Negotiations on an Investment Protocol under the African Continental Free Trade Area (AfCFTA) began among the 54 countries that are parties to the AfCFTA in December 2021. At the February 2023 36th Ordinary Session of the Assembly of Heads of State and Government of the African Union, the Assembly adopted the AfCFTA Investment Protocol. The Protocol is still subject to ratification and implementation by AfCFTA State Parties. State Parties also will need to harmonize their domestic investment policies and legislation to the final Protocol.
Generally, the Investment Protocol seeks to create an attractive investment environment in AfCFTA State Parties. It provides basic investor protections such as national treatment, most favored nation treatment, the ability to transfer funds, and guarantees against expropriation. There are provisions on investment facilitation, including creating a focal point, streamlining investment administration procedures, and establishing a Pan-Africa Trade and Investment Agency.
The Investment Protocol seeks to balance State Parties’ right to regulate and protecting investments. It narrowly defines investment with an enterprise-based definition, excluding portfolio investment and sovereign bonds, for example.
Companies with investments in African countries should seek legal counsel to determine whether the Investment Protocol will apply to their particular investment. Generally, the Investment Protocol applies to AfCFTA State Parties and to investors that are national persons or legal juridical persons of an AfCFTA State Party with substantial business in the territory of another State Party.
Under the Investment Protocol, investor-state disputes can be settled either through 1) negotiations, consultations, or other means of alternative dispute resolution; or 2) through dispute resolution mechanisms to be provided in an Annex to the Protocol. The Investment Protocol will ultimately replace existing intra-African Bilateral Investment Treaties.
The Draft Protocol on Investment contains eight chapters:
1. General provisions: definitions, objectives, and scope.
2. Investment promotion and facilitation: promotion, facilitation, incentives for sustainable investment, national focal points, provision of information.
3. Investment protections: national treatment, most favored nation treatment, administrative and judicial treatment, expropriation, and transfer of funds.
4. Sustainable development issues such as: the right to regulate, standards, climate change, public health, development goals, human resources, and technology transfer.
5. Investor obligations such as: national law, business ethics, human rights, labor standards, environmental protection, indigenous people, anti-corruption, corporate social responsibility, corporate governance, and taxation.
6. Institutional arrangements: the establishment of a Committee on Investment, the role of the Pan-African Trade and Investment Agency, and technical assistance.
7. Management and settlement of disputes: state to state, dispute prevention, and investor liability.
8. Final Provisions: the relationship of the Investment Protocol to other international investment agreements, as well as notifications.
For more information on the status of the AfCFTA Investment Protocol, see the AfCFTA Secretariat’s Investment guidance.