2 Month Pilot-Phase Puts the AfCFTA’s Environmental, Legal and Trade Arrangements to the Test

By Dean Ehrlich, 7 September 2022

Three years after the launch of the African Continental Free Trade Area (AfCFTA), seven countries – Rwanda, Cameroon, Egypt, Ghana, Kenya, Mauritius and Tanzania – have commenced actual trading under the free trade agreement in a ‘pilot’ phase. Together, the nations included in the pilot-phase span two hemispheres and an area of roughly 16 million square kilometres.

Revealed during the 9th meeting of the AfCFTA Council of Ministers in Accra, Ghana on 25 July 2022, the pilot-phase is expected to run for two months (until 26 September 2022), with its main aims to:

  • test the environmental, legal and trade arrangements under the AfCFTA;
  • demonstrate the AfCFTA’s functioning;
  • encourage the submission of outstanding provisional schedules of tariff concessions in accordance with the agreed modalities.

According to the AfCFTA, its overarching mandate is to eliminate trade barriers and boost intra-African trade. The AfCFTA’s specific environmental, legal and trade arrangements can be found in the AfCFTA agreement and its three protocols.

Although each protocol is dedicated to a different topic (trade in goods, trade in services and dispute settlement), they form a single undertaking and an integral part of the agreement as a whole.

As State Parties are not permitted to make reservations to the AfCFTA agreement, and it prevails over any and all regional agreement signed by and between State Parties, the agreement appears – at least on paper – to be well positioned towards fulfilling the free trade areas’ essential ambitions:

  • deepening economic integration between State Parties;
  • creating a single liberalised market for the movement of goods, services and people;
  • facilitating investments; and
  • progressively eliminating all import (but not export) duties, charges, quantitative restrictions and other non-tariff barriers on goods and services originating from the territory of any other State Party.

In order to achieve this, the AfCFTA agreement requires State Parties to accord each other (on a reciprocal basis) preferences that are “no less favourable than those given to Third Parties.” In other words, State Parties must accord each other Most-Favoured Nation Treatment and they must at least extend to each other any advantage, concession or privilege granted to a Third Party.

The agreement, however, does permit State Parties to, in certain circumstances, deny benefits to service suppliers of another State Party where the service is being supplied by a juridical person of a non-State Party, without real or continuous link with the economy of the State Party or with negligible or no business operations in the territory of the other State Party of any other State Party.

Disputes concerning the rights and obligations of State Parties (and there are bound to be some, given the free trade area’s size and ambitions) are to be settled in accordance with the Protocol on Rules and Procedures on the Settlement of Disputes – modelled on the WTO’s Dispute Settlement Understanding.

However, as the pilot-phase has already entered its final month, it is unlikely that the AfCFTA’s Dispute Settlement Mechanism will be put to the test anytime soon.

According to the Trade Law Centre NPC (tralac), judicial control over state actions is “not a major issue in African economic integration. For now, there are other more pressing issues, such as boosting employment, securing borders, industrialisation and improving infrastructures.”

In addition, disputes between African States on trade issues have historically been rare – despite the existence of a number of courts of justice linked to Regional Economic Communities.

Perhaps the most infamous of these courts is the SADC Tribunal, which was effectively abolished with the support of all SADC Member States in 2011 following the SADC’s Tribunal’s decision to rule against Zimbabwe in a matter concerning the expropriation of private farm land without compensation.

TAO has written about the decision of South Africa’s Supreme Court of Appeal to uphold in principle a claim for constitutional damages against its President for the South African government’s role in dismantling the SADC Tribunal here.

The AfCFTA’s Dispute Settlement Mechanism

The Dispute Settlement Mechanism contained in the AfCFTA agreement is limited to the settlement of disputes arising between States. So, private parties have no locus standi under the mechanism.

Although the dispute settlement protocol establishes a Dispute Settlement Body (DSB), the mechanism displays a clear preference for dispute avoidance.

In this regard, the multi-tier dispute settlement process begins with consultations between parties “with a view to finding an amicable resolution.” In addition, parties may at any time voluntarily undertake good offices conciliation or mediation.

It is only if amicable resolution is not achieved that a party may refer the matter to the DSB. The DSB must then appoint a panel, setting in motion the process of formal dispute resolution.

Here, the panel’s procedures are to be “sufficiently flexible” to ensure that disputes are resolved in an effective and timely manner. In doing so, a panel must fix timetables and time limits as well as the format for the delivery of submissions to ensure that a final report is issued within five months (or six weeks in urgent cases).

Parties are obliged to act in good faith and “observe in a timely manner, any directions, rulings and stipulations that may be given to them” in relation to procedural matters.

Third Parties with a substantial interest may be permitted to be heard and make written submissions – provided the disputing parties first agree to their participation.

The panel must produce a single report based on the information and evidence the parties provided that reflects the majority of panellist’s views. Following at least two notice and comment rounds as well as a meeting with the parties to review the specific sticking points, the panel must issue a final report.

Objections to the final report may be submitted to the DSB, and parties may participate fully in the DSB’s consideration of the report. The DSB report shall adopt the final report unless a party notifies the DSB of its decision to appeal the report.

Appeals are, however, limited to issues of law and legal interpretations arising from the panel report. Appeals are heard by three of the seven members of the Appellate Body. The Appellate Body may uphold, modify, or reverse the panel’s report.

A panel or Appellate Body report must be adopted by the DSB without amendment unless the DSB decides, by a consensus of all its members, to reject the report. The DSB’s decision is final and binding on the parties to the dispute.

The losing party may request a reasonable time to comply with the recommendations of a report. However, if they fail to comply, the winning party may seek compensation or request authorisation from the DSB to engage in retaliation.

Parties have the choice to either opt for the AfCFTA dispute settlement mechanism or to design their own procedures, such as arbitration. However, the same matter may not be simultaneously referred to arbitration and to the DSB.

Background

The AfCFTA entered into force on 30 May 2019 and was formally launched in July 2019 at the 12th Extraordinary Session of the AU Assembly of Heads of State and Government in Niamey, Niger.

Trading under the AfCFTA technically commenced on 1 January 2021.

The AfCFTA Secretariat is hosted in Accra, Ghana. His Excellency Wamkele Mene is the first elected Secretary-General coordinating the implementation of the Agreement.

The AfCFTA is the world’s largest free trade area (measured by the number of participating countries. It brings together the 55 countries of the African Union (AU) and eight (8) Regional Economic Communities (RECs). 54 AU Member States have signed the AfCFTA agreement as of June 2022. 43 have deposited their instrument of ratification.

 

URL: https://taobserver.com/news/240/2-month-pilot-phase-puts-the-afcftas-environmental-legal-and-trade-arrangements-to-the-test