No legal instrument available to investors to settle disputes
Against the background of the SADC Regional Infrastructure Investment Conference in Maputo next week, Gerhard Erasmus, a tralac associate, discusses the ongoing suspension of the SADC Tribunal and the implications this has had for the region.
Erasmus was one of the three-man legal team that helped draft the Namibian Constitution in 1990.
Tralac is the trade law centre for southern Africa, operating as a law research agency at the University of Stellenbosch. This commentary was first published at www.tralac.org .
In 2010 the SADC Summit decided to “suspend” the SADC Tribunal. The result is that since that time no state or private party entitled to standing before this forum can bring an application for the enforcement of rights provided for in any of the SADC legal instruments. This does not seem to bother the member states; they do in any case not litigate against each other. However, firms (which are the actual traders), service providers, business people and investors are in clear need for the protection of their rights. So are individuals employed by SADC institutions.
What exactly “suspension” means is unclear. The SADC Treaty does not provide for any such action; meaning that the Summit decision of 2010 is ultra vires. However, this decision is beyond review. The Summit is the highest decision-making body and takes its decisions on the basis of consensus.
In the meantime the implementation of the SADC FTA (which is premised on objective rules such as the elimination of tariffs and non-tariff barriers) is directly affected. The system cannot function as originally planned. At the moment there are serious unresolved legal issues as a result of “surcharges” and new duties imposed on mainly South African goods imported into Zimbabwe and Tanzania. These measures are prima facie unlawful under Articles 3 and 4 of the SADC Trade Protocol but cannot be ruled upon by an independent judicial forum.
What are the implications of this lingering uncertainty? The long term consequences for investment, development and respect for the rule of law will be negative; while the benefits of freer trade and the certainty of a rules-based system will be undermined. Trade in SADC apparently takes place on the basis of discretions and ad hoc policy responses.
A binding international legal instrument is at stake here. The SADC Trade Protocol has entered into force and is binding on all Parties thereto. This arrangement also has to respect the applicable multilateral rules of the WTO. At present certain members are clearly in breach of their obligations but can apparently do so with impunity. It is ironic that at the same time all of them participate in negotiations on the establishment of a new Tripartite FTA among the members of SADC, COMESA and the EAC. Will their behaviour under a new FTA be of the same order?
What benefits does adjudication have? The judicial process allows for clarification of all facts, the interpretation of the applicable legal texts and the setting of precedents. Rulings will guide future behaviour. In short – it brings certainty and predictability. Judgements normally contain a detailed factual investigation, including a study of applicable documents, derogations and exceptions invoked by the Parties. The ultimate objective is to ensure respect for the applicable law and the implementation of the obligations of the Parties.
The implications of a finding about invalidity of a particular state measure should be explained. In international trade law the standard remedy is that the unlawful behaviour must be discontinued. This is also the approach adopted by the SADC Trade Protocol: The settlement of any dispute among Member States shall, whenever possible, imply removal of a measure not conforming with the provisions of this Protocol or causing mollification or impairment of such provision. When direct and comprehensive responses are not possible, a negotiated settlement about concessions and acceptable measures between the parties to the dispute will follow.
Domestic trade measures by SADC Member State must be in line with the applicable law. If this basic principle is not vindicated an essential feature of SADC will be undermined. Actions by the Parties which regulate trade will then become unpredictable and discretionary. This is clearly not how SADC has been conceptualized. Article 6 of the Treaty deals with General Undertakings of Members and requires them to “undertake to adopt adequate measures to promote the achievement of the objectives of SADC, and shall refrain from taking any measure likely to jeopardise the sustenance of its principles, the achievement of its objectives and the implementation of the provisions of this Treaty”.
Formal dispute settlement promotes transparency and certainty. The private sector, firms, service providers, investors and consumers then know where they stand. Dispute settlement should not only be limited to those rare occasions (not yet seen in SADC) when direct inter-state interests may be involved. Governments do not trade. The ideal is that the governments of nationality of private parties affected by unlawful behaviour should take up their cases and litigate against such other state parties. This is what happens in practically all disputes decided by WTO Panels and the Appellate Body.