*Karl P. Sauvant, PhD*
*Resident Senior Fellow*
*Columbia Center on Sustainable Investment*
Columbia Law School - The Earth Institute, Columbia University
435 West 116th St., Rm. JGH 825, New York, NY 10027
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"Beware of FDI statistics!", "Towards an Indicative List of FDI
Sustainability Characteristics", “The Importance of Negotiating Good
Contracts", "A New Challenge for Emerging Markets: the Need to Develop an
Outward FDI Policy”, "China Moves the G20 toward an International
Investment Framework and Investment Facilitation", "The Rise of
Self-judging Essential Security Interest Clauses in IIAs", "Can Host
Countries have Legitimate Expectations?", "The Next Step in Governance: The
Need for Global Micro-regulatory Frameworks", and "The Evolving
International Investment Law and Policy Regime: Ways Forward" *are*
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*Columbia FDI Perspectives*
Perspectives on topical foreign direct investment issues
No. 217  January 15, 2018
Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Matthew Schroth ([log in to unmask])
*The Pan-African Investment Code: a good first step, but more is needed*
*** <#m_-4752564704417885213__edn1>
Mouhamadou Madana Kane** <#m_-4752564704417885213__edn2>

In 2008, the African Union (AU) member states, through their ministers in
charge of integration, decided to develop a Pan African Investment Code
(Code) whose objective would be to foster cross-border investment flows in
Africa. Under the leadership of the AU Commission, the first draft of the
Code was released in 2015. It has since then been subject to several rounds
of experts’ review and consultation meetings. The last consultation meeting
gathered AU members’ experts in Nairobi, Kenya, in November 2016. It
resulted in a recommendation to submit the Code’s amended version for
adoption by the African Ministers of Economy, Finance and Integration.

The decision to develop the Code was welcomed by African experts and
policy-makers as an opportunity to contribute to Africa’s industrial and
structural transformation through a binding instrument that would
effectively restore the balance between investors’ rights and host states’
obligations, take into account countries’ sustainable development
objectives, streamline the investor-state dispute-settlement system (ISDS),
and, finally, overcome issues with the fragmentation of the international
investment regime, due to the multiplicity of investment treaties and the
diverse interpretative practice of arbitral tribunals.

Taking stock of the progress achieved so far in negotiating the Code, it is
disappointing to note that the original ambition to have a binding
instrument replacing the existing intra-African investment agreements has
been abandoned[1] <#m_-4752564704417885213__edn3> in favor of a “guiding
text.”[2] <#m_-4752564704417885213__edn4> The choice of a soft law
instrument will exacerbate the fragmentation of the investment law regime
in Africa and, hence, impair one of the Code’s core objectives. It will
also reduce the effectiveness of numerous substantive provisions of the
current text, including provisions:

   - establishing the right of host country governments to regulate
   admitted investments and to adopt measures concerning preserving the
   environment, international peace and security, national security interests,
   and promoting national development (including through performance
   requirements and local content);
   - limiting the application of most-favored-nation treatment (MFN) and
   national treatment obligations to investors and investments “in like
   circumstances” and granting host governments the right to derogate from
   these obligations to preserve public interests (e.g., environment,
   - imposing certain obligations on investors, including to comply with
   corporate governance standards, to adhere to socio-political obligations,
   to refrain from bribery, to adhere to corporate social responsibility
   standards, to use natural resources in a responsible manner, and to comply
   with business ethics and human rights;
   - regulating state contracts, public-private partnerships, labor issues,
   human resources development, and those promoting technology transfer, clean
   technologies and environmental and consumer protection;
   - relating to ISDS that give host country governments the discretion to
   implement ISDS,[3] <#m_-4752564704417885213__edn5> thereby offering a
   middle ground solution to African states that are either pro-ISDS or

Furthermore, the benefits of not including the controversial
fair-and-equitable-treatment provision in the Code, on the one hand, and
excluding dispute-settlement procedures from the scope of the MFN clause,
on the other hand, will now be limited in the absence of a binding text.
Indeed, as the Code loses its treaty character, there is no guarantee that
these provisions will not be re-introduced in new bilateral investment
treaties negotiated by African countries.

It is clear, under these circumstances, that the Code will not keep its
original promises. Nevertheless, it certainly remains a useful instrument
for African investment policy-making. As many binding regional instruments
are currently under negotiation, including the SADC-COMESA-EAC Tripartite
Free Trade Agreement and the Continental Free Trade Agreement, which both
contain investment chapters, the Code can serve as a useful
capacity-building instrument. It can, indeed, provide guidance to the
negotiators of these agreements, in support of the continent’s structural
transformation objectives.[4] <#m_-4752564704417885213__edn6> Having said
that, to put the Code into context and clarify its purpose, it will
probably be necessary to rename it as “Pan-African Guiding Principles on
Investor-State Relations.”

* <#m_-4752564704417885213__ednref1> *The Columbia FDI Perspectives are a
forum for public debate. The views expressed by the author(s) do not
reflect the opinions of CCSI or Columbia University or our partners and
supporters. **Columbia FDI Perspectives (ISSN 2158-3579) is a peer-reviewed
** <#m_-4752564704417885213__ednref2> Mouhamadou Madana Kane (
[log in to unmask]) is the founder of the African Center of International Law
Practice ( The author thanks Ismaila Ngum for his helpful
comments and is grateful to Nathalie Bernasconi, Xavier Carim and Hamed El
Kady for their helpful peer reviews.
[1] <#m_-4752564704417885213__ednref3> A binding instrument was
contemplated in Article 3.2 of the 2016 version of the Code; *see* United
Nations Economic Commission for Africa (ECA) and AU document No.
E/ECA/COE/35/18 AU/STC/FMEPI/EXP/18(II), March 26, 2016,
[2] <#m_-4752564704417885213__ednref4> A non-binding instrument is
contemplated in the revised Article 3 of the 2017 version; *see* ECA-AU
Document No. E/ECA/CM/50/1AU/STC/FMEPI/MIN/1(III), February 8, 2017,
ECA-Conference-of-Ministers-Senegal-March-23-28. The Code was supposed to
be adopted during the 2017 ECA-AU joint Conference of Ministers, March
23-28, 2017; but the meeting was adjourned due to disagreements among
member states on the participation of the Sahrawi Arab Democratic Republic.
[3] <#m_-4752564704417885213__ednref5> Article 42.1 of the 2017 draft Code
states: “Member States *may*, in line with their domestic policies, agree
to utilize ISDS mechanism. *In the event that the ISDS mechanism is agreed
upon*, the process below shall apply[…]” (emphasis added).
[4] <#m_-4752564704417885213__ednref6> In fact, the AU member states
experts’ meeting held on November 21-23, 2016 clearly recommended “to use
the Pan-African Investment Code as a reference framework document in the
negotiation of the CFTA investment chapter”. *See* “Meeting of Member
States Experts on the consideration of the Pan African Investment Code[…],”
ECA-AU DocumentNo. E/ECA/CM/50/1AU/STC/FMEPI/MIN/1(III), February 8, 2017,
*The material in this Perspective may be reprinted if accompanied by the
following acknowledgment: “Mouhamadou Madana Kane, ‘The Pan-African
Investment Code: a good first step, but more is needed,’ Columbia FDI
Perspectives, No. 217, January 15, 2018. Reprinted with permission from the
Columbia Center on Sustainable Investment (**
<>**).” A copy should kindly be sent to the
Columbia Center on Sustainable Investment at **[log in to unmask]*
<[log in to unmask]>*. *

For further information, including information regarding submission to the
*Perspectives*, please contact: Columbia Center on Sustainable Investment,
Matthew Schroth, [log in to unmask]

   - No. 216, Kenneth J. Vandevelde, “IIA provisions, properly interpreted,
   are fully consistent with a robust regulatory state,” January 1, 2018.
   - No. 215, Karl P. Sauvant, “Beware of FDI statistics!”, December 18,
   - No. 214, Fabrizio Di Benedetto, “A European Committee on Foreign
   Investment?”, December 4, 2017.

*All previous FDI Perspectives are available at
<>**. *

*Other relevant CCSI news and announcements*

   - In January 2018, The *Yearbook on International Investment Law and
   *was released*.* The *Yearbook* monitors current developments in
   international investment law and policy, focusing (in Part One) on trends
   in foreign direct investment (FDI), international investment agreements,
   and investment disputes. Part Two, then, looks at central issues in the
   contemporary discussions on international investment law and policy. This
   volume includes a chapter by CCSI's Lisa Sachs, Lise Johnson and Jesse
   Coleman, with CCSI Fellow Kanika Gupta. *For more information, and
   for details on our Call for Papers for the edition covering 2017, please
   see our website here
   - CCSI has released its 2016-2017 Annual Report. *The full report is
   available here
   - CCSI is accepting applications for our three upcoming executive
   trainings: on Extractive Industries and Sustainable Development
   (June 4-15, 2018), Sustainable Investments in Agriculture
   (June 19-29, 2018), and Investment Treaties and Arbitration for
   Government Officials
   (July 30-August 9, 2018). Each program is designed to equip participants
   with the necessary skills, analytical tools, and frameworks to address
   relevant challenges and opportunities, and to encourage a rich dialogue
   about best practices from around the globe. *More information about each
   training, including brochures and applications, is available at the links

Karl P. Sauvant, Ph.D.
Resident Senior Fellow
Columbia Center on Sustainable Investment
Columbia Law School - Earth Institute
Ph: (212) 854-0689
Fax: (212) 854-7946
*Copyright © 2018 Columbia Center on Sustainable Investment (CCSI), All
rights reserved.*
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