Africa Finance Today’s Post

This week, UN Trade and Development (UNCTAD) issued its latest briefing, showing that the number of treaty-based investor–state dispute settlement (ISDS) cases has more than doubled in the past 10 years. ISDS is a mechanism that allows foreign investors to sue host governments in international arbitration tribunals for alleged violations of their rights under the treaty. According to UN Trade and Development (UNCTAD), there were fewer than 600 known ISDS cases at the end of 2013, against more than 1,300 at the end of 2023. In 2023 alone, claimants initiated at least 60 new arbitration cases. Developing countries faced the majority of investor–state disputes, often brought by claimants from developed countries. This is consistent with previous reports that have been issued, exposing the double standard in international investment treaties. Treaties with ISDS provisions enable multinational corporations to challenge national policies designed to protect environmental standards, public health, and labour rights often through international arbitration mechanisms that prioritise investor protections over the well-being of local communities and ecosystems. ISDS provisions in many investment agreements have been widely criticised for undermining countries’ sovereignty and ability of countries to regulate industries in the public interest. Africa has particularly been a big victim of this for many years. Countries like Rwanda, Tanzania, DR Congo, Egypt, Libya, Zimbabwe, and Algeria, among others, have recently been confronted with exorbitant investor-state dispute claims. These disputes are often arbitrated at the International Centre for Settlement of Investment Disputes (ICSID) in Washington, a World Bank affiliated settlement body.  At the Civil Society Forum underway in Uganda, African trade and investment experts have been clear: the current investment architecture is one-sided and the current investor-state dispute settlement mechanism must be reformed. As the former Minister of Trade and Industry of South Africa, Rob Davies, told me, the current system has caused a “package of troubles” to Africa as opposed to attracting investments. The system has collectively cost most African governments billions of dollars in arbitration. Failure to reform or dismantle the current investment architecture risks stalling Africa’s progress. Check out Africa Finance Today's exclusive analysis and coverage on this. https://lnkd.in/eY_R_GKr

🤩 Fantastic analysis by Julius Bizimungu Africa Finance Today on the challenges African countries face with exorbitant investor-state dispute settlement #ISDS claims. Grateful for the insightful coverage of the #CSOInvestmentForumUganda and for quoting me 🙌: Verbeek laments that this system is harming sustainable development in #Africa since it allows foreign investors to claim compensation from governments, compensation he suggests is in the millions and potentially billions that African governments have to pay to foreign investors from North America and Europe. “While Africa is in dire need to get financial support to bring about structural transformation, actually what we see is that financial flows are reversing [through these mechanisms],” he notes. SEATINI UGANDA SOMO Both ENDS ActionAid Nederland https://lnkd.in/e5GXJpez

🌍 “Discuss Amongst Yourselves” – Sovereign Rights & Investment Dispute Resolution 🌍 I’ve really enjoyed the exchanges over the past month around some big issues in international arbitration. First, we discussed proposed changes to the English Arbitration Act, then followed up with thoughts on the doctrine of separability. Now, I’d like to dive into another hot topic in international arbitration: the flexibility of sovereign rights in shaping dispute mechanisms for investment treaties. Consider this scenario: Greece and the United States are both part of a broader multilateral investment treaty that provides a framework for resolving investment disputes. Now, imagine that Greece and the U.S., by mutual agreement, decide to carve out a separate arrangement just for their investors. Instead of following the multilateral treaty’s arbitration process, they establish a unique bilateral tribunal to handle U.S.-Greek investment disputes. This raises some intriguing questions: 1. Can two sovereign nations mutually decide to modify dispute resolution for their own investors, provided it doesn’t affect the rights of other treaty members or their investors? 2. Since investors don’t directly create these treaties but benefit from rights granted by their governments, should sovereigns have the freedom to adjust or withdraw these rights for their own nationals? 3. Does a carve-out like this weaken the multilateral treaty framework, or is it a valid expression of sovereign autonomy within an international agreement? For those familiar with investment arbitration, it’s clear what my questions are referencing (Achmea). Further note, that though I am not taking a position here, I am looking to generate discussion. Thanks all! #InternationalLaw #InvestmentTreaties #SovereignRights #GlobalEconomy #InternationalArbitration #DisputeResolution #MultilateralAgreements #LegalTheory #InvestmentDisputes #PolicyDebate #Sovereignty #InvestorRights #InternationalRelations #TreatyFlexibility #LegalPhilosophy #ADR #InternationalArbitration #Achmea #EU #EULaw

Bilateral Investment Treaty (BIT) disputes under International Centre for Settlement of Investment Disputes (ICSID) arbitration is a subject I developed an interest in while I was doing my LLMs in international business law and Oil & Gas Law. Unlike commercial arbitration, many ICSID arbitral awards are publicly available for scrutiny and research. In what is known as "Roundtrip" BIT, 3 relatively recent BIT cases (below) have effectively set a precedent on the issue of jurisdiction challenge in BIT disputes, involving a state and its own citizens investors, notwithstanding that the investment companies they owned were registered in a foreign jurisdiction. The states argued that the the BIT and the ICSID Convention prohibited nationals from one contracting party to bring BIT claims against their own country. The takeaway  here is that the tribunal (majority decisions in two out of three cases) determined that Article 25 of the ICSID Convention granted discretion to the contracting parties of international investment agreements regarding the definition of nationality criteria. In the absence of explicit instructions, the tribunals believed it was not permissible to impose additional limitations on the nationality requirements. Does this ICSID position make sense? Obviously, not for the descending opinions in two of the cases - how about you? Sources: Jus Mundi and IAReporter . 1.     Tokios Tokelés v. Ukraine, ICSID Case No. ARB/02/18. The bifurcated award on jurisdiction was issued on 29/4/2004. The majority tribunal affirmed jurisdiction. Interestingly, in the case presided over by Prosper Weil (chair), a divergence emerged regarding their jurisdiction over the claim under the Lithuania-Ukraine BIT. Tokios Tokelés was owned by Ukrainian nationals.  This resulted in an unusual split of votes with the majority formed by the two arbitrators appointed by the parties. The tribunal chair Mr. Weil couldn't overlook the economic reality central to the matter, leading him to dissent and, in a rare occurrence, resign from the tribunal. 2.       Longreef v. Venezuela, ICSID Case No. ARB/11/5.  Longreef was formally incorporated under Dutch laws and was owned and controlled by Venezuelan nationals. A unanimous award on 12/2/2014  confirmed its jurisdiction on the case. The final award was rendered on 6/11/2017 in favor of the investor. 3.     Agroinsumos Ibero-Americanos v. Venezuela, ICSID Case No. ARB/16/23. In a final Award on 23 Mar 2022, the tribunal majority upheld jurisdiction. In his partial dissenting viewpoint, Mr. Bottini, the State's appointed arbitrator, argued that the tribunal should have rejected jurisdiction because of the clear absence of foreign investment, because of the fact that the investment was initially made by Venezuelan nationals and later transferred to the claimants through an intra-group transaction, without any funds or assets entering Venezuela. #BITDisputes #Arbitration #InternationalInvestment #ICSID #

⚡ #UkraineInvest and #ICC join forces to raise awareness of investment opportunities in Ukraine. The International Chamber of Commerce has announced the launch of a new initiative to improve access to justice in Ukraine. The initiative will provide world-class dispute resolution services for the country's reconstruction projects. The ICC International Court of Arbitration has also announced a reduction in its case management fees to support Ukraine's recovery process and attract foreign investment. This move will help create a stable and predictable environment for investors. A key element of the initiative is the collaboration between the ICC and UkraineInvest to conduct a series of webinars and other events to raise awareness of investment opportunities in Ukraine. These events will also highlight the importance of effective dispute resolution mechanisms, which are critical to the smooth development of investment projects. 📝 "In order to attract significant foreign investment for Ukraine's recovery, the government has adopted new investment legislation that ensures support and protection for investors with substantial investments. The ICC initiative is important for investors because it creates a transparent legal framework that minimises legal risks and provides stability for doing business in Ukraine. This will help build confidence in the Ukrainian economy," said Oleksandr Melnychchenko, Acting Executive Director of UkraineInvest. As Ukraine's recovery involves large-scale reconstruction efforts, the implementation of effective dispute resolution mechanisms is critical to reducing risks, particularly in areas such as infrastructure, energy and transport. In this context, the ICC's dispute resolution services will not only ensure a high level of legal protection, but also strengthen the confidence of international investors, which is key to Ukraine's sustainable economic recovery. ℹ️ The ICC is a global organisation representing more than 45 million businesses in over 170 countries. Its mission is to ensure the sustainable development of international trade, promote responsible business practices and establish high regulatory standards. Through its unique combination of advocacy, innovative solutions and dispute resolution services, the ICC is one of the leading representatives of global business on the international stage. ICC members include not only large multinational corporations, but also small and medium-sized enterprises, business associations and local chambers of commerce. This makes the organisation a powerful and influential voice for global business at the international level, able to represent the interests of a wide range of market participants, regardless of their size or geographical location.

India’s Model Bilateral Investment Treaty (BIT) requires foreign investors to attempt to resolve disputes through India's legal system for at least five (5) years before seeking international arbitration. However, the new India-UAE BIT, which entered into force on August 31, 2024, has reduced this period to three (3) years - thereby giving foreign investors easier access to Investor-State Dispute Settlement (ISDS). The UAE is India’s seventh largest FDI source with a cumulative investment of almost USD 20 billion (from April 2000 to June 2024). Importantly, the reduced time period with respect to exhaustion of local remedies could attract more FDI. Further, unlike India's Model BIT, which excludes portfolio investments from the ambit of treaty protection, the treaty with the UAE includes them. This will allow investors with passive financial holdings to also use ISDS. Given that a 2022 committee on external affairs (its report is available at https://lnkd.in/g7Web8-m) strongly advised the government to sign more BITs to attract higher levels of FDI, it remains to be seen whether other countries demand similar terms from India. The UAE treaty may signal the birth of a new trajectory involving India’s willingness to deviate from its Model BIT when a key investment partner is involved. Accordingly, India’s ongoing and future treaty negotiations will assume added importance, including on the possibility of: (1) reintroducing the most-favored-nation (MFN) clause (which is absent in India’s Model BIT), and relatedly, (2) MFN clauses being invoked in respect of dispute settlement provisions. #isds #uae #investindia #dubai

YEGEUBAYEV & PARTNERS ADVISED ON SETTLEMENT BETWEEN STATI PARTIES AND THE GOVERNMENT OF KAZAKHSTAN. It is difficult to overestimate and too easy to underestimate the significance of this event. This is the largest international arbitration award in the country's history. The positive effect from the Settlement Deed is multiplicative. The Settlement Deed is extremely positive for the country and the entire post-Soviet region, for litigation practitioners, for professional negotiators, for the Government and, most importantly, for the citizens of Kazakhstan. Only recently The National Bank of Kazakhstan announced the return of the National Fund (National Investment Corporation of the NBK (NIC) assets from Sweden as a positive effect from the Settlement. The Government of the Republic of Kazakstan, the The National Bank of Kazakhstan , and #Stati parties, with the support and approval of leading #Tristan_Oil creditors, have successfully completed the process of resolving a long running dispute over oil and gas assets in Kazakhstan. The signed Agreement on final settlement shall be the basis for the termination of all ongoing disputes without the right to reopen them in the future. The specific terms of the Agreements are confidential. Daniel Chapman, CEO of Argentem Creek Partners*: « This settlement and the approach taken by the Republic of Kazakhstan to find a fair resolution for all parties underscores that the country is a place where investor rights are respected. We thank President Kassym-Jomart Tokayev for his leadership in transforming the way foreign investors see Kazakhstan. We look forward to working on new projects in the future » Azamat Yeskarayev, Minister of Justice of the Republic of Kazakhstan: « With the end of the long dispute, #Kazakhstan has additional opportunities to develop its economy, including by attracting investment. At the same time, as I noted earlier, funds from the republican budget were not used as part of the settlement. » https://lnkd.in/gC4ntXAj #arbitration #negotiations #settlement #award #winwin #lawfirm #law #foreign_investments #kazakhstan #stati #deed #investments #ECM #DCM #capital_markets

In his recent piece, Prof. Dr. Nikos Lavranos provides an overview of the 2024 Report on compliance with investment treaty awards by States. Nikos dives into the complexities of State compliance with Investor-State Dispute Settlement (#ISDS) awards, especially in light of recent #EU developments. The 2024 Report highlights a rise in ISDS disputes and reveals that States often prevail more than investors, contrary to popular belief. However, unpaid awards and compensation amounts have increased, with Spain leading in non-compliance. The Report also notes divergent #enforcement trends within and outside the EU, with countries like Australia, the UK, and the US emerging as favorable jurisdictions for enforcing intra-EU awards. #internationallaw #internationalarbitration #disputeresolution #investmentarbitration

Grateful for the authors’ valuable insights! Russia’s investment policy continues to create significant obstacles to the fair enforcement of international arbitration awards. Russian courts frequently show clear reluctance to recognise and enforce arbitral awards, particularly when they affect state assets. The problem is further complicated by Russia’s demands in ongoing disputes to exclude arbitrators from countries it considers 'unfriendly,' creating additional challenges for fair dispute resolution. Numerous arbitration awards against Russia are already being pursued for enforcement worldwide, with many more claims expected to seek compensation for losses linked to destruction and asset loss caused by military aggression. To ensure fair compensation for these losses, Ukraine has initiated the establishment of an International Compensation Mechanism. As part of this mechanism, an International Register of Damages has already been created, and work is underway to establish a Claims Commission to review claims from affected parties. Modelled on the system used for Iraq after the occupation of Kuwait, this mechanism, if fully implemented, could be a crucial tool for enforcing compensation decisions.

A legal development? What impact will it make in international investment arbitration in 2025? The English Court of Appeal recently ruled that sovereign immunity cannot be invoked to resist the enforcement of ICSID awards in the case of Border Timbers Ltd & co. v Republic of Zimbabwe (2024). This landmark decision reinforces the binding nature of arbitration awards under the ICSID Convention, highlighting the primacy of international arbitration in resolving disputes between investors and states. Why This Matters For international arbitrators, states, and investors, this ruling underscores the importance of understanding the legal framework governing the recognition and enforcement of ICSID awards: 1. For Arbitrators: A robust understanding of enforcement ensures arbitrators can craft awards that are enforceable in jurisdictions worldwide, safeguarding the credibility of international arbitration. 2. For States: States must acknowledge their obligations under the ICSID Convention. Sovereign immunity cannot shield them from compliance, emphasizing the need for careful treaty commitments and responsible dispute resolution practices. 3. For Investors: Investors can be assured that their rights under ICSID awards will be upheld, providing a stable and predictable framework for protecting cross-border investments. This decision is a significant affirmation of the ICSID framework, promoting confidence in the rule of law and reinforcing the enforceability of arbitration awards globally. Let’s continue the conversation: What are your thoughts on this development? How do you see this decision shaping the landscape of international investment arbitration? #ICSID #Arbitration #SovereignImmunity #InvestmentLaw #RuleOfLaw #InternationalArbitration