Legal certainty and foreign investment in Africa: let?s call the African Union
| Autor | Camilo Andrés Rodríguez Yong |
| Cargo | Professor of Universidad del Rosario Law School. LLM and SJD graduate from Indiana University Maurer School of Law. |
| Páginas | 1-52 |
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LEGAL CERTAINTY AND FOREIGN INVESTMENT IN AFRICA: LET’S CALL
THE AFRICAN UNION
CERTEZA LEGAL E INVERSIÓN EXTRANJERA EN ÁFRICA: LLAMEMOS
LA UNIÓN AFRICANA
Camilo Andrés Rodríguez Yong1
Fecha de recepción: 10 de noviembre de 2010.
Fecha de aprobación: 3 de diciembre de 2010
ABSTRACT
This article studies the role of the African Union (AU) as an instrument for
providing legal certainty to foreign investors in the African continent. Africa has
failed to attract foreign investment since the business environment and market
conditions do not even appeal to national investors. One of the biggest problems
contributing to this situation is a low level of legal certainty which makes it too
risky for foreign investors to invest in the region. Therefore, the development
and adoption of policies and actions aimed at the provision of a higher level of
legal certainty is necessary. This article precisely proposes the usage of the AU
1 Professor of Universidad del Rosario Law School. LLM and SJD graduate from Indiana University Maurer
School of Law. The article was developed within the research project Legal Mechanisms to Attract Foreign
Direct Investment carried out by the Economic Law research group of Universidad del Rosario.
REVISTA VIRTUAL VIA INVENIENDI ET IUDICANDI
"CAMINO DEL HALLAZGO Y DEL JUICIO"
http://viei.usta.edu.co/ E-MAIL: revistainveniendi@usantotomas.edu.co
as an instrument to achieve this goal. This regional integrationist experience
groups several elements that can positively contribute to the provision of legal
certainty to foreign investors. For instance, it has an institutional structure that
allows its institutions to work coordinately in the adoption of policies and laws,
which makes possible the development and adoption of coherent and stable
laws and policies. Likewise, the AU’s structure allows the exchange of opinions,
ideas, and experiences between African governments and foreign investors
during the decision-making process by means of an institution such as
ECOSOCC and the private sector Forum. This communication promotes
transparency and predictability to foreign investors for the development of their
economic activities. In addition, AU also has the power to create legal
instruments that serve to regulate the activity of foreign investors, limiting the
power of the host country to interfere in the investment, and promote the
progress and respect of matters such as the rule of law, transparency and good
governance in the continent. Moreover, the AU has its own judicial body that
works to enforce the AU legal instruments and guarantees their fulfillment by
member countries.
This article studies the role of the African Union (AU) as an instrument for
providing legal certainty to foreign investors in the region. Africa is a region
characterized by a low level of foreign investment. The continent has failed to
attract foreign investors since the business environment and market conditions
REVISTA VIRTUAL VIA INVENIENDI ET IUDICANDI
"CAMINO DEL HALLAZGO Y DEL JUICIO"
http://viei.usta.edu.co/ E-MAIL: revistainveniendi@usantotomas.edu.co
do not even appeal to national investors. This situation is a consequence of
multiple reasons such as restricted defense of property rights, low levels of
technical capacity and skill of management and employees,2 existence of
several barriers affecting access by foreign investors and increasing transaction
costs,3 insufficient infrastructure (in areas such as transport,
telecommunications, power supply), corruption, and ineffective policies for
promoting foreign investment in the continent.4 However, one of the biggest
problems affecting foreign investment in the region is a low level of legal
certainty which makes it too risky for foreign investors to invest in the region.5
Legal certainty is that principle that “expresses the fundamental premise that
those subject to the law must know what the law is so as to be able to plan their
* Professor of Universidad del Rosario Law School. LLM and SJD graduate from Indiana University
Maurer School of Law. The article was developed within the research project Legal Mechanisms to
Attract Foreign Direct Investment carried out by the Economic Law research group of Universidad del
Rosario.
2 WORLD BANK, AFRICA DEVELOPMENT INDICATORS 2006 7 (World Bank 2006).
3 Miria A. Pigato, The Foreign Direct Investment Environment in Africa, 1-2, 10 (World Bank, African
Region Working Paper Series No. 15, 2001).
4 Several measures have been proposed: a) constructing a good image o f the continent by increasing
political and macroeconomic stability a nd the protection of pro perty rights, b) improving the investment
environment by developing infrastructure, services and modifying the legal framework, c) promoting
investment opportunities through current investors and use of technolog y such as the internet, d)
diversifying the econo my, e) liberalizing trade, and f) privatizing inefficient state companies. C hantal
Dupasquier & Patrick N. Osakwe, Foreign Direct In vestment in Africa: Performance, Challenges, and
Responsibilities, 17 J.OF ASIAN ECON. 241, 254-57 (2006).
5 The uncertainty in the region is also the result of political instability, macroeconomic instability, lack of
transparent policies and low level o f policy coherence. Political instability is generated by the exi stence of
wars, military inter vention in politics, and conflicts of religious and ethnic character. Macro economic
instability occurs as a result of currency crashes, high i nflation, and large budget deficits. Id. at 250-53.
Lack of transparency is expressed by circumstances such as the difficulty of obtaining access to
government documents by the public and their lack of clarity where access is possib le. ECONOMIC
COMMISSION FOR AFRICA, AFRICAN GOVERNANCE REPORT 2005 145-46, 153-54 (Economic Commission
for Africa 2005).
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