Analysis

In the early days of investment treaty awards, twenty or so years ago, it was obvious something was badly amiss. With virtually no legal analysis, the Metalclad tribunal found an indirect expropriation against Mexico based on the government’s refusal to authorize a landfill in a historically polluted area. A few years later, foreign asset owners busily sued Argentina for the country’s emergency measures, adopted in the face of a national economic crisis; the arbitrators were unsympathetic to the Argentine lawyers’ argument that it was ‘necessary’ for the country’s government to override the stipulated water rates in contracts with irresponsibly privatized utilities so households could afford drinking and bathing during the crisis and recovery. In CME, a case against the Czech Republic, the tribunal awarded hundreds of millions to a U.S. mogul after reasoning very erratically that the country had violated most of the cryptic investor protections in the invoked treaty. The dispute arose from Czech efforts to regulate broadcasting of cheap American re-runs on a major privatize TV station that was filling the airwaves with profitable muck. A sister tribunal in Lauder, bizarrely hearing a parallel claim by the human owner of the CME company, refused to award any compensation for the same dispute.

Three years ago, at the heart of the COVID-19 pandemic, I wrote an entry in this blog on the Martha Wangari Karua vs. Attorney General of the Republic of Kenya (Martha Karua case) in the East Africa Court of Justice (EACJ) First instance division titled: The EACJ First Instance Court Decides Martha Karua v Republic of Kenya: The Litmus Test for EACJ Jurisdiction and Supremacy. In that case, the First Instance division found that the Respondent State through the actions of its Judiciary (Supreme Court) had violated its commitment to the fundamental and operational principles of the EAC, specifically the principle of the rule of law guaranteed under Article 6(d) and 7(2) of the EAC Treaty. The court had found that Martha Karua’s right to access justice was violated and it issued a historic award for general damages in the sum of $ 25,000 to the applicant at a simple interest rate of 6% per annum. Since then, I contend that there is a supremacy battle between Kenya’s apex municipal court and the EACJ in two specific arenas. The first was Kenya’s appeal of this decision in the EACJ Appellate division which categorically dismissed the appeal with costs to the Appellant in February of 2022. The second venue for this ongoing conflict is in the Supreme Court of Kenya where Kenya’s Attorney General filed a reference for an advisory opinion reference that many observers saw as the aftermath of the Martha Karua case. This is the long awaited advisory opinion judgement that was issued on 31 May 2024 and forms the basis of this piece.

A fundamental premise of The Investment Treaty Regime and Public Interest Regulation in Africa is that national constitutions “are supreme in the hierarchy of legal norms within the domestic context, and governmental actions in Africa, including the making of investment treaties, are governed by these fundamental legal norms.” In this monograph, I addressed, then, the question of the limits that national constitutions and the right of African states to regulate in international law place on the authority of African states in their conclusion of international economic treaties such as investment treaties. I examined four different and fundamental areas of public interest: national judicial systems, the environment, human rights, and development. Based on a constitutional-general international law imperatives analysis, I developed the imperatives theory as a theoretical framework to explain the conflict of legal norms and interests through a critical analysis of the intersections of public law and policy and international investment treaties. The issue addressed by the imperatives theory is whether the fundamental human rights and corresponding obligations of African states towards citizens under African constitutions, international environmental treaties and international human rights treaties do place or should place, limitations on the competence of African states to conclude investment treaties the terms of which constrain the exercise of the states’ public interest regulatory authority.

The inclusion of Fintech in the Protocol on Digital Trade and the requirement to develop the Fintech Annex represent a significant milestone for Fintech on the continent. Documents like the Fintech Annex take time to develop and are not revised as frequently as domestic frameworks. Therefore, it is crucial that stakeholders involved in negotiating the Fintech Annex strive to produce a document that will stand the test of time and facilitate measurable results. This piece has attempted to highlight some key considerations for developing the Fintech Annex. However, what has been covered is merely the tip of the iceberg. There are many other issues to consider. Experts and scholars in the field of Fintech are encouraged to urgently publish on this topic to support the efforts of the actual negotiators of the Fintech Annex.

In the pecking order of cabinet ministries, Trade and Industry tends to come close to the bottom. What is more, is that Trade and Industry Ministries typically get allocations of less than 1 percent of national budgets. No wonder, then, that ecosystems don’t exist that would facilitate production and trade of high-value, transformative products with high impact in the broader economy. Yet, the rhetoric about export-led development is ceaseless. This is certainly the case in practically all African countries.

Globalisation and digitalisation of the economy has radicalised tax administration and commerce in Africa. While there is still significant room for growth, there has been a paradigm shift in Africa’s development policy landscape over the past three decades. Economic liberalisation measures aimed at opening up the continent to global market forces and attracting foreign direct investment have significantly replaced state intervention and public ownership in most African countries.1 There is a race amongst governments in the continent to optimise and harness the vast tax potential of both the digital economy and the emerging digital finance market involving trading in cryptocurrencies, Non-Fungible Tokens (“NFTs”), and other digital assets. They aim to embrace the regulatory complexities of both the digital economy and the emerging digital finance market with a view to making their countries fit for the digital age and to building a future-ready economy that works for the advancement of their people. However, the rise of globalisation and digitalisation of the economy, including the economic liberalisation that followed, has (amongst other factors) allowed tax and commercially related Illicit Financial Flows (“IFFs”) to thrive in Africa. IFFs from Africa are said to have assumed crisis proportions in recent times.3 Global Financial Integrity (2010) reportedly estimates IFFs from Africa between 1970 and 2008 alone at more than U$1 trillion, an amount that dwarfs the combined inflows of developmental assistance and foreign direct investments into the continent over the same period.4 Nigeria is also reported to have led other resource-rich African economies with this enormous outflow, put at US$217.7 billion, or 30.5% of the total IFFs from Africa within the relevant period.5 Africa is currently estimated to be losing more than US$50 billion to US$86.63 billion annually in IFFs.6

South Africa was recently put on the Financial Action Task Force’s grey-list. The Financial Action Task Force (FATF) – an authoritative quasi-regulatory global body - relegates countries to ‘grey-list’ status when they fail to live up to global anti-money laundering, anti-terrorism, and anti-proliferation financing standards. Following an evaluation and extensive engagements with the African country, the FATF decided that a series of 8 strategic deficiencies needed to be addressed by South Africa before the end of 2025. It therefore placed South Africa under ‘increased monitoring’, a listing informally known as grey-listing. The FATF was created in 1989 to oversee the development and implementation of global anti-money laundering law. Through a series of developments – including the September 11, 2001 terrorism strikes in the United States – the FAFT’s mandate expanded to capture terrorist finance and proliferation financing. Drawn from the content of a series of international instruments attentive to the relationship between money and crime, the FATF compiled a set of 40 recommendations known as the global anti-money laundering, anti-terrorist finance, and anti-proliferation financing standards. The recommendations comprise matters such as specific money-laundering offences and confiscation regimes as well as measures designed to promote financial transparency (for instance, financial reporting requirements and beneficial ownership registries) and to facilitate international cooperation.

The International Asset Recovery Mechanism as it currently operates is highly unfair and disadvantageous to developing African countries. It is a system frost with power game, colonial vestige, and the undermining of the African sustainable development agenda. Indeed, African countries persistently suffer from the detrimental impact of outward illicit financial flows (IFFs), stemming from complex and multifaceted criminal and commercial activities. Latest IFFs estimates from the United Nations Conference on Trade and Development Organization for Economic Cooperation and Development and African Development Bank (AfDB) reveal an ugly illicit financial flight that continues to deprive the continent of huge domestic resources and economic prosperity.