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Law vital to China-Africa production cooperation

ZHU WEIDONG | 2017-08-10
(Chinese Social Sciences Today)

 
 

Workers assemble eletronics at a plant in South Africa bulit with investments from Chinese appliance maker Hisense Electric.


In order to implement the Johannesburg Action Plan (2016-2018) drafted at the Forum on China-Africa Cooperation (FOCAC) Johannesburg Summit in 2015, China’s Ministry of Foreign Affairs is looking to South Africa to serve as the engine of Africa’s industrialization while treating nations including Ethiopia, Kenya, Tanzania, Congo-Brazzaville, Egypt, Mozambique and Angola as pilot areas or key partners for cooperation.


Legal disputes are bound to increase as economic and trade interactions between China and African nations become more frequent, which requires the establishment of a firm legal framework between China and Africa.


Considering the current situation of legal cooperation between China and Africa, China should broaden bilateral legal cooperation with African nations. Legal cooperation with regional organizations must be strengthened in Africa, and when the conditions are satisfied, multilateral legal frameworks are needed to facilitate China-Africa production capacity cooperation.

 

Bilateral cooperation
Bilateral legal cooperation between China and Africa lags behind the development of trade, investment and interpersonal exchanges.There are insufficient practical and effective legal guarantees for China-Africa production capacity cooperation.


To date, China has signed Bilateral Investment Treaties (BIT) with 34 African nations, of which only 18 have come into force. Of all the aforementioned pilot projects and key partners for China-Africa cooperation, China has only signed effective BITs with South Africa, Ethiopia, Tanzania and Congo-Brazzaville. China’s BIT with Kenya, signed in 2001, still has yet not come into effect. China has invested in more than 50 nations and regions in Africa. It is necessary for China to sign BITs with African nations as soon as possible and implement the signed and effective treaties.


In terms of civil and commercial issues, the growing number of civil and commercial cases requires more bilateral judicial assistance treaties to settle disputes rapidly.


So far, China has only signed this kind of treaty with Morocco, Algeria, Tunisia and Egypt. Some African nations with many Chinese immigrants, including China’s pilot regions and key partners, such as Ethiopia, Kenya, Tanzania and Angola, have not signed similar treaties with China. Many cases cannot be effectively settled in the absence of such treaties.


The issue of double taxation in China-Africa production capacity cooperation also warrants attention. Double taxation increases the burden of the taxpayers while obstructing the cross-border movement of capital, technology and personnel. The issue of double taxation is always eliminated through a bilateral agreement. Currently, China has signed effective double taxation agreements with 11 African nations, which include only three of all the pilot and key partners for China-Africa cooperation: Egypt, South Africa and Ethiopia. Obviously, only a few effective agreements on the avoidance of double taxation between China and African nations have been reached.


In terms of judicial cooperation, China has signed judicial assistance treaties on criminal cases with only South Africa and Egypt. In addition, China has signed extradition treaties with South Africa and Angola. The cross-border telecommunication fraud case in Kenya in 2016 and a recent case in Zambia in which 31 Chinese were taken into custody demonstrate the necessity and urgency of strengthening judicial and enforcement cooperation with African nations on criminal cases.

 

Regional organizations
African nations have established many regional organizations, including the East African Community (EAC), the Economic Community of West African States (ECOWAS), the Southern African Development Community (SADC) and the Southern African Customs Union (SACU). These regional organizations have played a significant role in promoting regional integration and improving the regional environment for trade and investment development.


Negotiating and signing free trade agreements or economic partnerships and strengthening legal cooperation with these regional organizations will be vital to China-Africa production capacity cooperation.


Negotiating and signing free trade agreements or economic partnerships with regional organizations in Africa will promote African regional integration and bring common prosperity to China and Africa, which is the consistent stance of the Chinese government. For example, China’s Second Africa Policy Paper released at the FOCAC Johannesburg Summit in 2015 clearly stated that China will support Africa’s establishment of a free trade area and promote regional integration while actively exploring institutional arrangements for trade with African nations and regional organizations.


Free trade agreements and economic partnerships between China and African regional organizations will further expand the African market, upgrading China-African cooperation in investment and trade. China’s trade and investment with African nations are currently entirely based on bilateral agreements. China has not yet signed more comprehensive free trade agreements or economic partnerships with any regional organizations in Africa. Once such agreements are reached, it will be easier for Chinese products to enter the African market as well as for China to increase investment in Africa. In addition, reaching such agreements will also make China more competitive with the West in terms of investment and trade.


China may first try to negotiate agreements with African regional organizations including SACU, the Common Market for Eastern and Southern Africa (COMESA) and ECOWAS, which possess good economic conditions, great market potential and strong capacity for regional radiation. The African continent is currently promoting the integration of various regional organizations, speeding up the establishment of an African common market. In this sense, China is presented with good opportunities and conditions in developing such agreements with African regional organizations.

 

Multilateral legal framework
Multilateral legal frameworks also play a significant role in China-Africa production capacity cooperation. They provide convenient multilateral channels for the settlement of civil, commercial and investment disputes concerning more than two nations.


For example, if multiple nations are parties to the Hague Service Convention and Hague Evidence Convention, it will facilitate the processing of legal documents or the transmission of evidence among them.


International investment disputes can be settled through the arbitration mechanism of the International Center for Settlement of Investment Disputes (ICSID) which was established based on the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, also known as the Washington Convention. The recognition and enforcement of foreign arbitration awards can follow the articles of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.


In terms of existing multilateral legal frameworks that are applicable to China-African production capacity cooperation, the legal framework on the recognition and enforcement of foreign arbitration awards is the only one that is convenient. Other multilateral frameworks, which address civil or commercial matters and investment disputes, are either insufficient or inapplicable to the practical needs of China and African nations.


For example, China ratified the Hague Service Convention and the Hague Evidence Convention years ago. Morocco, Egypt, Botswana, Malawi and Seychelles are the only African nations that have signed the Hague Service Convention while South Africa, Morocco and Seychelles are the only African nations that have signed the Hague Evidence Convention.


Considering that the civil and commercial disputes between China and Africa involve almost all African nations, it would be unrealistic to use these conventions to address the problems of transmission of legal documents or evidence.


In terms of settling investment disputes, China and 46 African nations are members of the Washington Convention. However, this does not mean that investment disputes between China and African nations can all be settled through its arbitration mechanism. Only nine of 18 BITs between China and African nations allow investment disputes to be submitted to the ICSID. Considering China now has investments in nearly every African nation, the settlement mechanism of the convention is insufficient.


In addition, some African nations in practice have gradually realized that the settlement of investment disputes through arbitration is detrimental to themselves. Nations including South Africa and Egypt have rejected the dispute-settlement mechanism put forth by the convention, which poses potential barriers to the application of this multilateral mechanism in settling investment disputes.


In the long run, China and Africa may try to establish a multilateral legal framework that conforms to the real situation and practical needs of both parties. These efforts should be based on the reality of the development of bilateral investment and trade as well as their similar traditions of legal culture.


China and African nations may explore the possibility of reaching a free trade agreement or economic partnership within FOCAC and make corresponding arrangements on trade settlement as well as business and investment disputes between China and African nations. Considering the complexity of reaching a comprehensive free trade agreement or economic partnership and the urgency of settling investment disputes, China and Africa may first negotiate on procedural issues of dispute settlement and establish a center for settlement of investment disputes between China and Africa.


In terms of civil and commercial matters, China and Africa may make a multilateral arrangement for judicial assistance, clarifying such matters as the determination of jurisdiction, investigation and taking evidence abroad and the recognition and enforcement of judicial decisions on civil and commercial matters.

 

Zhu Weidong is from the Institute of West-Asian and African Studies at the Chinese Academy of Social Sciences.