Africa must avoid disputes with foreign investors

‘African states should urgently call for the suspension of investor-state arbitration for all Covid-19-related measures, and urge others to do the same. State resources and global financial support should be focused on public health systems, restoring economic health and managing related crises, not defending perverse claims made in times of a global pandemic.’ Nyaguthii Maina, a law adviser with the International Institute for Sustainable Development, notes that SA began terminating its old-generation investment treaties – with their investor-state dispute settlement (ISDS) mechanisms – in 2014. While it is still pushing to reform the system, it has now become urgent in light of the coronavirus pandemic, given that foreign investors are expected to challenge some of the emergency measures taken in response. Writing in Business Day, Maina points out that an ISDS claim could arise where an aggrieved investor seeks compensation for the alleged breach of rights under an international investment agreement. ‘These claims range from direct and indirect expropriation of their rights – where governments have taken measures affecting their businesses without compensating them adequately – to the unfair treatment of foreign investors vis-à-vis domestic investors.’

Maina says the ISDS system is riddled with inconsistencies, lack of transparency and costs. She believes African states must take urgent precautionary measures to prevent possible claims. ‘One such step could be calling for the suspension of ISDS on all Covid-19 related measures on multilateral platforms,’ she says. Looking at the scale of the problem, Maina notes the UN Economic Commission for Africa estimates that 27m people could be pushed into extreme poverty in the region, while several countries will default on debt payments. African Finance Ministers have already called for the urgent release of $100bn, of which $44bn would go towards debt relief for all African countries. ‘African states’, she says, ‘must be prepared for the imminent threat of ISDS claims to undermine these emergency measures and responses’.

Full analysis in Business Day