With the AfCFTA agreement providing the opportunity for effective collaboration in raising the income of millions of Africans, there is a huge expectation of economic development for African countries.
According to the World Bank, the AfCFTA agreement creates the largest free trade area in the world by connecting 1.3 billion people across 55 countries with a combined GDP valued at US$3.4 trillion. Hence, effective measures must be in place to restrict trade disputes that might hinder its progress.
This was the crux of discussion at the recent AfCFTA roundtable organized in collaboration with the Nigerian Institute of Chartered Arbitrators (NICA), and the Nigerian Chambers of Commerce Dispute Resolution Center (NCCDRC) themed ‘’AFCFTA and Non-State Parties: Implications for Trade and Dispute Resolution’’. The webinar brought together business leaders, academia, government representatives, trade, and legal experts to discuss and deliberate on dispute issues in implementing the agreement in Nigeria.
Participants identified a challenge that might lead to disputes in implementing the AfCFTA agreement in Nigeria, which is that the economic activities on AfCFTA are mostly done by private persons and not by the state. Many of these private persons are owners of Small and Medium Enterprises (SMEs). However, the agreement gives power to the state, thus private persons become aggrieved because the state will have to act on their behalf. Thus, they believe that there should be more structure on investment negotiations so that private entities can also participate effectively and have their rights protected.
According to figures provided at the webinar by the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), there are over six million SMEs in Nigeria and half of them do not understand the AfCFTA implementation yet. Due to the large size of its economy and population, Nigeria continues to attract investment in its private sector. SMEs in Nigeria are key to the agreement because they employ a significant amount of the workforce in the country with the potential to boost local production and development capacity. Hence, there should be more education for the SMEs to ensure they are part of the AfCFTA negotiations and implementation process.
Arbitration partner at Hogan Lovells, Nathan Searle, gave an overview of the issue, highlighting the importance of resolving efficiently disputes between Member states and non-state parties. Commenting further on the private sector involvement in AfCFTA, he said
‘’ The AfCFTA agreement provides a real opportunity and huge prospect for growth in Africa through investment. There is an important role for Chambers of Commerce and Trade bodies to engage with the government on behalf of the Small and Medium Enterprises to put the case to the government about the economic impact of any remaining trade barriers to market access so that these can be addressed under the AfCFTA. Such engagement by industry bodies may encourage the government to trigger the state-to-state dispute resolution to resolve such issues. As we move ahead to the second phase of implementation of the agreement, discussions are ongoing regarding the preparation an investment protocol for settlement in trade in goods and services that fit with this mechanism’’.
Part IV of the AfCFTA Agreement establishes a Dispute Settlement Body wherein representatives of all state parties monitor and evaluate the functions of the Dispute Settlement Mechanism (DSM). The mechanism ensures that disputes among the member states are resolved with an efficient, rule-based, and transparent approach.
‘‘In order to gain the benefit from the Free Trade Agreement, it is important to have a mechanism to enforce the rules. It is hoped that the preexistence of the mechanism will mean that parties who are wary of others breaking the rules will know that there is a means to resolving those disputes. That’s why in Phase one of the agreement, there is a protocol in the rules of dispute. This will ensure that parties to the AfCFTA agreement see the process as fair for all’’. Searle added
While there is no direct access for private actors to the state-to-state dispute resolution mechanism, however the private sector can play a key role through member state governments to ensure that there is effective enforcement of the obligations of other member states, such as market access.
Participants hinted that while this approach could reduce some problems, the challenge is that the trading in goods and services as well as other economic activities in FTAs like AfCFTA are not done by States. Dispute settlement only among State Parties could be costly and time consuming and may not be sustainable for business and commercial activities which thrive on rapidity. There was consensus that there should be further consideration on the role and significance of the private sector and the balance to be struck, particularly as Phase 2 documents such as the Investment Protocol are currently being negotiated.
The AfCFTA roundtable was conceived to educate, galvanize and engage Africans and investors in participating in and actualizing the vision of the AfCFTA agreement. Hogan Lovells is committed to understanding, operating in, investing in and respecting Africa. With close relationships with law firms in 50 African countries, the global law firm continues to drive and be part of discussions that drive forward the actualization of the AfCFTA agreement in Africa’s key sectors.