Title
Draft Pan-African Investment Code
Preamble
Preamble The Member States,
RECALLING the Abuja Treaty establishing the African Economic Community and the adoption of Agenda 2063 by the African Union Heads of State and Government;
RECOGNIZING the need for a comprehensive guiding instrument on investment for all African Union Member States;
RECOGNIZING the growing importance of trade and investments for the growth and development of Africa;
AFFIRMING the desire of Member States to promote an attractive investment climate and expand trade and investments for long-term development;
CONSIDERING the African Union objectives stated in the Constitutive Act aimed at fast- tracking the political and socio-economic integration of the continent;
RECOGNIZING that the vision for regional integration and development is to strengthen the regional market, create wealth in Africa, and enhance competitiveness through increased production, trade and investment flows in African countries;
MINDFUL of the increasing importance of the development and strengthening of financial and capital markets, and the role played by investment and the private sector in productive capacity, increased economic growth and sustainable development;
DESIRING to promote within Member States an environment conducive to the development of a more vibrant and dynamic private sector that facilitates job creation, promotes technology transfer, supports long-term economic growth and contributes effectively to the fight against poverty;
RECOGNIZING that investment and trade based activities represent one of the major avenues for illicit financial flows from Member States and that corrupt practices underpin these outflows, and AFFIRMING their desire to promote corruption free investment and trade regimes and improved laws and regulations that promote transparency and accountability in governance;
RECOGNIZING their right to regulate all the aspects relating to investments within their territories with a view to meeting national policy objectives and to promoting sustainable development objectives;
SEEKING to achieve an overall balance of the rights and obligations between Member States and the investors under this Code;
MINDFUL of the crucial role played by women and youth in the development of Africa;
RECALLING that the free movement of people is a fundamental pillar of African integration;
RECOGNIZING the role played by the New Economic Partnership for African Development (NEPAD)and the complementary existing regional and international initiatives relating to a transformational economic agenda for Africa;
DESIROUS of the need to ensure national and continental coherence in investment policymaking;
TAKING into account the various regional arrangements on investment across the continent; TAKING into account the Sustainable Development Goals (SDGs) and the Investment Policy
Framework for Sustainable Development of the United Nations Conference on Trade and Development (UNCTAD);
TAKING into account obligations of some of the Member States under relevant international instruments;
DETERMINED therefore to use the Pan-African Investment Code (hereinafter, the Code) as a guiding instrument
THE MEMBER STATES HAVE AGREED AS FOLLOWS:
Body
Chapter 1. GENERAL PROVISIONS
Article 1. Objective
The objective of this Code is to promote, facilitate and protect investments that foster the sustainable development of each Member State, and in particular, the Member State where the investment is located.
Article 2. Scope
1. This Code shall apply as a guiding instrument to Member States as well as investors and their investments in the territory of Member States as defined by this Code.
2. This Code defines the rights and obligations of Member States as well as investors, and principles prescribed therein.
Article 3. Relationship with other Investment Agreements
1. This Code does not affect rights and obligations of Member States deriving from any existing investment agreement.
2. Notwithstanding Paragraph 1, Member States may agree that this Code could be reviewed to become a binding instrument and to replace the intra-African bilateral investment treaties (BITs) or investment chapters in intra-African trade agreements after a period of time determined by the Member States or after the termination period as set in the existing BITs and investment chapters in the trade agreements.
3. Member States and Regional Economic Communities (RECs) shall take into account as far as possible the provisions of this Code when entering into any new agreement with a third country in order to avoid any conflict between their present or future obligations under this Code and their obligations in other agreements.
Article 4. Definitions
In this Code, unless the context otherwise requires:
1. "enterprise or company" means any entity duly constituted or otherwise incorporated, under the applicable laws and regulations of a Member State provided that it maintains substantial business activity in the Member State in which it is located. Substantial business activity requires an overall examination, on a case-by-case basis, of all the circumstances, including, inter alia: (i) the amount of investment to be brought into the host State, (ii) the number of jobs to be created , (iii) its effect on the local community , and (iv) the length of time the business has been in operation ;
2. "home State" means a Member State from where the investment or the investor originates;
3. "host State" is the Member State where the investment is located;
4. "investment" means an enterprise or a company, as defined under Paragraph 1, which is established, acquired or expanded by an investor, including through the constitution, maintenance or acquisition of shares, debentures or other ownership instruments of such an enterprise, provided that the enterprise or company is established or acquired in accordance with the laws of the host State; An enterprise or company may possess assets such as:
a. shares, stocks, debentures and other equity instruments of the enterprise or another enterprise;
b. a debt security of another enterprise;
c. loans to an enterprise;
d. movable or immovable property and other property rights such as mortgages, liens or pledges;
e. claims to money or to any performance under contract having a financial value;
f. copyrights, know-how, goodwill and industrial property rights such as patents, trademarks, industrial designs and trade names, to the extent they are recognized under the law of the host State.
For greater certainty, investment does not include:
i. debt securities issued by a government or loans to a government;
ii. portfolio investments;
iii. claims to money that arise solely from commercial contracts for the sale of goods or services by a national or enterprise in the territory of a Member State to an enterprise in the territory of another Member State, or the extension of credit in connection with a commercial transaction, or any other claims to money that do not involve the kind of interests set out in subparagraphs (a) through (f) above;
iv. investments of a speculative nature;
v. investments in any sector sensitive to its development or which would have an adverse impact on its economy;
vi. commercial activities.
In order to qualify as an investment under this Code, the investment must have the following characteristics: the substantial business activity according to Paragraph 1, commitment of capital or other resources, the expectation of gain or profit, the assumption of risk, and a significant contribution to the host State's economic development.
For avoidance of doubt, establishment, acquisition and expansion under this Code only apply to the post-establishment phase.
5. "investor" means any national, company or enterprise of a Member State or a national, company or enterprise from any other country that has invested or has made investments in a Member State;
6. "list of scheduled investment sectors" means schedules of excluded sectors of Member States or any other list submitted by Member States where applicable;
7. "Member State" means a Member State as defined in the Constitutive Act of the African Union;
8. "measures" include any legal, administrative, legislative, judicial or policy decision that is taken by the host State, relating to and affecting an investment in the host State;
9. "national" means a natural person who is a citizen of any Member State;
10. "portfolio investment" refers to any investment where the investor owns less than 10 per cent of shares in a company or through stock exchange, or otherwise does not give the portfolio investor the possibility to exercise effective management or influence on the management of the investment;
11. "public official" means any persons appointed or elected who performs public functions on a permanent or temporary basis. This includes persons who work for an organ of the State or an organ of the central Government or an organ of a territorial unit of the State at the national, regional or local levels;
12. "State contract" means a contract entered into between Government of a Member State or a territorial unit, on one hand, and an investor on the other hand;
13. "third country" means a State which is not a Member of the African Union.
Chapter 2. STANDARDS OF TREATMENT OF INVESTORS AND INVESTMENTS
Article 5. Admission and Establishment
1. Each Member State shall promote, encourage and facilitate investments in its territory, and admit such investments in accordance with its laws and regulations.
2. Each Member State shall accord investors rights of entry and establishment, in accordance with its laws and regulations with the aim of promoting free flows of investment within the region.
Article 6. Encouragement and Support of Investments
1. Member States may introduce incentives in order to attract investments. Such incentives may include inter alia:
a. financial incentives in the forms of investment insurance, grants or loans at concessionary rates;
b. fiscal incentives such as tax holidays, pioneer status and reduced tax rates;
c. subsidized infrastructure or services, market preferences;
d. development-oriented incentives, to encourage preferential markets schemes and specific investors within the region;
e. incentives for technical assistance, technology transfer requirements; and
f. investment guarantees.
2. Member States may harmonize incentives for investments that are of strategic interest to the Member States or as prescribed by relevant African Union bodies. Member States may harmonize incentives in accordance with standards to be prescribed from time to time by relevant African Union bodies.
Article 7. Most-Favored-Nation Treatment
1. Each Member State shall accord to investors of another Member State treatment no less favorable than it accords, in like circumstances, to investors of any other Member State or of a third country with respect to the management, conduct, operation, expansion, sale or other disposition of investment.
2. Each Member State shall accord to investments made by investors of another Member State treatment no less favorable than it accords, in like circumstances, to investments made by investors of any other Member State or of a third country with respect to the management, conduct, operation, expansion, sale or other disposition of investments.
3. The concept of "in like circumstances" requires an overall examination, on a case by-case basis, of all the circumstances of an investment, including, among others:
a. its effects on third persons and the local community;
b. its effects on the local, regional or national environment, the health of the populations, or on the global commons;
c. the sector in which the investor is active;
d. the aim of the measure in question;
e. the regulatory process generally applied in relation to a measure in question;
f. company size; and
g. other factors directly relating to the investment or investor in relation to the measure in question.
The examination referred to in this Paragraph shall not be limited to or be biased towards any one factor.
4. For greater certainty, the "treatment", referred to in Paragraphs 1 and 2, does not include dispute settlement procedures provided for in other treaties. Substantive obligations in other treaties, do not in themselves constitute "treatment," and thus cannot give rise to a breach of this Article.
Article 8. Exceptions to Most-Favored-Nation Treatment
1. Member States may adopt measures that derogate from the Most-Favored-Nation principle.
2. Any regulatory measure taken by a Member State that is designed and applied to protect or enhance legitimate public welfare objectives, such as public health, safety and the environment, does not constitute a breach of the Most-Favored-Nation principle.
3. The measures taken by reason of national security, public interest, public health or public morals are not considered as a "less favorable treatment", in the meaning of Article 7.
4. The Most-Favored-Nation principle shall not apply to sectors excluded in a Member State's List of scheduled investment sectors.
5. The Most-Favored-Nation principle does not oblige a Member State to extend to the investors of another Member State or of a third country the benefit of any treatment, preference or privilege contained in:
a. the existing or future free trade area, customs union, common market agreement or any international arrangement to which the investor's home State is not a Party, or
b. any international agreement or domestic legislation relating wholly or mainly to taxation.
Article 9. National Treatment
1. A Member State shall accord to investors of another Member State treatment no less favorable than it accords, in like circumstances, to its own investors with respect to the management, conduct, operation, and sale or other disposition of investments.
2. A Member State shall accord to investments from another Member State treatment no less favorable than it accords, in like circumstances, to investments of its own investors with respect to the management, conduct, operation, and sale or other disposition of investments.
3. The concept of "in like circumstances" requires an overall examination, on a case by-case basis, of all the circumstances of an investment, including, among others:
a. its effects on third persons and the local community;
b. its effects on the local, regional or national environment, the health of the populations, or on the global commons;
c. the sector in which the investor is active;
d. the aim of the measure in question;
e. the regulatory process generally applied in relation to a measure in question;
f. company size; and
g. other factors directly relating to the investment or investor in relation to the measure in question.
The examination referred to in this Paragraph shall not be limited to or be biased towards any one of the factors.
Article 10. Exceptions to National Treatment
1. Member States may adopt measures that derogate from the National Treatment principle provided such measures are not arbitrary.
2. Any regulatory measure taken by a Member State that is designed and applied to protect or enhance legitimate public welfare objectives, such as national interests, public health, safety and the environment, does not constitute a breach of the National Treatment principle.
3. Member States may, in accordance with their respective domestic legislation, grant preferential treatment to qualifying investments and investors in order to achieve national development objectives.
4. A Member State reserves the right to deny an investor the benefits of this Code, and to grant special and differential treatment to any investor and investment in such cases, though not limited to instances where:
a. the investor does not have substantial business activities in the Member State; or
b. the investor is engaged in activities inimical to the economic interest of Member States.
5. A Member State may deny national treatment if advantages available within the Member State's economy are made for the exclusive benefit of its own nationals within the framework of its national development programs or its List of scheduled investment sectors where applicable.
6. The National Treatment principle does not apply:
a. to subsidies or grants provided to a government or a State enterprise, including government-supported loans, guarantees and insurance; or
b. to taxation measures aimed at ensuring the effective collection of taxes, except where this results in arbitrary discrimination.
7. In accordance with national laws and regulations, Member States may accord more favorable treatment to address the internal needs of designated disadvantaged persons, groups or regions.
8. The implementation of these exceptions shall not entitle any investor to compensation for any competitive disadvantages they may suffer.
Article 11. Expropriation and Compensation
1. Investments in Member States shall not be nationalized, expropriated or subjected to measures having effect equivalent to nationalization or expropriation except if the following conditions are met in a cumulative manner:
a. a public purpose related to the internal needs of that Member State;
b. on a non-discriminatory basis;
c. against adequate compensation; and
d. under due process of law.
2. The investor affected shall have the right, under the laws of the Member State expropriating, to prompt review, by a judicial or other independent authority of that Member State, of its case and of the valuation of its investment in accordance with the procedure established by the laws of the Member State.
3. A non-discriminatory measure of a Member State that is designed and applied to protect or enhance legitimate public welfare objectives, such as public health, safety and the environment, does not constitute an indirect expropriation under this Code.
4. This Article shall not apply to the issuance of compulsory licenses granted in relation to intellectual property rights, or to the creation, limitation or revocation of intellectual property rights, to the extent that such issuance, revocation, limitation or creation is consistent with applicable international agreements on intellectual property.
Article 12. Determination of the Value of Compensation
1. Adequate compensation shall normally be assessed in relation to the fair market value of the expropriated investment immediately before the date of expropriation and shall not reflect any change in value occurring because the intended expropriation had become known earlier. In no event shall the valuation date be moved to any future date. The computation of the fair market value of the property shall exclude any consequential or exemplary losses or speculative or windfall profits claimed by the investor, including those relating to moral damages or loss of goodwill.
2. Where appropriate, the assessment of adequate compensation shall be based on an equitable balance between the public interest and interest of the investor affected, having regard to all relevant circumstances and taking into account the current and past use of the property, the history of its acquisition, the extent of previous profit made by the foreign investor through the investment, and the duration of the investment.
3. If the compensation is not paid within six months from the date of its determination, it shall after that date attract simple interests at the normal commercial rate where applicable at the national level of the host State.
4. Any payment shall be made in a freely convertible currency.
Article 13. War and Civil Disturbance
Investors who suffer within the territory of a Member State damage in relation to their investments owing to the outbreak of hostilities or a state of national emergency such as, revolt, insurrection or riot, shall be accorded treatment no less favorable than that accorded to investors of such a Member State or to investors of any third country, as regards to any measure to be taken by the concerned Member State including restitution, compensation or other valuable consideration.
Article 14. General Exceptions
1. This Code shall not prevent any Member State from adopting or enforcing measures relating to the protection of human, animal or plant life or health, or to the maintenance of international peace and security, or to the protection of its national security interests, subject to the requirement that these measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between investors in like circumstances or a disguised restriction on investment flows.
2. Member States shall not be required to change nor relax their appropriate level of protection of human, animal or plant life or health in pursuit or attraction of investments.
3. Any interested Member State may request information on the reasons for the measures taken under Paragraph 1. The Member State taking such measures shall respond to the request for information within three months.
Article 15. Transfer of Funds
Member States shall, subject to national laws, permit all transfers relating to an investment to be made freely and without delay. Such transfers may include:
a. profits, capital gains, dividends, royalties, interests and other current income accruing from an investment;
b. the proceeds of the total or partial liquidation of an investment;
c. repayments made pursuant to a loan agreement in connection with an investment;
d. license fees in relation to investment;