The quest for a Pan-African Investment Code to promote sustainable development

21 June 2016

In late 2015, African countries finalised the drafting of the Pan-African Investment Code (PAIC). What is the added value of this continental instrument related to the regulation of foreign investment?


The year 2015 was a crucial one for Africa regarding the negotiation of the first continent-wide investment agreement: the Pan-African Investment Code (PAIC). Although this legal instrument – presented in the form of a treaty – is not yet officially adopted, it reflects an African consensus on the shaping of international investment law. It has been drafted from the perspective of African developing and least developed countries focusing on Sustainable Development Goals (SDGs). The PAIC contains a number of Africa-specific and innovative features, making it a truly unique legal instrument.

The main objective of the PAIC is to foster coherence and consistency with respect to the rules and principles that will govern investment protection, promotion and facilitation on the African continent. As such, it has the potential to become a sustainable solution to solve the puzzle of international investment agreements (IIAs) in Africa.

The puzzle of IIAs in Africa

African countries adopted the large bulk of their bilateral investment treaties (BITs) between the mid-90s and the early 2000s. Traditionally, BITs were concluded with capital exporting countries, mainly from Europe. African states hoped that the establishment of international rules to protect investment intended to ensure stability and predictability, would promote and attract foreign capital into their economies. Today, African countries have signed around 870 BITs or IIAs, which corresponds to about a third of all IIAs signed worldwide.[1] However, since 2002, there has been a marked decline in the number of BITs signed by African countries.

Aside from BITs, regional investment agreements have emerged in the African context due to the proliferation of regional economic communities (RECs). Within West Africa, there are three RECs: the West African Economic and Monetary Union (UEMOA), the Mano River Union (MRU), and the Economic Community of West African States (ECOWAS). Central Africa has three groupings: the Economic Community of Central African States (ECCAS), the Economic and Monetary Community of Central Africa (CEMAC), and the Economic Community of Great Lakes Countries (ECGLC). In the Eastern and Southern African sub-regions, six groupings coexist: the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC), the Inter-Governmental Authority on Development (IGAD), the Indian Ocean Commission (IOC), the Southern Africa Development Community (SADC), and the Southern African Customs Union (SACU). North Africa shares two RECs, namely the Arab Maghreb Union (UMA) and the Community of Sahel-Saharan States (CEN-SAD). Today, in this complex mosaic, 28 countries retain dual membership, 20 are members of three RECs, the Democratic Republic of Congo belongs to four RECs, and six countries maintain single membership.

Most of these RECs adopted legal instruments concerning the regulation of foreign investment.[2] From the 1970s to the 1990s, various treaties were concluded to enhance cooperation and harmonisation in the area of investment, such as the 1965 CEMAC Investment Agreement, the 1982 ECGLC Investment Code, and the 1990 Arab Maghreb Union Investment Agreement. ECOWAS adopted two protocols that relate indirectly to foreign investment: the 1984 ECOWAS Protocol on Community Enterprises and the 1979 ECOWAS Protocol on Movement of Persons and Establishment. More recently, in 2007, COMESA developed a modern investment agreement, which was intended to establish the COMESA Common Investment Area. However, the agreement has not yet entered into force and the economic community is currently renegotiating its content. The 2006 SADC Protocol on Finance and Investment is another recent text which has been adopted in the region. The EAC has also launched various investment initiatives, notably adopting a model investment agreement in 2006 (which was revised in late 2015).

Consequently, each African REC has at least one instrument relating directly or indirectly to investment. However, the picture becomes more intricate when one considers that many African states are simultaneously member to two or more RECs. While regional economic integration is generally perceived as benefitting the economy and fostering foreign and domestic investment, the multiple and overlapping commitments in various RECs make Africa’s integration efforts in relation to investment harmonisation inefficient. Nonetheless, recent developments give hope for more harmonised economic integration. In the summer of 2015, the SADC, COMESA, and EAC launched the Tripartite Free Trade Area (TFTA), which seeks to promote the harmonisation of trade and investment arrangements amongst the three RECs as a step towards the wider goal of African continental integration.

By formulating their own investment rules, African RECs play a prominent role in the development of international investment law. They have adopted investment instruments which they consider to be more adequate in light of the specific needs of African countries, the most recent of which seek to combine attracting foreign investment with achieving sustainable development objectives.

The aforementioned COMESA Investment Agreement is an innovative text. It contains significant reform approaches aimed at achieving more balanced investment protection and ensuring that investment benefits flow back to local communities. It also constitutes an attempt to render investment provisions clearer and more predictable. The 2006 SADC Investment Protocol, for its part, states the need to integrate foreign investment into the larger framework of sustainable development. In addition to this protocol, SADC also adopted a Model BIT, which has at its heart the sustainable development concerns of developing countries.[3] Today, it is considered as one of the leading models as regards treaties that not only focus on the protection of foreign investors, but also on sustainable development considerations. The SADC Model and the COMESA Investment Agreement have received tremendous attention in the current discussion on reform of the international investment regime.

The PAIC and the challenge of investment facilitation in Africa

At the continental level, the African Union (AU) has been mandated by its member states to enhance the political and socio-economic integration of the continent and promote sustainable development. Currently, the most important integration endeavours undertaken by the AU are the establishment of the African Economic Community by 2034, and the creation of the Continental Free Trade Area (CFTA) to be finalised by 2017.[4] In regard to the harmonisation of the African investment regime, the AU also appears to be the most appropriate organisation to initiate measures intent on disentangling the complex web of intra-African BITs and investment instruments adopted by African RECs.

In the spirit of enhanced economic integration, African ministers responsible for continental integration decided in 2008 to start working on a comprehensive investment code for Africa: the Pan-African Investment Code (PAIC). The declared aim of the initiative was to attract greater investment flows to the continent and to facilitate intra-African cross-border investment. A group of independent African experts – composed of representatives from various African RECs, academia, and the private sector – has drafted the text over several years, proceeding in two phases. In the first phase, the group compiled African best practices in the field and elaborated a first draft. The second and decisive phase, which took place throughout 2015, consisted in finalising the PAIC text at the expert level. Two meetings of African independent experts were held for this purpose in May 2015 in Tunisia and in September in Mauritius. Experts from AU member states then reviewed the work of the independent experts during a continent-wide meeting in Uganda that took place in December 2015.

What is the potential added value of a continental instrument related to the regulation of foreign investment? As shown above, African regional integration is based on a complex web of legal instruments. As such, the overall landscape of investment law in Africa is very fragmented, which is counter-productive for African integration and for investment facilitation. When foreign investors, from Africa or elsewhere, invest in an African country, they currently have to comply not only with national laws and the investment contracts concluded with the host state, but also with the two or more regional instruments applicable in a given state, as well as with any potential BIT between their home state and the host state. The different levels of legal commitments raise many issues, in particular concerning their interrelationship, and this uncertainty regarding applicable or prevailing rules constitutes a serious challenge for investors in Africa.

The PAIC, which would be applicable to any investment made in AU member states, has the potential to solve the problems of legal uncertainty and fragmentation. The issue of the relationship between the PAIC and other investment agreements is addressed in the draft text of the PAIC, which clarifies that: “Member States may agree that in the case of a conflict between this Code and any intra-African BIT, investment chapter in any intra-African trade agreement, or regional investment arrangements, this Code shall take precedence." This crucial provision on the relationship between the PAIC and other investment agreements in Africa, despite its soft language, highlights the significance of the PAIC, which would thus seek to ensure continent-wide coherence and legal certainty for the purpose of investment facilitation.

The PAIC and the “Africanisation” of international investment law

With a continent-wide instrument such as the PAIC, Africa provides its own investment rules. Over the last sixty years of international investment law practice, African countries have been perceived as investment rule consumers. African economies did and still do rely heavily on international private capital commitment. In the hope of attracting more foreign investment, various African countries thus concluded numerous BITs with capital-exporting countries, accepting the pre-drafted BIT models of these countries. Today, however, African states have initiated a shift and are increasingly becoming investment rule providers. The PAIC reflects this trend towards the "Africanisation" of international investment law in the current context of reform of the international investment regime.

The PAIC contains several innovative features. It reformulates traditional investment treaty language, introduces new provisions (such as unprecedented provisions on due diligence and obligations for investors in relation to human rights, corporate social responsibility, use of natural resources, and land-grabbing) and omits certain investment standards completely (for instance, there is no mention of the controversial fair and equitable treatment standard).

The PAIC is intended to be a balanced instrument, meaning that it seeks to balance between investment protection and non-investment related public interests, as suggested by the innovative UNCTAD Investment Policy Framework on Sustainable Development.The PAIC does not depreciate the need to attract and facilitate foreign capital into Africa, yet this objective should not overshadow the long-term goal of sustainable development. Consequently, sustainable development plays a prominent role throughout the draft text of the PAIC. The very objective of the PAIC is “to promote, facilitate and protect investments that foster the sustainable development of each Member State.”

Africa will certainly continue to attract foreign investment in the upcoming decades, notably because of its natural resources, but not only. What is at stake now is determining how to regulate these investment flows, and which type of investment and investor operating in Africa should be protected under international law. The answer given by the PAIC is that it has to be investments that foster the larger interests and needs of African societies and economies, while preserving the environment. Thus, future foreign investment in Africa needs to be responsible and based on corporate sustainability.

As the international investment law regime is going through a period of review and revision, countries, regions, as well as international governmental and non-governmental organisations are discussing various reform approaches. The drafters of the PAIC were inspired by the current international reform discussion. Several of the ideas found in the PAIC text are what can be called “common approaches” in the international discussion on reform of the investment law regime as a whole. Such ideas mainly concern the reformulation of certain treaty standards, the inclusion of societal concerns, as well as the rethinking of investor-state dispute settlement. Africa, unlike Brazil for example, is not fundamentally contesting the system of IIAs. The PAIC is rather an attempt by African countries to shape an international investment treaty according to their own priorities. It shows that new IIAs are no longer based on either the North American or European models, and that other regions can meaningfully engage in shaping IIAs according to their level of economic development and social needs.

The legal nature of the PAIC is still uncertain. It might end up as a binding instrument applicable in all AU member states, as it might be adopted as a model treaty serving as a guide for individual member states’ IIA negotiations. The pros and cons of these two options constitute a political question and AU member states need to decide upon the issue with their relevant stakeholders. Whatever the outcome, the elaboration of the PAIC has allowed African countries to deliberate on their vision of IIAs and to build awareness amongst themselves regarding the broader implications of foreign investment as a tool for sustainable development. The PAIC thus endows Africa with a voice in the international debate on the future and reform of the investment regime. Further, its strong emphasis on SDGs bears the potential for the PAIC to become a model for innovation outside of Africa.

Author: Makane Mbengue, Associate Professor of International Law, University of Geneva.

[1] UNCTAD. “International Investment Agreements Navigator.”

[2] The following analysis is based on data from UNCTAD’s “International Investment Agreements Navigator”, available at

[3] SADC Model Bilateral Investment Treaty Template With Commentary. 2012. Gaborone: South African Development Community.

[4] Soininen, Ilmari. “The Continental Free Trade Area: What’s Going On?” International Centre for Trade and Sustainable Development.

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