Paper presented at the AfAA 2nd Annual International Arbitration Conference. 15th - 16th April 2021 

1. INTRODUCTION

The conclusion, signing and ratification of a Bilateral Investment Treaty (BIT) is usually celebrated with measured pomp and pageantry as it is usually seen as a step that heralds an expectation of enhanced business and investment relations among investors of the Treaty Parties. With the BIT comes the expectation of the comfort and protection required to meet the profit expectations of investors on the one hand and an expectation of fulfillment of the investment expectations and possibly, economic development of the Host States, on the other hand.

In reality, whether or not the BITs meet the expectations of all involved is arguable, especially in relation to developing countries. The general notion is that the old generation BITs were designed essentially to give investment protection and comfort to investors to attract investments from capital-exporting countries, thereby meeting their profit expectations. In recent times, it is becoming apparent that in developing States, the profit expectations of the investors may have been met at the expense of the developmental objectives of the Host State, with sometimes harmful environmental and labour practices, ironically creating great poverty in areas of the greatest wealth.

The texts of the first-generation treaties, which centered primarily around investment promotion and protection appeared to have been designed to woo investors at any cost, no matter how much. They were a means through which capital importing countries do and sign whatever it took to attract investors and investments into their countries. Conversely, capital exporting countries sought to gain as much protection as the treaty could give to meet their profit expectations. It appears that the capital importing countries did not give much thought to the consequences of the loosely drafted provisions of such treaties beyond the optics of having signed a document that appeared to encourage inflow of investments.

Broadly drafted and unclear provisions such as definitions, fair and equitable treatment, full protection and security, pre-establishment, prohibition of performance requirements, expropriation and failure to circumscribe Most Favoured Nation (MFN) and National Treatment (NT) articles, devoid of ambiguities that enable broad interpretation of the text, are a few of the triggers of Investor- State Dispute Settlement (ISDS) cases.

The first generation treaty texts show a clear asymmetry between the rights and obligations of the investor, with the former far outweighing the latter. The treaties also included unbridled access to ISDS, which is at the core of investment protection policies implemented by host States to attract investors and is arguably the most important provision of International Investment Agreements (IIAs) to the investors, giving them the most comfort. Many still consider it scandalous that individual investors can commence commercial or investment arbitral proceedings against sovereign States, especially when the claims concern measures taken by the host State to achieve public policy objectives.

Overtime, there appears to have been a paradigm shift in that mindset as a result of a number of factors including the fact that the line between capital importing and capital exporting countries is fast fading or blurred. It also has not helped to see that a definite correlation between the signing of Bilateral Investment Treaties (BITs) and increase in FDI inflows is still a subject of debate.[1] Furthermore, some capital-importing countries have realized that even where the proliferation of treaties have attracted FDI, the investments attracted fall short of the right quality required to meet the economic growth expectations and developmental objectives of such host States.

Arbitral awards against developing countries heightened the concerns and fears of those who considered the text of the treaties and the system to be skewed against host States.  Some recent awards against developing host States have brought this previously latent concern to the fore. A case in point is the 2017 award ordering Nigeria to pay P&ID $6.6 billion plus interest amounting to a total of over $9 billion for a project that was yet to take off.[2] Another example is the 2018 International Centre for the Settlement of Investment Disputes (ICSID) award ordering Pakistan to pay $5.9bn to mining firm Reko Diq,[3] an amount that is about two times the total Foreign Direct Investment (FDI) attracted by Pakistan in 2018.  Some of these cases were brought on the basis of broadly drafted standards found in older IIAs that limit the right of host States to regulate investment in their territories, and that expose them more openly to investor–State disputes.[4]

Of further concern is the fact that in 2018, the majority of the new ISDS cases were brought by developed country investors against developing countries and transition economies.[5]

It is against this background that some developing countries such as Nigeria, which previously were capital importers and are now capital exporters, especially regionally, have commenced far reaching reforms to their IIA regimes. The focus of this short paper is to share Nigeria’s current approach in the negotiation of innovative content of BITs to meet not only the profit expectations of investors, but also the developmental objectives of the country.

2.    NIGERIA’S REFORM-ORIENTED APPROACH TO NEGOTIATION OF BILATERAL INVESTMENT TREATIES (BITs)

With the global wave of reforms, largely informed by an increase in the number of ISDS cases, and the growing dissatisfaction of host States in the old order of IIAs, which were clearly disconnected from the achievement of their developmental objectives, Nigeria commenced holistic and far-reaching national and bilateral reforms of its IIA regime. The reforms were structured to mirror UNCTAD’s three phases of IIA reform found in its Reform Package for the International Investment Regime (2018 edition)[6].

Phase 1 was a national effort in the development of a new model BIT. Phase 2 centers around a national review of the existing stock of old generation BITs and a bilateral effort at modernizing the treaties that fall short of the quality required to attract responsible, inclusive, and sustainable investments.  Phase 3 will entail an alignment of the bilateral reforms with the national laws to achieve cohesion at both levels.  The reform process is driven by Nigeria’s Investment Promotion Agency (IPA), the Nigerian Investment Promotion Commission (NIPC) established under the provisions of the Nigerian Investment Promotion Commission Act.[7]

2.1 New Model BIT

The national reforms in Nigeria’s investment treaty regime commenced in 2015 with the development of a new model BIT in pursuit of sustainable development, balance of investors’ rights and obligations, preservation of Nigeria’s policy space, expansion of investment facilitation dimension of the treaties and more importantly, the insertion of safeguards to seemingly unrestricted access to Investor State Dispute Settlement (ISDS).

The model was developed by an Inter-Ministerial IIA team comprising core economic Ministries and Agencies, including the Federal Ministry of Justice as Chair, Nigerian Investment Promotion Commission as Technical Lead, the Federal Ministry of Industry, Trade and Investment and a practicing Arbitrator in the academia.  The team was largely reflective of Nigeria’s standing Inter-Ministerial IIA team chaired by the Federal Ministry of Industry, Trade and Investment with Nigerian Investment Promotion Commission as technical lead/ Chief Negotiator.

The model, which became effective in February 2016 captures the national policy in innovative and modern provisions that set the tone for the attraction of RIBBS investments i.e Responsible, Inclusive, Balanced, Beneficial and Sustainable investments. Careful efforts were made to include well thought out definitions of key terms such as “investment” and “investor” to ensure that the protections and benefits of BITs only cover actual investments already established in Nigeria and determine in clear terms, who can access ISDS.

Other issues covered in the model, among others, were innovative provisions:

• introducing circumscribed NT and MFN articles;
• ensuring that BITs promote Nigeria’s sustainable development objectives including specifically addressing issues relating to the environment, human rights, health, labor, safety and anti-corruption;
• preserving Nigeria’s policy space and the right of Nigeria to regulate in the public interest;
• balancing the asymmetry in investor’s rights and obligations;
• inserting temporary safeguard measures;
• insertion of investment facilitation provisions to proactively assist investors with information and promote transparency of the legal and regulatory framework as well as transparency in arbitral proceedings;
• including dispute prevention as a key component of the treaty;
• establishing a Joint Implementation Committee to monitor the implementation of the treaty, share information on investment projects and serve as a de-escalation and mediation mechanism;
• Inserting pre-conditions to accessing ISDS and safeguards to curb seemingly unrestricted exposure to international arbitration.

3.  THE NIGERIA- MOROCCO BIT

In December 2016, the new model was used to successfully conclude negotiations and sign a BIT between the Federal Government of Nigeria and the Kingdom of Morocco. The Nigeria - Morocco BIT,[8] with its reform-oriented provisions, featured prominently in United Nations Conference on Trade and Development (UNCTAD)’s 2017 World Investment Report (WIR) and was cited as an example of a balanced “new generation” investment treaty, which other developing countries and emerging economies should emulate[9].

The Treaty captured virtually all the innovative reform-oriented provisions in Nigeria’s new model in addition to other critical investment protection provisions typically found in such treaties.

Though a number of its innovative provisions are yet to be tested, it seems safer to embed them in the treaty text with the chance of achieving the required objectives with them if and when they are tested as against not having them at all in the treaty text.

3.1 Dispute prevention, dispute de-escalation and mediation

Care was taken to word innovative provisions in the treaty to address some current global concerns on ISDS and the substantive provisions leading up to those concerns.  One major issue addressed nationally in the model BIT and bilaterally in the treaty is dispute prevention, dispute de-escalation and mediation.

The Nigeria-Morocco BIT establishes a Joint Implementation Committee, which among other things, is a dispute prevention mechanism, to “…seek to resolve any issues or disputes concerning Parties’ investment in an amicable manner”.[10] The Committee also serves as a mediation and dispute resolution mechanism, to resolve disputes submitted under specified timelines, by an investor within 6 months from the date of the written request for consultations and negotiations, failing which “…the investor may, after the exhaustion of local remedies or the domestic courts of host State, resort to international arbitration mechanisms”.[11]

These provisions and the Joint Implementation Committee mediation provide ready solutions at a bilateral level to concerns on the improvement of time efficiency for ISDS, enhancing treaty Parties’ involvement and control over their instruments, dispute prevention and mitigation, exhaustion of local remedies and mediation, which are being considered at multilateral engagements at the ICSID Rules (Amendment) Process and UNCITRAL Working Group III.

At the national level in Nigeria, the OSIC Lab, an administrative dispute prevention and resolution mechanism has been established in the country’s Investment Promotion Agency: Nigerian Investment Promotion Commission to support the country’s efforts at dispute prevention and de-escalation and other forms of mediation.

Unlike the discussions at the multilateral level, the treaty text at the bilateral level has the added advantage of reflecting a mutually agreeable time efficiency template that takes cognizance of the developmental realities and constraints of the treaty partners, thereby addressing the issue very quickly.

In similar national and/or bilateral efforts to address some ISDS concerns, Argentina and the United Arab Emirates have included a ban of Third Party Funding (TPF) in their 2018 BIT.[12] The United States has also restricted TPF of domestic claims against the federal government.[13] Similarly, Egypt’s Investment Law No.72 of 2017 provides “…multitiered mechanisms for the settlement of investment disputes, including domestic litigation, amicable settlement and alternative dispute resolution (ADR)…”[14] Essentially, it is indicative of the fact that Egypt seeks to develop an effective and flexible mechanism for the settlement of investment disputes. Such are similar bilateral efforts to treat other identified concerns raised under the ICSID Rules Amendment Process and UNCITRAL WG III. 

4.    REFORMING THE OLD GENERATION BITS

In 2017, Nigeria commenced Phase 2 of the reform process, which entails reforming the existing stock of old generation BITs that are still in force despite their potentially injurious provisions that expose Nigeria to the needless risk of international arbitration. Inspired by a table in UNCTAD’s 2017 World Investment Report, which analysed IIAs on the basis of 11 reform-oriented provisions,[15] Nigeria came up with 20 critical and reform-oriented parameters. On the basis of the 20 parameters, which included critical considerations for the IIA reform,[16]of the key investment protection, facilitation and promotion provisions of most of the 29 BITs signed by Nigeria prior to the adoption of the new model, were assessed.  The exercise revealed that a large percentage of the BITs fell short of the provisions needed to attract RIBBS quality investments. Validation of the work done on the assessment of Nigeria’s BITs was received from UNCTAD, the World Bank and Nigeria’s IIA team.

In 2019, practical steps commenced on the renegotiation and modernization of older BITs and concluded treaties that do not align with the current policy direction on Nigeria’s BITs. With guidance from UNCTAD, Nigeria recently undertook a country-specific analysis of each BIT in force with country by country proposals on the next steps to be taken to proactively modernize each BIT. The analysis highlights:

a)   scores of each Treaty based on the 20 critical and reform-oriented parameters used for the assessment;

b)   tenures and current status of each Treaty (since a large number of them are already expired but are automatically renewed along with the potentially injurious provisions);

c)    next dates for the possible unilateral termination of the Treaties; and

d)   tenure of the survival clause (during which the treaty provision will still be in effect even after the Treaties are terminated).

Similar country-specific analysis of concluded but yet-to-be-ratified BITs was undertaken with specific focus on the availability of quality safeguards to ISDS and the absence of pre-establishment provisions.

Engagements with some treaty partners has commenced on modernization of some treaties. 

5.    ALIGNMENT AND COHESION IN NATIONAL AND BILATERAL EFFORTS

To ensure cohesion of the reforms at the national, regional and bilateral levels, Nigeria has commenced preliminary work on Phase 3 of the reform process that entails the review of critical investment protection, facilitation and promotion provisions of the national investment law, the Nigerian Investment Promotion Commission Act,[17] which contains a number of unqualified protections, in addition to a seemingly unrestricted unilateral offer of Investor-State Dispute Settlement by international arbitration to foreign investors.

The objective is to ensure that the national investment law and other related legislations largely align with reforms undertaken at the bilateral level so that the gains made in the model BIT are not lost through the current provisions of the legislations.

Similar efforts at cohesion are being replicated at regional and multilateral negotiations including discussion on the AfCFTA Investment Protocol for Africa, the ICSID Rules Amendment Process, UNCITRAL Working Group III on the reform of ISDS and the formulation of Guiding Principles on Investment policymaking for D-8 countries developed jointly with UNCTAD. [18]The non-binding Guiding Principles provide guidance for investment policymaking with a view to: promoting inclusive economic growth and sustainable development; promoting coherence in national and international investment policymaking; fostering an open, transparent and conducive global policy environment for investment; and aligning investment promotion and facilitation policies with sustainable development goals. These initiatives aligns with Nigeria’s key IIA reform pillars, including sustainable development, right to regulate and preservation of policy space, balancing the asymmetry between investors rights and obligations and encouraging international cooperation on investment-related challenges in addition to mitigating investment disputes through the use of Ombudspersons or similar institutions. 

6.   CLOSING THOUGHTS

As the impact, negative and sometimes costly implications of loosely worded treaty provisions grow on treaty partners, the importance of carefully wording of such provisions and inclusion of reform-oriented provisions cannot be over-emphasized. It therefore behooves such treaty partners to formulate and embrace innovative tailor-made provisions that meet their policy objectives in order to ensure that the treaty meets a balance of expectations of both the investors and the Host States.

While the desirability of reforms in treaty negotiation is increasingly gaining ground, attention must be given to other success factors in the negotiation of such treaties, prominent among which are skilled treaty negotiators and having like-minded treaty partners, with complementary objectives around the table.

Forums such as the AfAA Conference provide an opportunity to share experiences and interrogate issues that help build the capacity of treaty negotiators and expose countries to the need to embrace the wide range of reforms in their investment treaty regimes. This, in my view, is a critical first step in enhancing the possibility of concluding even more reform-oriented treaties, which over time can change the “face” of BIT networks across the world.

____________________

* Deputy Director and Legal Adviser of Nigerian Investment Promotion Commission and Chief Negotiator of Nigeria’s International Investment Agreements team

[1] https://investmentpolicy.unctad.org/uploaded-files/document/unctad-web-diae-pcb-2014-Sep%2024.pdf (09 March 2020)

[2]https://jusmundi.com/en/document/decision/en-process-and-industrial-developments-ltd-v-the-ministry-of-petroleum-resources-of-the-federal-republic-of-nigeria-part-final-award-friday-17th-july-2015  (03 March 2020)

Process and Industrial Development Ltd. v. The Ministry of Petroleum Resources of the Federal Republic of Nigeria. 

[3]Tethyan Copper v. Pakistan https://www.thefreelibrary.com/Barrick+Gold+Corporation+(TSE%3a+ABX)+-+Barrick+Announces+Reko+Diq...-a0595353574 (03 March 2020)

[4] Hamed EL-KADY and Mustaqeem DE GAMA, The Reform of the International Investment Regime: An African Perspective, ICSID Review, (2019), pp. 1–14.

[5] https://investmentpolicy.unctad.org/publications/1202/fact-sheet-on-investor-state-dispute-settlement-cases-in-2018   (04 March 2020)

[6] https://investmentpolicy.unctad.org/publications/1190/unctad-s-reform-package-for-the-international-investment-regime-2018-edition- (04 March 2020)

[7] http://www.nigeria-law.org/Nigerian%20Investment%20Promotion%20Commission%20Act.htm

[8]https://investmentpolicy.unctad.org/international-investment-agreements/treaties/otheriia/3711/morocco---nigeria-bit-2016- (03 March 2020) https://www.iisd.org/itn/2017/09/26/the-2016-morocco-nigeria-bit-an-important-contribution-to-the-reform-of-investment-treaties-tarcisio-gazzini/ (03 March 2020)

[9]https://issuu.com/unpublications/docs/world_investment_report_2017/68 Pages 120-123 and 140 (03 March 2020)

[10] Article 4(4)d

[11] Article 26

[12]Agreement for the Reciprocal Promotion and Protection of Investments between the Argentine Republic and the United Arab Emirates, signed April 16, 2018 (03 March 2020) https://investmentpolicy.unctad.org/international-investment-agreements/treaties/bilateral-investment-treaties/3819/argentina---united-arab-emirates-bit-2018- (02 March 2020)

[13]  31 USC 3727 (United States Anti-Assignment of Claims Act). https://www.iisd.org/itn/2019/06/27/third-party-funding-and-the-objectives-of-investment-treaties-friends-or-foes-brooke-guven-lise-johnson/ (02 March 2020)

[14]Moataz HUSSEIN https://www.iisd.org/itn/2018/10/17/new-egyptian-investment-law-eyes-on-sustainability-and-facilitation-moataz-hussein/ (03 March 2020)

[15]https://issuu.com/unpublications/docs/world_investment_report_2017/68 Page 121 (04 March 2020)

[16] The parameters include reference to sustainable development, inclusion of enterprise-based definition of investment, inclusion of temporary safeguard measures, inclusion of transparency and investment facilitation clauses, among others.

[17]Nigerian Investment Promotion Commission Act No. 16 of 1995 (see earlier reference to this Act) http://www.nigeria-law.org/Nigerian%20Investment%20Promotion%20Commission%20Act.htm (03 March 2020)

[18] The D-8 Organization for Economic Cooperation, also known as Developing-8, is an organization for development co-operation among the following countries: Bangladesh, Egypt, Nigeria, Indonesia, Iran, Malaysia, Pakistan, and Turkey. Text of the principles available at: https://investmentpolicy.unctad.org/publications/1221/joint-d-8-organization-for-economic-cooperation---unctad-guiding-principles-for-investment-policymaking (04 March 2020)