Research Paper 65, February 2016

The Rise of Investor-State Dispute Settlement in the Extractive Sectors: Challenges and Considerations for African Countries

African countries have been active in concluding international investment treaties. They are increasingly subject to investor-state dispute settlement (ISDS) cases, including claims that challenge regulatory actions of host countries in a wide range of areas, including public services and race relations. At the same time, African States have developed the ‘Africa Mining Vision’, which is aimed at introducing policy and regulatory frameworks intended to maximize the development of the region through the use of natural resources as catalyst for industrial development in order to diversify the economy.

This paper discusses the potential challenges that could arise out of rules established by international investment treaties and ISDS to policy space in African countries and the operationalization of the ‘Africa Mining Vision’. It provides an overview of the rising number of ISDS cases in the mining and extractive industries, including cases brought against African countries. It also reviews how investment treaties are increasingly imposing a wider net of prohibitions around performance requirements, which could potentially be crucial for the operationalization of the ‘Africa Mining Vision’.

The paper concludes that in the case of African countries, similar to other developing countries, the expansion of international investment agreements could carry significant risks to policy space and policy tools necessary for industrialization and development. In the case of African countries, this implies risks to the potential use of sectoral policies, such as policies in the extractive industries and the ‘Africa Mining Vision’, in order to support and promote African countries’ industrialization objectives.

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