Chapter III: An Evaluation the PAIC and its Article 14
III.2 The legal hurdles of a potential application of the PAIC
In this part of the third chapter of the thesis, the legal challenges that could compromise the implementation of the PAIC as a legally binding instrument, as allowed by Article 3(2), will be studied. While the PAIC features a provision to replace intra-African BITs and become legally binding, as of now it remains a model treaty and as such not legally binding.165 Even if the AU members were to agree on the legal status of the PAIC and rely on its Article 3(2) to use the PAIC as a substitute to the AfCFTA Investment Protocol, it would still encounter a number of challenges of a legal nature. Ranging from practical legal application issues to double standards of treatments between Intra and Extra-African investors instead of the targeted harmonization of International Investment Law on the African Continent, these issues will be studied and analyzed.
164Ibid (n 163).
163SH Nikièma and N Maina, ‘Negotiating the AfCFTA Investment Protocol: An Opportunity for Africa to Set its Own Investment Facilitation Agenda’ ( Afronomics Law, 3 September 2021)
<www.afronomicslaw.org/category/analysis/negotiating-afcfta-investment-protocol-opportunity-africa-set-its-own-i nvestment> accessed on 21 May 2022.
162‘Investment facilitation for development’ (World Trade Organization, December 2021)
<www.wto.org/english/tratop_e/invfac_public_e/invfac_e.htm> accessed on 21 May 2022.
Harmonizing Intra-African IIAs
Firstly, if the PAIC were to be used as a legally binding treaty, it would face hurdles in its application. Indeed, in his article Oulepo emphasized how coexistence of intra-African BITs and the AfCFTA might undermine the overall objective of harmonization, which would also be true for the PAIC.166 Oulepo illustrates his point through the Oded Besserglik v Mozambique case.
The Besserglik v. Mozambique case is the only concluded ICSID case to date brought under an Intra-Africa BIT.167 In this case, the arbitral tribunal ruled that it was incompetent as it lacked consent because the Mozambique-South Africa BIT was not enforced.168 Oulepo uses this example to highlight the status of intra-African BITs which often still await ratification despite having been concluded between 1980 and the 1990s. This fact is further emphasized by statistics provided by the UNCTAD which showcase that more than 65% of the Intra-African IIAs are still not ratified.169
With all these de facto unusable BITs, it is in the interest of all African States to seek harmonization as sought by the innovations led by the PAIC & the AfCTFA through transfers of competence for example. This need to nullify and harmonize the existing intra-African investment law regime raises another legal issue which relates to the survival periods and sunset clauses that many BITs feature. Ngobeni argues that using Article 3(2) of the PAIC and terminating all intra-African BITs is complicated in practice because some AU Members like South African drafted BITs featuring a 10 to 15 years sunset clause.170Contrary to the argument advanced by Dr. Ngobeni, this thesis argues that to tackle this issue, the AU may seek a solution
170Ibid (n 157); European Union Parliamentary Questions: South Africa's Bilateral Investment Treaties (European Parliament, 29 August 2019) <www.europarl.europa.eu/doceo/document/E-9-2019-002587_EN.html> accessed on 22 May 2022.
169UNCTAD International Investment Agreements Navigator,
<investmentpolicy.unctad.org/international-investment-agreements/advanced-search> accessed on 22 May 2022.
168Ibid (n 166).
167Oded Besserglik v. The Republic of Mozambique, ICSID Case No. ARB(AF)/14/2, Award, 28 October 2019
<https://www.italaw.com/sites/default/files/case-documents/italaw10925.pdf> accessed on 21 May 2022.
166A Oulepo, ‘AfCFTA, the Future Investment Protocol, and the Phasing-Out of Intra-African BITs’ ( Kluwer Arbitration Blog, 7 February 2021)
<arbitrationblog.kluwerarbitration.com/2021/02/07/afcfta-the-future-investment-protocol-and-the-phasing-out-of-int ra-african-bits/> accessed on 21 May 2022.
similar to the one the European Union (EU) used to solve the challenges raised by intra-EU BITs clashing with EU Law.
Intra-European Union BITs Termination
At the origin of this issue was the Court of Justice of the European Union (CJEU) ruling over the Slovakia v. Achmea case.171This CJEU case arose out of a UNCITRAL case brought by Achmea against the Slovak Republic on the basis of Article 8 of the 1991 Netherlands-Slovakia BIT.172 After the UNCITRAL Award required Slovakia to pay more than 20 millions of Euros to Achmea, Slovakia sought for the Award to be set aside by claiming that Article 8 of the concerned BIT went against Articles 18, 267 and 344 of the Treaty on the Functioning of the European Union (TFEU). When this setting-aside proceeding was refused, Slovakia appealed the decision which was ultimately referred to the CJEU.173
The CJEU Achemea ruling concluded that Article 8 of the Netherlands-Slovakia BIT was incompatible with EU Law.174 This ruling had direct consequences on the Intra-European Union Investment regime as it defined Investor-State arbitration clauses as a violation of EU law (Articles 267 and 344 of the TFEU) and “fundamental principles of autonomy”.175As a result of the Achmea ruling, the EU member states issued a declaration in January 2019 to announce their commitment to terminate all Intra-EU BITs.176 The Achmea ruling and the EU member states
176Declaration on the consequences of Judgement of the Court of Justice in Achmea and on Investment Protection in the European Union, 15 January 2019
<ec.europa.eu/info/sites/default/files/business_economy_euro/banking_and_finance/documents/190117-bilateral-inv
175D Bray and S Kapoor, ‘Agreement on the Termination of Intra-EU BITs: Sunset in Stone?’ (Kluwer Arbitration Blog, 4 November 2020)
<arbitrationblog.kluwerarbitration.com/2020/11/04/agreement-on-the-termination-of-intra-eu-bits-sunset-in-stone/>
accessed on 23 May 2022.
174Ibid (n 171).
173CJEU Case C‑284/16[GC]Slowakische Republik (Slovak Republic) v. Achmea BV(2018) EU:C:2018:158.
172PCA Case No. 2008-13, Final Award, 7 December 2012
<www.italaw.com/sites/default/files/case-documents/italaw3206.pdf> accessed on 23 May 2022.
171C Fouchard and M Krestin, ‘The Judgment of the CJEU in Slovak Republic v. Achmea’ ( Kluwer Arbitration Blog, 7 March 2018)
<arbitrationblog.kluwerarbitration.com/2018/03/07/the-judgment-of-the-cjeu-in-slovak-republic-v-achmea/?doing_
wp_cron=1593268482.6703040599822998046875#:~:text=Achmea%20B.V.%20(Case%20C%2D284,therefore%20 incompatible%20with%20EU%20law> accessed on 23 May 2022.
declaration led to the implementation of the Agreement for the termination of Bilateral Investment Treaties between the Member States of the European Union which entered in force in August 2020.177
Article 3 of the Agreement for the termination of Bilateral Investment Treaties between the Member States of the European Union is a solution for the termination of BITs which featured sunset clauses. Indeed, it reads that the sunset clauses of Intra-EU BITs are terminated through the Agreement which nullifies their legal effects.178 This provision of the Agreement is an example of a way forward to adopt for the African Union as it would solve the legal issues raised by the existence of sunset clauses in the BITs of certain member states like South Africa.
Additionally, Article 7 to 9 of the Intra- EU BIT Termination Agreement also provides an outline of procedures for the pending Intra-EU Investor-State arbitration.179These three provisions could also be used as a guide to facilitate a potential transition between Intra-African BIT pending arbitration proceedings and PAIC/AfCFTA investor-state arbitration.
This paper argues that despite differences in the motivation for the termination of intra-African and intra-EU BITs, the Intra-EU BITs Termination Roadmap is a useful guide for the AU to solve the challenges raised by continental investment law harmonization listed in the report of Meeting of Expert on the considerations of the PAIC.180 The example of the European Union provides a clear legal processus which can be used to implement Article 3(2) of the PAIC and allow the review of the PAIC to become a binding legal instrument and finally harmonize the Intra-African Investment Law regime.181
181Ibid (n 20) Art 3(2).
180Ibid (n 154).
179Ibid (n 177) Arts. 7-9.
178Ibid (n 177) Art. 3.
177Agreement for the termination of Bilateral Investment Treaties between the Member States of the European Union, 5 May 2020 <eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:22020A0529(01)&from=EN>
accessed on 25 May 2022.