Approaches to investor state dispute resolution in Eastern Africa: Rwanda, Kenya and Mauritius

• Jurisdiction: South Africa
• Citation: 2018 Acta Juridica 113
• Published date: 19 December 2019
• Pages: 113-148
• Date: 19 December 2019

113

Approaches to investor state dispute

resolution in Eastern Africa: Rwanda,

Kenya and Mauritius

LISE BOSMAN* AND SUSAN KIMANI†

The current system of investor state dispute settlement (ISDS)

derives largely from bilateral investment treaties (BITs), which many

African states have signed as part of a strategy to attract foreign direct

investment. Against the backdrop of current criticisms facing the ISDS

system and reform proposals under discussion, including the creation

of a permanent multilateral investment court or appeal mechanism,

we examine approaches to ISDS by three Eastern Afr ican states

– Rwanda, Kenya and Mauritius. Each of these three countries has

adopted investment laws and entered into BITs including ISDS, and

has faced investment arbitration proceedings at least twice. However,

unlike two other Afr ican countries highlighted – Egypt and South

Africa – they have neither engaged critically with the ISDS system,

nor shown signs of adapting their ISDS policies. This essay suggests

that while this approach to ISDS may be eective in the short term,

the current evolution of the global system invites deeper engagement.

The paper concludes with a call to governments and specialists in these

countries to participate in current ISDS reform debates and contr ibute

to shaping the future evolution of the system.

I INTRODUCTION

(1) ISDS and East Africa

This essay will examine possible approaches to resolving investor-

state disputes (investor state dispute settlement or ISDS) in three

Eastern African states – Rwanda, Kenya and Mauritius – against the

background of modern developments and controversies surrounding

ISDS. After outlining these developments and controversies, we

* BA LLB (UCT) LLM (Notre Dame); Adjunct Professor at the University

of Cape Town, Senior Legal Counsel at the Permanent Court of Arbitration,

Executive Director of the International Council for Commercial Arbitration.

† LLB (Nairobi) LLM (UCT); Legal Counsel at the Permanent Court of

Arbitration, Co-Registrar at the Mauritius International Arbitration Centre.

2018 Acta Juridica 113

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114 FOREIGN DIRECT INVESTMENT AND THE LAW

will focus on those ISDS mechanisms available in both bilateral

investment treaties (BITs) and national investment protection laws,

and how these are being applied in Rwanda, Kenya and Mauritius.

We have chosen to focus on these three states as they share the

ambition to become hubs for international arbitration on the African

continent and have all been active in recent years in developing

the legal framework and organisational infrastructure necessary

to achieve this objective. Their approach is both to develop the

infrastructure to support international commercial arbitration, and

to adopt policies to protect foreign investors, engaging with the

current global system of ISDS to varying degrees.

In section I of this essay, we outline the evolution of the current

system of ISDS and briey describe the practices that characterise

the system. Section II of the essay deals with current debates and

proposals for ISDS reform. Section III discusses African approaches

to international arbitration, including ISDS, noting the renaissance of

international arbitration on the African continent and touching on

trends such as reliance on national investment protection legislation

to supplement or to replace BITs, drawing on examples from South

Africa and Egypt. Section IV focuses on the approach adopted by

Kenya, Mauritius and Rwanda and examines the trends emerging

from these jurisdictions. In section V, we draw conclusions from this

survey, noting that the debate in other regions of the world has

not (yet) aected the approaches adopted in Eastern Africa. Rather,

despite having responded to investor state claims,1 all three states

maintain solid regimes of investor protection, both through BITs

and national investment protection legislation.

(2) Current ISDS practices globally

Before the modern proliferation of BITs, the rights of foreign

investors were protected by customary international law principles

guaranteeing minimum standards of treatment and vindicated either

through the courts of the host state or through the mechanism of

diplomatic protection. This latter practice saw the rights of investors

being taken up (or ‘espoused’) by their home states in direct claims

against the state that had hosted the investment. That system was,

however, awed both in substance (in that substantive protections

were not recorded in generally applicable instruments and out-

comes were not consistent) and procedure (in that an investor was

1 Rwanda has responded to two, Kenya to three, and Maur itius to four claims.

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APPROACHES TO INVESTOR STATE DISPUTE RESOLUTION 115

dependent on the goodwill and political expedience of its own state

in whether and how a claim would be espoused).2

From the late 1950s, states started entering into international

investment agreements (usually taking the form of BITs), which

typically included a core list of substantive protections for foreign

investors, protecting, for instance, against expropriation without

compensation, discriminatory treatment and inequitable treatment,

and preserving the right to repatriate prots from the investment.

Perhaps even more signicantly, at the procedural level, BITs also

conferred on investors the right to initiate arbitral proceedings

directly against the host state of the investment – thus cutting out

the investor’s home state. The rst known BIT was signed between

West Germany and Pakistan in 1959 and came into force in

1962.3 Since then, the United Nations Conference on Trade and

Development (UNCTAD) estimates that the number of BITs has

grown to 2 911 with some 2 353 currently in force,4 while other

researchers estimate the number to be even higher.5

Under the current system of ISDS, arbitral proceedings

are mostly conducted under the arbitration rules of either the

International Centre for the Settlement of Investment Disputes

(ICSID)6 or the United Nations Commission on International Trade

Law (UNCITRAL). ICSID or the Permanent Court of Arbitration

(PCA) mostly administer arbitral proceedings and the terms of the

applicable BIT apply to arbitral proceedings, with the applicable

law usually being the law of the host state or a combination of

2 E Neumayer & L Spess ‘Do bilateral investment treaties increase foreign

direct investment to developing countries?’ (2006) LSE Research Online, available at

http://eprints.lse.ac.uk/archive/00000627 (accessed on 6 July 2017).

3 Treaty for the Promotion and Protection of Investments (with Protocol and

Exchange of Notes) (adopted on 25 November 1959, entered into force 28 April

1962) 457 UNTS 23.

4 UNCTAD International Investment Agreement Navigator, available at

http://investmentpolicyhub.unctad.org/IIA (accessed on 20 August 2019).

5 G Kaufmann-Kohler & M Potestà ‘Can the Mauritius Convention serve

as a model for the reform of investor state arbitration in connection with the

introduction of a permanent investment tribunal or an appeal mechanism?’ (2016)

CIDS – Geneva Centre for International Dispute Settlement para 5, available at http://

www.uncitral.org/pdf/english/CIDS_Research_Paper_Mauritius.pdf (accessed

on 23 June 2018).

6 Established by the 1965 International Convention for the Settlement of

Investment Disputes between States and Nationals of Other States (adopted on

18 March 1965, entered into force 14 October 1966) 575 UNTS 159 (the ICSID

Convention or Washington Convention).

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