2 Jan 2021

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Leading the world – the African Continental Free Trade Area (AfCFTA) sets a new high-water mark for dispute settlement under regional trade agreements

On 1 January 2021, trading began under the African Continental Free Trade Area (AfCFTA), a regional trade agreement aimed at all 55 member states of the African Union. The agreement is publicized as encompassing the world’s largest free trade area since the formation of the World Trade Organization (WTO). Once fully implemented, the AfCFTA will establish a new high-water mark for dispute settlement under regional trade agreements.

To date, most trade disputes have been resolved using the WTO dispute settlement mechanism, even when the matters concerned could have been resolved under a regional trade agreement. This is largely because the WTO was viewed as offering a better mechanism to address complex factual and legal issues. Disputes that reach the formal dispute settlement stage inevitably involve political sensitivities, particularly for the country whose measures are being challenged, but also for the challenging country.  Whatever the outcome, both disputing countries must “sell” that outcome to their constituents. To best achieve this, particularly if the outcome is negative, the constituents need to be convinced that the strongest possible case was put forward, that the decision-making body understood and considered that case, and that the decision that was issued is factually accurate and legally well-reasoned. Although it has been the subject of criticism by some WTO Members, the WTO mechanism has generally been successful at meeting these requirements. This is due to its well-developed procedures, the ability to appeal findings of dispute settlement panels, and dispute settlement support by an experienced and professional Secretariat. Until now, the ad hoc trade dispute settlement mechanisms under regional trade agreements have lacked these components.

The AfCFTA changes this by creating a dispute settlement mechanism that closely resembles the WTO mechanism, including panels, a process for appeals, a procedure governing the “suspension of concessions” (e.g., trade retaliation), and a supporting Secretariat.  Although it does not have the 165-country membership of the WTO, the AfCFTA membership of 55 countries should generate enough formal disputes to reasonably utilize the mechanism.

Tereposky & DeRose LLP regularly provides advice and acts as counsel in international trade disputes, including WTO and regional trade agreement dispute settlement proceedings.

Daniel Hohnstein
613.237.9005
dhohnstein@tradeisds.com

Greg Tereposky
613.237.1210
gtereposky@tradeisds.com