A. An African-Based Approach to Investor–State arbitration—a Viable Substitute for ISDS?

In Africa, the criticisms of ISDS and the actual benefits of investment agreements to developing-country host nations have in recent years informed collective efforts on the continent to shape the dispute resolution mechanisms provided for in regional investment agreements, including PAIC, SADC FIP, the SADC model BIT, COMESA, ECOWAS and the EAC investment agreements. In a clear move towards the Africanisation of investor–State dispute resolution, the provisions in these agreements leave no doubt as to the dissatisfaction of African countries with the traditional approach to ISDS. The proposed dispute resolution mechanisms reflect the perception of African nations that the ISDS system was created to protect the interests of wealthy countries and their investors,Footnote ³⁹ and that ISDS has done more to protect foreign investors and developed countries than to address the developmental challenges of capital-importing States on the continent.Footnote ⁴⁰

A. South Africa

At present, South Africa is the only African country to have abandoned investor–State arbitration.Footnote ¹¹⁹ The substitute options made available in the country's domestic legislation are consultation, mediation, domestic courts and State–State arbitration.Footnote ¹²⁰ The government has been clear on its policy position in this regard, namely that it does not intend to accede to the ICSID Convention, nor to submit any of its investment disputes to ISDS under any international arbitration forum.Footnote ¹²¹ This is thought to be a sign of revolt against the popular belief that developing countries, and particularly African countries, do not have independent and robust judiciaries, and are thus not equipped to deal with investment matters.Footnote ¹²² So, even though no other SADC member State has given notice of its intention to remove investor–State arbitration from their BITs, South Africa's influence is clearly visible in the 2016 SADC FIP.Footnote ¹²³

All South Africa's previous BITs contained a dispute resolution clause that permitted referral to ISDS by the foreign investor.Footnote ¹²⁴ The dispute settlement mechanism meant that foreign investors had a right to take the South African government to international arbitration for alleged breach of BIT clauses, without requiring the host State's permission.Footnote ¹²⁵ In so doing, South Africa conformed to the general practice, acknowledging that foreign investors often—and, in many instances, justifiably so—do not have confidence in the impartiality of the host State's judiciary.Footnote ¹²⁶ Instead, they prefer to have disputes resolved before a neutral tribunal to secure impartial justice.Footnote ¹²⁷ The dispute resolution clause in the now terminated United Kingdom–South Africa BIT serves as a typical example of the country's investment arbitration dispensation prior to the PIA. The clause read as follows:

While some of the South African BITs contained slightly different clauses that excluded international arbitration where a foreign investor had specifically chosen to approach the local courts,Footnote ¹²⁹ none contained a clause requiring that foreign investors first exhaust local remedies, as exhaustion of local remedies posed the risk of creating delays and uncertainty in the process of adjudication. In contrast, the PIAFootnote ¹³⁰ specifically provides for dispute resolution through the country's domestic courts, in the following terms:

In a rather drastic step, any reference to international investor–State arbitration has therefore been removed.Footnote ¹³¹ Foreign investors will first be subjected to an as-yet untested mediation process led by the Department of Trade and Industry.Footnote ¹³² This does not bode well for attracting foreign investors.

Section 13(5) contains the only exception, permitting arbitration to be conducted between South Africa and the investor's home State, though still only after domestic remedies have been exhausted. This is small consolation, however, as the exhaustion of domestic remedies takes time, and the foreign investor cannot be certain that his home State would feel it necessary to intervene once all local remedies have been put to the test.Footnote ¹³³ In addition, the legislature's choice of the words ‘may consent to international arbitration’ in this subsection allows the government wide discretion to refuse to consent to such arbitration for fear that the international tribunal might scrutinise its domestic policies.

ISDS enables foreign investors to hold host States accountable for unreasonable interferences with their investments.Footnote ¹³⁴ In particular, it offers a mechanism for rendering swift, enforceable and depoliticised awards in the event of indirect and direct expropriation without compensation—a matter in which the neutrality of the host-State's courts is generally called into question, irrespective of the sophistication of their legal systems.Footnote ¹³⁵ While problems with non-compensated expropriation are often encountered in jurisdictions with underdeveloped legal systems, such as lengthy court proceedings and corruption, South Africa, despite its fairly advanced judiciary and legislative framework, has certainly not proven itself beyond reproach in this regard.Footnote ¹³⁶ In 2009, for instance, the Constitutional Court established that the physical acquisition of property by the State was a prerequisite for expropriation to be recognised in South African law.Footnote ¹³⁷ This differs from the position in international law, which recognises indirect expropriation without physical acquisition.Footnote ¹³⁸ In addition, the South African Constitution fails to distinguish between direct and indirect expropriation, but prefers the words ‘deprivation’ and ‘expropriation’. In 2013, the Constitutional Court went on to define deprivation of private property rights as ‘sacrifices that holders of private property rights may have to make without compensation’.Footnote ¹³⁹

As the law relating to expropriation continues to evolve in South Africa,Footnote ¹⁴⁰ particularly given the Parliament's stated intention of amending section 25 of the Constitution to allow the expropriation of land without compensation, the attraction of ISDS from a foreign investor's perspective is easy to comprehend.

Although the South African courts are impartial and independent, the South African judiciary is loyal to local public interests such as affirmative action and black economic empowerment (BEE) policies, which have been entrenched in the legal system by way of various national laws. Therefore, while these policies are often viewed as detrimental to foreign investors, the South African courts are bound by the Constitution to give effect to their provisions to transform society.

This was confirmed in Agri SA v Minister of Mining and Energy, where the court acknowledged the social context of South Africa and decided ‘not to over-emphasise private property rights at the expense of the state's social responsibilities’.Footnote ¹⁴¹ Another good illustration of the conflict between the protection of foreign investors and the public interest is found in the case of Piero Foresti, Laura de Carli vs Republic of South Africa,Footnote ¹⁴² which also served as one of the key triggers for South Africa's decision to terminate its BITs. The claimants argued that by requiring mining companies to transfer 26 per cent ownership of mining assets to historically disadvantaged South Africans, the Mining Charter advocated indirect expropriation and also breached the obligation of fair and equitable treatment, which prohibits discrimination. They further claimed that the BEE equity divestiture requirement that required foreign investors to sell 26 per cent of their shares to historically disadvantaged South African companies amounted to expropriation. In response, the South African government argued that even if it was admitted that the Mining Charter treated foreign investors differently from their South African counterparts, this would be legitimate, falling squarely within the government's margin of appreciation for determining which measures are reasonable and justifiable in advancing critical public interests. Thus, the government contended that there could not have been indirect expropriation when, as in this case, the government's actions were a rational and proportional means of pursuing legitimate public regulatory purposes. The parties eventually reached a settlement, and the merits of the case were never argued.

In short, therefore, both Agric and Foresti illustrate that foreign investors may indeed suffer the consequences of measures aimed at redressing past racial discrimination, realising land reform and promoting equitable access to South Africa's natural resources. While certainly legitimate from a social and political point of view, these measures raise concerns among foreign investors that their private property rights and business interests will be rendered worthless when pitched against the country's social transformation policies. It can be argued, that the ISDS mechanism has been rather effective in hedging against this. It is therefore safe to conclude that by removing the investor–State arbitration method of resolving investment disputes, the South African government has severely eroded the protection to which the country's foreign investors have become accustomed.

B. Tanzania

Tanzania is another African country that has recently been facing investment arbitration problems. The Tanzanian Parliament in 2017 passed three controversial pieces of legislation. In July 2017, Tanzanian President John Magufuli signed a raft of new laws aimed at (among other things) excluding the prospect of investor–State international arbitration in the mining sector: Written laws (Miscellaneous Amendment Act) 2017,Footnote ¹⁴³ the Natural Wealth and Resources (Permanent Sovereignty) Act 2017,Footnote ¹⁴⁴ which precludes proceedings in foreign courts or any other international tribunal, and the Wealth and Resources (Review and Re-negotiation of unconscionable terms) Act 2017. The Natural Wealth and Resources Contracts (Review and Re-negotiation of Unconscionable Terms) ActFootnote ¹⁴⁵ mandates the government to renegotiate or remove any terms from investor–State contracts that Parliament deems ‘unconscionable’, including those that ‘subject the State to the jurisdiction of foreign courts and forums’.

This legislation is aimed at increasing governmental control over the management of natural resources such as oil and gas, and mining. In 2018, the Tanzanian government, despite pending international arbitration cases brought against the country, made another significant legislative reform by passing the Public–Private Partnership (Amendment) Act No 9 of 2018. Section 22 of the Act requires that any dispute arising during the course of a Public–Private Partnership (PPP) agreement shall be resolved through mediation and arbitration adjudicated by arbitral bodies established within Tanzania and in accordance with Tanzanian laws. As was the case with the 2017 reform, this is intended to ensure that investor disputes are resolved locally and that the government is not subject to international arbitration forums such as ICSID. It has been reported that the Tanzanian government has no faith in multilateral arbitration bodies because they lack impartiality when it comes to resolving disputes between member countries and investors.Footnote ¹⁴⁶

Tanzania has terminated its BIT with the Netherlands.Footnote ¹⁴⁷ It notified the Dutch government of its intention to terminate the treaty ‘only hours’ before the expiry date, which was on the 1 April 2019 and it indeed notified the Dutch government that their treaty would not be extended. This was contrary to the provisions of Article 14 of the BIT which states, ‘[u]nless notice of termination has been given by either Contracting Party at least six months before the date of the expiry of its validity, the present Agreement shall be extended tacitly for periods of ten years’.Footnote ¹⁴⁸ The reason for its termination by the Tanzanian government is unclear, particularly given its last minute nature. It is unclear whether only the Dutch BIT will be affected or whether the government will also terminate all its remaining BITs. However, it has been reported that the NGOs the East African Strategic Group on Influencing Multi and Bi-lateral Trade and Investment Negotiations, as well as the Southern and Eastern Africa Trade Information and Negotiations Institute have played a role in pushing the country to bring the BIT to an end.Footnote ¹⁴⁹

It is believed that a series of international arbitration cases have also contributed to triggering this move. The first is the case of Biwater Gauff (Tanzania) Ltd v United Republic of Tanzania. In 2008, an ICSID Tribunal upheld a claim by a UK investor in a water and sewerage infrastructure project, arising out of seizure of its assets, takeover of its business and deportation of its senior management. The Tribunal found breaches of the BIT's provisions on direct and indirect expropriation and fair and equitable treatment, among others, but awarded no compensation. The claim amounted to US$ 20 million but no causal link was found. Each party was ordered to bear its own costs.Footnote ¹⁵⁰ The second case was Standard Chartered Bank v United Republic of Tanzania. In 2012, an ICSID Tribunal dismissed on jurisdictional grounds a claim by a UK investment bank arising out of an unpaid loan for the construction and operation of a power plant. An application before an Annulment Committee is pending.Footnote ¹⁵¹ In March 2017, US Corporation Symbion Power instituted proceedings at the International Chamber of Commerce in Paris, claiming US$561 million for an alleged breach of a contract with Tanzania's State power supplier TANESCO.Footnote ¹⁵² In July 2017, following the introduction of an export ban on raw minerals in March, both AngloGold Ashanti and Acacia Mining have instituted international arbitration proceedings against Tanzania.Footnote ¹⁵³ Eco Energy instituted an ICSID claim under the Sweden–Tanzania BIT following the 2016 cancellation of a sugar cane plantation and ethanol production project.Footnote ¹⁵⁴ While the Tanzanian responses to these various cases demonstrate hostility to investor–State arbitration, they do not affect Tanzania's expressions of consent on the international plane, whether to its BITs or to investor–State contracts which currently remain in force.

C. Zimbabwe

Zimbabwe has been the respondent in three ICSID claims, each brought by rural landowners aggrieved by Zimbabwe's ‘fast-track land reform programme’. In 2009 in Bernardus Henricus Funnekotter and Others v Republic of Zimbabwe, an ICSID Tribunal awarded Dutch claimants US$10.6 million (plus 10 per cent interest compounded every six months) in compensation for breaches of the BIT's provisions on direct expropriation. Zimbabwe was ordered to bear the Tribunal's costs (US$450,000), but the Tribunal did not follow the general practice of ordering Zimbabwe to bear the claimants’ legal costs, as it ‘would not be completely appropriate, in the present case, taking into account the situation in Zimbabwe in 2001/2002’.Footnote ¹⁵⁵ The unpaid debt, after applying interest, stood at US$25 million by the end of 2015, when a US District Court granted the claimants leave to execute the award against the US assets of several Zimbabwean State-owned entities.Footnote ¹⁵⁶

In 2015 in Bernhard von Pezold and Others v Republic of Zimbabwe and Border Timbers Ltd and Others v Republic of Zimbabwe, two consolidated claims instituted under Zimbabwe's BITs with Germany and Switzerland—an ICSID Tribunal found breaches of the provisions on expropriation, fair and equitable treatment, denial of justice, and others. The Tribunal awarded damages (including moral damages) totalling over US$95 million (which could be reduced substantially if Zimbabwe makes restitution of the expropriated properties). The Tribunal also ordered Zimbabwe to bear the claimants’ legal costs (GB£7.8 million plus US$ 18 million plus ZAR 662,000), as well as the Tribunal's costs (US$1.3 million). Zimbabwe's own legal costs came to almost US$2 million. Zimbabwe has lodged a challenge against this award with an ICSID Annulment Committee, which remains pending.Footnote ¹⁵⁷ Despite these defeats, Zimbabwe has not disclosed any intention of terminating or renegotiating its BITs. On the contrary, in his 2016 budget statement, Finance Minister Patrick Chinamasa announced that the government intended to conclude more BITs.

A. African States Carry Equal Responsibility

Significantly, African countries played a critical role in the conception, development and establishment of the ICSID dispute resolution system. Most fundamentally, the participation of African countries in the negotiations, drafting and entry into force of the ICSID Convention can be traced from the mid-1960s, during the period in which many African countries gained their independence.Footnote ¹⁶⁸ Prior to the adoption of the final draft of the ICSID Convention, the general counsel of the World Bank, Aron Broches, was tasked with devising a preliminary draft Convention which he took to a series of consultative regional meetings with various legal experts in different jurisdictions from December 1962 to June 1963.Footnote ¹⁶⁹ The first of these regional meetings was held in Addis Ababa, Ethiopia, at the headquarters of the UN Economic Commission for Africa.Footnote ¹⁷⁰ Amongst other things, the discussion in this meeting covered issues that were to dominate the Convention, foreign investors’ direct access to ICSID arbitration, the need to strike a balance between foreign investors’ interests and those of developing countries and the assurance that investment disputes would be resolved in a depoliticised international legal forum, namely ICSID arbitration, in order to attract foreign direct investment (FDI).Footnote ¹⁷¹ This meant that African countries understood they were not likely to attract foreign direct investment if they did not grant foreign investors the right to some form of independent adjudication.

Therefore, given the need to attract FDI, Africa was supportive of ICSID arbitration from the beginning. Like most developing countries, African countries have embraced ICSID arbitration by signing numerous BITs, because they viewed FDI as an integral part of their development strategy. They had to demonstrate their ability to protect such investment for them to be able to attract FDI.Footnote ¹⁷² African countries also embraced ICSID arbitration by ratifying multilateral treaties such as ICSID Convention, the New York Convention on Recognition and Enforcement of foreign Arbitral Awards (New York Convention) and the Convention Establishing the Multilateral Investment Guarantee Agency (MIGA Convention). Currently, there are 45 countries that have ratified the ICSID Convention, three countries have signed but not ratified the ICSID Convention (Namibia, Ethiopia and Guinea-Bissau) and only six countries have neither signed nor ratified the ICSID Convention.Footnote ¹⁷³

Notably, 15 out of the first 20 countries to sign the ICSID Convention were African countries and the majority (15 out of 25) of the first 25 cases that were registered at ICSID involved African States. As such, certain African States have agreed to abide by its jurisdiction in their international investment policies—even including countries such as South Africa, which was not a party to the ICSID Convention.Footnote ¹⁷⁴ This is because the South African Government has been subjected to the jurisdiction of the centre through the use of the ICSID additional facility mechanism.

In addition, another impetus for the submission of investment disputes to ICSID arbitration is that potential recourse to international legal fora has long been deemed necessary in African countries because of the perception that domestic legal processes may be inadequate and unfair to foreign investors, and also because of the perceived deficiencies of the African courts such as a lack of impartiality, corruption and a lack of independence from the executive. Indeed, to a large extent, concerns over domestic courts are what makes provision for international arbitration so common for investment in the region: according to the 2019 Transparency International Corruption Perceptions Index, the majority of countries in Sub-Saharan Africa scored an average of 32 points out of 100.Footnote ¹⁷⁵ As the lowest scoring region in the corruption perception index, Sub-Saharan Africa's performance paints a bleak picture of inaction against corruption. Other studies conducted by the World Justice Project provide similarly troubling assessments.Footnote ¹⁷⁶ The World Bank's Ease of Doing Business’ rankings for Africa paints an even bleaker picture: only two African countries in the region managed to score in the top fifty, with other key regional economic partners of South Africa falling behind by a significant margin.Footnote ¹⁷⁷ While the methodology of these rankings is not without controversy, these surveys portray a similar story: Africa is still lagging behind in the development of its legal institutions and in the protections accorded to foreign investors. Another challenge is that national courts in Africa often face a strain on resources, which can lead to delays in court proceedings.

As noted above, the decisive contribution of African countries to ISDS is evident from not only the ratification of the ICSID Convention, but also by their consent to many investment contracts, laws and BITs which agree to submit disputes to ICSID for settlement. A typical contractual clause is found in the 1980 Agreement between the Tunisian government, the Entreprise Tunisienne d'Activités Pétrolières (ETAP) and a group of foreign investors. The agreement provides in Article 13 that ‘The parties agree that any dispute arising between them shall be finally settled by arbitration of the International Centre for the Settlement of Investment Disputes’.Footnote ¹⁷⁸ An example of the earliest BIT clauses requiring a host African country to submit investment disputes to ICSID arbitration is to be found in Article 8 of the BIT between Egypt and Yugoslavia, which provides that ‘any dispute between a Contracting Party concerning the protection of investments against non-commercial risks, shall be submitted for settlement by the Contracting Parties to the International Centre for Settlement of Investment Disputes’.Footnote ¹⁷⁹

The early proliferation of cases concerning Africa meant that African States contributed to the cases which laid the foundations of ICSID jurisprudence and its subsequent development.¹ The first arbitration initiated under the ICSID Convention was against an African State (Morocco, which had signed the ICSID Convention in 1966 and ratified the following year). Holiday Inns/Occidental Petroleum v Government of Morocco explored the question of ratione personae jurisdiction over a locally incorporated foreign investor under Article 25 of the ICSID Convention.Footnote ¹⁸⁰ The first case in which an ICSID arbitration award was rendered also involved an African State, in Adriano Gardella SpA v Cote d'Ivoire. Footnote ¹⁸¹ The ICSID tribunal upheld its jurisdiction based on a State's investment law for the first time in Southern Pacific Properties limited v Arab Republic of Egypt. The tribunal held in this case that ‘a host state might in its investment promotion legislation offer to submit disputes arising out of certain classes of investments to the jurisdiction of the centre, and an investor might give his consent by accepting the offer in writing’.Footnote ¹⁸²

ICSID practice has also been considerably developed in cases involving African member States, such as the now famous case of Salini Costruttori SpA and Italstrade SpA v Kingdom of Morrocco Footnote ¹⁸³ in which the tribunal identified the criteria to be used in defining an investment pursuant to Article 25 of the ICSID Convention. Although ICSID arbitration extends to matters arising out of an investment pursuant to Article 25 of the ICSID Convention, the Convention never defines an ‘investment’. The arbitral tribunal struggled with the issue, but eventually settled on what has become known in international investment law as the Salini Test. This identifies four criteria to be used in defining an investment: (1) contribution of money or assets; (2) a certain duration; (3) an element of risk and (4) a contribution to the economic development of the host State.

ISDS, and especially ICSID arbitration, has contributed to the evolution of customary international law in the area of investment law. According to Lowenfeld:

African countries have agreed to abide by the jurisdiction of ICISD arbitration in their international investment treaties, investment laws and contracts for decades.Footnote ¹⁸⁵ It will arguably make little sense to abandon what they helped to establish. While the contention is not that ICSID arbitration is beyond reproach, in blaming international institutions such as the ICSID for the perceived failings of investment arbitration, African States should not lose sight of the fact that the ICSID arbitration system did not create itself. Member States, including those from Africa, co-created it to provide a neutral forum for dispute resolution between host States and foreign investors. This very fact negates the argument that ISDS is a tool crafted by Western countries to impose their power on their past victims of colonialism. Instead, it can be argued that African countries carry equal responsibility within the global community to engage in the development and reform of the ICSID arbitration system.

B. Responsibility to Appoint African Arbitrators Rests with African Nations Themselves

Admittedly, the lack of African representation at the ICSID is not ideal for the purposes of developing African-based jurisprudence in ICSD arbitration.Footnote ¹⁸⁶ Yet it should be noted that African countries who have been involved in ICSID arbitration have had equal opportunity to appoint arbitrators of their choice, regardless of nationality. The underlying principle of international arbitration is that of party autonomy, and parties are free to appoint arbitrators of their own choice.Footnote ¹⁸⁷ This is echoed by Schill, who confirms that arbitrators derive their authority to arbitrate from their being the choice of both parties involved in the investment dispute.Footnote ¹⁸⁸ The reality is that, in many instances, African governments involved in investment disputes have deliberately opted to appoint Western arbitrators for their arbitration proceedings. While the claim regarding the lack of African arbitrators at the ICSID is empirically correct, there is nothing in the ICSID Convention prohibiting the appointment of Africans skilled in the field of law, commerce, industry or finance to the panel of arbitrators. In fact, the ICSID Convention simply requires an ICSID arbitrator to ‘be of high moral character’, ‘recognized competence’ in the aforementioned fields, and able to ‘be relied upon to exercise independent judgement’.Footnote ¹⁸⁹

Regardless of their geographical origin, ICSID arbitrators are also required to respect standards of impartiality and independence. In the event of a perceived lack of impartiality, African countries may consider incorporating the International Bar Association guidelines in their treaty-drafting in order to challenge arbitrators who do not appear to be sufficiently independent.Footnote ¹⁹⁰ Additionally, the 2010 UNCITRAL rules provide that any arbitrator may be challenged if circumstances exist that give rise to justifiable doubts concerning their impartiality and independence.Footnote ¹⁹¹

C. Reform without an African Voice

Without denying that some aspects of ISDS require close scrutiny, many of these are in fact covered in the reform proposals outlined by the UNCTAD.Footnote ¹⁹² This means that the actual number of fundamental problems that still need addressing are far fewer than critical voices suggest.Footnote ¹⁹³ In response to the ‘legitimacy crisis’ of ISDS, proposed reforms include tailoring the existing system through individual International Investment Agreements, introducing an appeal facility, promoting alternative dispute resolution, and imposing certain limits on investors’ access to ISDS. In addition, the 2006 amendments to the ICSID's rules have expanded the stipulations on transparency to provide for the publication of awards as soon as possible. The amendments also afford non-disputing parties the opportunity to file submissions, or amicus curiae briefs. There are other improvements introduced by the 2006 amendments, such as strengthened disclosure requirements for arbitrators (arbitration rule 6(2), article 13(2) of the Arbitration (Additional Facility) Rules); a provision on the possibility of holding open hearings (arbitration rule 32(2), article 39(2) of the Arbitration (Additional Facility) Rules) and the possibility for a respondent to obtain an early dismissal of a case due to manifest lack of legal merit (arbitration rule 41(5), article 45(6) of the Arbitration (Additional Facility) Rules.Footnote ¹⁹⁴

Sorely lacking in efforts to reform ISDS however, is the African voice concerning how ISDS should be shaped to accommodate the developmental interests of African nations. African countries which are members of the World Bank enjoy equal representation in the Administrative Council of the ICSID, and thus have an equal opportunity to shape the reform and jurisprudence of ICSID arbitration.Footnote ¹⁹⁵ By staying within the system, therefore, African States could – and should – play a key role in proposing reforms that would mould ICSID arbitration to take account of African interests and needs. Rejecting ISDS would do nothing to correct a system that African States claim to be unjust.

D. Proposed Structures for African-Based Dispute Resolution

Finally, even if all the criticisms against ISDS were justified, this does not automatically render African domestic courts or regional arbitration centres the ‘natural’ alternative to international investment arbitration. In fact, the reluctance of many African member States to abandon ISDS in its entirety, as seen in the assessment of the regional investment agreements above, points to the continent's need for some form of independent adjudication. After all, the underlying reason why the ICSID was established in the first place has not changed: foreign investors need independent tribunals to secure impartial justice.

First, the most far-reaching proposal in the African regional investment agreements is replacing arbitration at the ICSID with adjudication in African host States’ domestic courts.Footnote ¹⁹⁶ As already discussed, only affording foreign investors recourse to domestic courts exposes investors to significant risk due to the potential bias of these courts and their susceptibility to political interference. Knowing that the need for impartial, independent arbitration necessitated the creation of the ICSID in the first place, it seems nonsensical to propose the complete opposite as a solution to its problems. South Africa and some other African countries may be an exception in this regard, since their judiciaries may be regarded as viable. Furthermore, South Africa has recently introduced the International Arbitration Act of 2017 which has resulted in increased arbitration processes in South Africa. Importantly, the International Arbitration Act adopts the UNCITRAL model law, which is internationally recognized and contains accepted norms in arbitration practice. The enactment of the International Arbitration Act is an indication of political support for the development of arbitration in South Africa.

The second, equally problematic alternative offered in the regional instruments is African-based centres of arbitration.Footnote ¹⁹⁷ Apart from doubts as to the impartiality of these centres, the fact that neither their names nor locations are defined or identified simply adds to foreign investors’ uncertainty. The fact remains: foreign investors in the traditional BITs prefer to have international arbitration resolved within the ambit of the World Bank and other neutral international bodies in order to secure impartial justice.Footnote ¹⁹⁸ A reference to untested, unidentified African centres of arbitration would hardly convince foreign investors that they would enjoy sufficient protection. On the other hand, it could be argued that although international arbitration is a commonly recognised method of dispute resolution especially by African countries, countries such as Rwanda and Mauritius are strategically positioning themselves as pivotal players in the arbitration field: the Kigali International Arbitration Centre of Rwanda, established as part of Rwanda's business reforms, is evidence of extensive efforts to promote the country as an attractive business and investment destination,Footnote ¹⁹⁹ and the Mauritius International Arbitration Centre (MIAC) is said to have brought the highest level of dispute resolution services to the international community.Footnote ²⁰⁰ From its establishment in 2011 until 2018, MIAC operated as part of a joint venture with the London Court of International Arbitration (LCIA-MIAC Arbitration Centre). Since 27 July 2018 it has operated as an independent arbitration centre, drawing on the significant expertise gained during this initial phase of its development.Footnote ²⁰¹

Thirdly, in the PAIC, the reference to the as yet non-existent African Court of JusticeFootnote ²⁰² raises suspicions about the quality of justice that can be expected from this soon-to-be-established institution, compared to that from long-standing international bodies such as the ICSID. Currently, States are unable to make use of the appeal mechanism provided for in Article 41(2) PAIC, which will render the decisions of the (equally unknown) African arbitration centres final, removing any further recourse that States may have. Whereas a functioning appeal process would have provided some form of legitimacy to the process where the domestic courts and African-based arbitration centres are found lacking, the lack of an appeal mechanism only serves to undermine the PAIC as a whole. Ironically, the lack of an appeal court also means that the PAIC fails to address one of the very criticisms levelled against international arbitration, namely the lack of an appeal system and inconsistent decisions by arbitrators. And considering that it is not even clear whether this non-existent African Court of Justice will indeed function as an appellate mechanism or will perhaps simply review arbitral awards, it cannot be regarded as a proper and viable alternative to the ICSID arbitration system.

Fourthly, the 2016 SADC FIP surprisingly maintains the defunct SADC tribunal, despite that body's questionable legitimacy. Following the matter of Mike Campbell v Republic of Zimbabwe,Footnote ²⁰³ the SADC tribunal suffered a blow to its integrity, and in effect became a toothless institution. In that case, the Zimbabwean government failed to abide by the tribunal's decision after the country was found to have been in breach of the provisions of the SADC treaty. In particular, the Zimbabwean government was found to have committed unlawful expropriation by refusing to pay compensation after it had taken possession of private property. In response, the Zimbabwean government questioned the legitimacy of the tribunal and lobbied for political support, which eventually resulted in the tribunal being suspended. One may therefore question how foreign investors would be protected by a tribunal that has fallen into disrepute, having previously failed to enforce its awards.

Finally, while arguably offering a more balanced approach to ISDS than the rest of the regional instruments, the multiple forums for dispute resolution provided for by the COMESA agreement could result in fragmented and inconsistent judgments. Therefore, globally, disputes across borders are not considered suitable for resolution in domestic courts and for business reasons parties routinely prefer the predictability of recognised international centres for dispute resolution. This predictability is not present in all jurisdictions, given that in some corruption is rife and in others there are significant challenges with delay, consistency and lack of confidence in the outcomes.