAS), the Intergovernmental Authority on Development (IGAD), and the Southern African Development Community (SADC).

[16] AfCFTA, Article 5.

[17] AfCFTA, Articles 3 and 5. The Abuja Treaty in 1991 already envisioned a gradual establishment of an African economic community built on the efforts of harmonization of the regional economic communities.

[18] AfCFTA, Article 19.2.

[19] OECD Business and Finance Outlook 2016, Chapter 8, The impact of investment treaties on companies, shareholders and creditors, p.3, available at

[20] Kluwer Arbitration Blog, Rebalancing the Asymmetric Nature of International Investment Agreements?, Kun Fan, April 30, 2018. Available at; Yearbook on International Investment Law & Policy 2014-2015 edited by Andrea K. Bjorklund, p.50 et seq.

[21] Boston College Law Review, Volume 59, Issue 8, 2018 Reforming International Investment Law, Caroline Henckels, ‘Should Investment Treaties Contain Public Policy Exceptions?’, available at

[22] PAIC, Articles 8, 10 and 12.

[23] PAIC, Article 14.

[24] See for example the Nigeria-Morocco BIT (2016) – not in force, Article 13; Canada-Côte d’Ivoire BIT (2014), Article 15 and 17; Macedonia-Morocco BIT (2010), Article 2(6); Nigeria-Turkey BIT (2011) – not in force, Article 6 ; Cameroon-Turkey BIT (2012) - not in force, Article 5; Japan-Mozambique BIT (2013), Article 18 ; Nigeria-Morocco BIT (2016) – not in force, Article 13.

[25] AfCFTA, Preamble.

[26] PAIC, Chapter 4.

[27] ECOWAS Supplementary Act, Chapter III, Article 15(1). See more generally, Articles 11 to 17, availabe at

[28] Amended Annex 1 SADC FIP Article 14.4, available at

[29] SADC Model BIT, Articles 10,11,13,14 and 16, available at ; Morocco-Nigeria BIT, Article 19.

[30] See SADC Model BIT, Article 19.

[31] See OECD Working Papers on International Investment 2004/03,’Fair and Equitable Treatment Standard in International Investment Law, p.2.

[32] Waste Management, Inc. v. United Mexican States (‘Number 2’), ICSID Case No. ARB(AF)/00/3, Award, 30 April 2004.

[33] See International Investments Protection: Comparative Law Analysis of Bilateral and Multilateral Interstate Conventions, Doctrinal Texts and Arbitral Jurisprudence Concerning Foreign Investments, Jan Schokkaert & Yvon Heckscher Bruylant, 2009 p.332 : ‘However, the fact remains that the content of the fair and equitable treatment concept is not clear. International jurisprudence and doctrine may well be distilled […] but to guarantee a correct application of this principle in the relations between host State and foreign investors, it is necessary that the duty of fair and equitable treatment be confirmed expressly in conventional international law.’; See also Journal of World Trade 2007 Kluwer Law International, ‘Playing Fair: The Meaning of Fair and Equitable Treatment in Bilateral Investment Treaties’, Graham Mayeda, available at; See also ‘The Vague Meaning of Fair and Equitable Treatment Principle in Investment Arbitration and New Generation Clarifications’, Günes Ünüvar, May 2016, p.12 and seq., available at

[34] SADC Model BIT, Article 5 on Fair Equitable Treatment and commentary on the same.

[35] SADC Model bIT, Article 5 on Fair Equitable Treatment, Option 2 and commentary on the same.

[36] COMESA Investment agreement, Article 14.3, ‘For greater certainty, Member States understand that different Member States have different forms of administrative, legislative and judicial systems and that Member States at different levels of development may not achieve the same standards at the same time. Paragraphs 1 and 2 of this Article do not establish a single international standard in this context’.

[37] Nigeria-Morocco BIT (2016) – not in force, Article 7; Canada-United Republic of Tanzania BIT (2013), Article 6.

[38] See for example Algeria Investment Promotion Law n°2016-09 (2016); Uganda Investment Code Act, Article 28 (1991), Angola Private Investment Law (2018), Article 15; DRC Investments Code (2002), Articles 37 et seq.; Mali Investments Code (2012), Article 29; Tanzania Investment Act (1997), Article 23.

[39] South Africa Protection of Investment Act (2015), Article 13.

[40] Tanzania’s Natural Wealth and Resources Act (2017), Article 11 and seq.

[41] PAIC, Article 42.1 and 42.1.c.

[42] AfCFTA, Article 5.

[43] See for example Namibia Investment Promotion Act (2016), Article 28.

[44] UNCTAD, IIA Issue Note, Reforming Investment Dispute Settlement: A Stocktaking, available at

[45] ECOWAS Supplementary Act, Article 33; ECOWAS Protocol on Energy, Article 26; COMESA Common Investment Agreement, Article 27; SADC Model BIT, Article 29.

[46] COMESA Common Investment Agreement, Article 26; Amended Annex 1 SADC FIP, Article 28.

[47] COMESA Common Investment Agreement, Article 28.2; SADC Model BIT, Article 29.4b.d.

[48] PAIC, Article 42.1.c ; SADC Model BIT, Article 29.4.b.i.

[49] ECOWAS Supplementary Act, Article 34.

[50] COMESA Common Investment Agreement, Article 28.5 and 28.6; SADC Model BIT, Article 29.17.

[51] Morocco-Nigeria BIT (2016), Articles 26.1 and 26.5.

[52] Morocco-Nigeria BIT (2016), Article 10.5.

[53] AfCFTA Preamble.

[54] UNCTAD, Phase 2 of IIA Reform: Modernizing the Existing Stock Of Old-Generation Treaties, available at

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