Rwanda-US Bilateral Investment Treaty and the EAC Common Market Protocol

The Rwanda-US Bilateral Investment Treaty (BIT) was signed in Kigali in 2008 and the United States Senate unanimously approved the treaty on September 26, 2011. Meanwhile, the EAC-US Trade and Investment Framework Agreement (TIFA) was signed in July 2008 between USTR and the EAC.  In addition, the EAC Common Market Protocol (CMP) to which Rwanda is a member came into force into force on 1st July 2010. 


The Rwanda-US BIT is the first to be concluded between the US and a sub-Saharan African country since 1998 (when a BIT was signed with Mozambique). Although there are over 40 BITs in force to which the US is a Party, this Treaty with Rwanda is only the second concluded on the basis of the ambitious 2004 U.S. model BIT. Other African countries with BITs currently in force with the US include: DRC, The Congo, Morocco, Senegal, Egypt, Cameroon and Tunisia. The BIT with Rwanda will remain in force for ten years after its entry into force and will continue in force unless terminated by a Party by providing one year’s advance notice to the other Party. 

The BIT provides investors with legal protections which include non-discriminatory treatment of investors and investments and the right to freely transfer investment-related funds.  Unlike the EAC CMP however, the BIT also provides for prompt, adequate, and effective compensation in the event of an expropriation; freedom from specified performance requirements, such as domestic content or technology transfer requirements; and provisions to ensure transparency in governance. The BIT also gives investors in all sectors the right to bring investment disputes to neutral international arbitration panels.  

In comparison, EAC CMP Article 29 on the Protection of Cross-Border Investments, undertakes to protect investors and their returns in a non-discriminatory manner however the modalities for doing so are not yet finalised. Article 29:3 proposes that within 2 years after the coming into force of the CMP, Partner States will take measures to ensure necessary protections in the Community.


In contrast, the EAC-US TIFA establishes a EAC-US Council On Trade and Investment to monitor trade, identify and remove impediments to trade and investment.

The BIT contains provisions on National Treatment and Most-Favoured-Nation Treatment whereby it protects investors of a Party and their covered investments from discriminatory measures by the other Party during the full life-cycle of an investment, including the establishment phase. Each Party commits to provide to investors of the other Party and to their covered investments treatment no less favorable than that which it provides, in like circumstances, to its own investors (National Treatment) or to investors from any third country and their investments (MFN Treatment). In this instance, Rwanda has committed in the BIT to give US investors similar treatment it is providing to EAC Partner States, in like circumstances, under the Common Market Protocol. 

In contrast however, the EAC CMP Article 13 on the Right of Establishment, EAC States have committed to the principle of MFN but not the principle of National Treatment. However in Article 16 on the Free Movement of Services, the principles of MFN and National Treatment are addressed. Hence National Treatment is applicable in the EAC CMP for investment in the services sectors but seemingly not investment in industrial sectors e.g. agriculture, manufacturing, hunting, and forestry, mining and quarrying, energy production/transmission and distribution. 

On Transfers, the BIT has free transfer obligations which require that a Party permit capital and other transfers related to an investment be made freely both into and out of its territory. Additionally, a Party must permit transfers to be made in a ‘‘freely usable currency,’’ as designated by the IMF, at the market rate prevailing at the time of the transfer. Parties may however prevent transfers through the equitable and non-discriminatory application of certain laws. The EAC CMP on the other hand has provisions on the Free Movement of Capital Articles 24-28 which corresponds to the CMP Schedule on the Removal of Restrictions on Free Movement of Capital (Annex VI).

On Performance Requirements, the BIT prohibits the imposition by the Parties of several requirements relating to the performance of investments, including a requirement to achieve a given level of exports or domestic content or requirements linking the value of imports or domestic sales by an investment to the level of its export or foreign exchange earnings. The Article also prohibits Parties from offering advantages, such as tax holidays, in exchange for a more limited set of performance requirements. In the WTO context, the Agreement on Trade Related Investment Measures (TRIMS) takes a similar prohibitive approach however only in the context of trade in goods. 

So as not to place U.S. and Rwandan investors at a competitive disadvantage, the disciplines on performance requirements also apply to all investments in the territory (non-discrimination) of a Party, including those owned or controlled by host-country investors (domestic investors) and those owned by non-Parties. The EAC CMP does not impose performance requirements however it would seem that by virtue of the BIT, Rwanda cannot impose such measures even in the services sectors vis a vie any third Party. In practice, Rwanda may want as a policy to impose some performance requirements e.g. the technology transfer in targeted sectors, vis a vie more developed countries and justifiably so, in order to meet key development objectives.  This provision is therefore not in the interest of Rwanda given her level of development. It should be mentioned that the development of China is linked to performance requirements (local content) the Chinese government put in place for foreign investors. See related piece here. Fortunately however Rwanda has exempted performance requirements in her Annex II on non conforming measures (discussed below).

On Senior Management and Boards of Directors, the BIT prohibits measures requiring that persons of any particular nationality be appointed to senior management positions in a covered investment. A Party may require that a majority of the board of directors of a covered investment be of a particular nationality, or that a director be a resident of the host country, so long as such requirements do not materially impair an investor’s control over its investment. This provision would prevent Rwanda from implementing broad-based local empowerment policy to foster development of its own nationals into senior management positions and fortunately Rwanda exempted this in her list of non conforming measures (discussed below). Meanwhile in this context, the EAC CMP does not discipline the composition of Boards of Directors and the nationality of Senior Management by virtue of the principles of free movement of workers and right of establishment. The CMP only requires that juridical persons be established in accordance with the national laws of a Partner State.  

In the Publication of Laws and Decisions the provisions in the BIT seek to promote transparency in the legal framework governing investment. It requires the Parties to ensure that laws, regulations, procedures, administrative rulings of general application, and adjudicatory decisions that relate to any matter covered by the Treaty are promptly published or otherwise made publicly available. The EAC CMP contains a mildly similar provision in the Free Movement of Services chapter Article 19 whereby notification is required but not publication and the notification only applies after the introduction of the measure. 

In the BIT, each Party is obligated, to the extent possible, to publish in advance any laws, regulations, procedures, or administrative rulings of general application with respect to matters covered by the Treaty that the Party proposes to adopt, and to provide interested persons and the other Party a reasonable opportunity to comment on the proposed measures. In the EAC CMP, provisions on advance publication and comments are not addressed.  In practice this means that the US would have the opportunity to view, comment  and make recommendations in advance, on Rwanda's proposed laws and regulations however EAC Partner States would not.

On the rules of origin (Denial of Benefits) the BIT establishes that a Party may deny the benefits of the Treaty to an investor of the other Party if persons of a third country own or control the enterprise and the denying Party either (1) has no diplomatic relations with the third country; or (2) adopts or maintains measures, such as foreign policy sanctions, with respect to the third country or to a person of the third country that prohibit transactions with the enterprise or that would be violated or circumvented if the benefits of the Treaty were accorded to the enterprise or to its investments. This provision impacts on third Parties that are on sanctioned lists of either Party.

The provisions on Denial of Benefits also establishes that a Party may deny the benefits of the Treaty to an investor of the other Party if the enterprise has no substantial business activities in the territory of the other Party and persons of a third country, or of the denying Party, own or control the enterprise. 

The Agreement also lists Non-Conforming Measures (equivalent to negative lists) and in these Annexes, each Party lists existing measures to which any or all of four key obligations of the Treaty do not apply, and sectors or activities in which each Party reserves the right to adopt future measures to which any or all of those obligations will not apply. Annex III of the BIT is reserved for financial services NCMs. 

Annex I:

Rwanda: Exemption from MFN and National treatment in all sectors to allow for differential minimum capital requirements for investment registration. Here Rwanda identifies "local investors" to include Rwandese and COMESA investors who are entitled to a lower capital threshold (USD 100,000) than "foreign investors" (USD 250,000). While EAC is not mentioned in the BIT given the common market was not yet in place, one can argue that the EAC falls in the "local investor" category since the common market is technically working towards a single market.

United States: Atomic Energy; Mining; Air Transportation; Customs Brokers; Radiocommunications Licenses; and restrictions on securities registration and OPIC insurance eligibility. 

Annex II 

Rwanda: Preferences for socially or economically disadvantaged communities and differential treatment pursuant to existing international treaties. Here Rwanda reserves the right to adopt  measures in all sectors that are not consistent with the provisions on National Treatment, Performance Requirements and Senior Management and Boards of Directors in order to accord rights or preferences to socially or economically disadvantaged communities. 


Rwanda also reserves the right in all sectors to deviate from MFN provisions in order to adopt or maintain any measure that accord differential treatment to countries under any bilateral or multilateral international agreement in force or signed before the BIT. For agreements signed or in force after the date of entry into force of BIT, Rwanda reserved the right to deviate from MFN treatment with regard to: (a) aviation; (b) fisheries; and (c) telecommunications.  

United States: Radio/Satellite Communications, Cable Television, Social Services, Minority Affairs, measures relating to U.S.-flagged maritime vessels, and differential treatment pursuant to existing international treaties. 

Annex III 

Rwanda: On insurance, Rwanda states that the entry shall cease to have effect on the earlier of: (i) the date that Rwanda enacts an insurance law that eliminates the non-conforming aspects of the measure as set forth above;' or (ii) September 1, 2009.

United States: Financial Services/Banking, Insurance, and general Financial Services. 

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Overall the US has more detailed sector specific Non Conforming Measures than Rwanda especially in the services sectors (transport (maritime, aviation), communication (audio visual, telecom), financial services (banking, insurance and other financial services). However Rwanda also made useful exemptions but at a sectoral level made general carve-outs in insurance, aviation, telecommunications and fisheries.  

The key take away from this comparison is the Rwanda-US BIT is highly asymmetrical and is more ambitious than the EAC CMP. Theoretically it can prejudice the regional processes given its objectives of MFN, National Treatment, Dispute Settlement (including Expropriation, Compensation), Intrusion in Law Making Processes (governance) and broad-based elimination of: performance requirements, empowerment measures including elimination of legitimate development oriented requirements for foreign investment and repatriation. 


Whether such comprehensive coverage is desirable for African countries is an important question, the answer to which is highly context- and situation-specific, and needs to be assessed against the overall objective of ensuring that investment treaties promote investment that actually exists or has the compelling potential to exist and that fosters sustainable development. The propensities to invest and hence the need for protection through an ambitious BIT is an important consideration before signing BITs as such needs may change over time. In closing its important to note that several countries receiving high FDI receipts in Africa e.g. Angola, Sudan have very few BITs and in a previous post we found that strict FDI provisions in BITs do not increase investment.

EPAs: Of what significance Multilaterally?

My article published on Tralac Website (original dated January 2008)

January 2008 ushered in useful milestones. Seven EPAs are reportedly in place, of which six are coined interim EPAs and therefore earmarked for further negotiations while the Caribbean-EC EPA has been crowned the full comprehensive EPA. All agreements have met the core objective, which is to conclude WTO compatible trade in goods agreements under Article XXIV and have thereby prevented trade disruption on the part of ACP States. EPAs have also provided the EU private sector with historic market access opportunities into some of the poorest countries in the world. Nonetheless, with additional negotiations anticipated in six EPA regions, the Cotonou Agreement preparatory period is far from over. Additionally, the repercussions of these agreements both regionally and at the WTO are not encouraging. 

The new EPA environment has been birthed amidst controversy and ingenuity. The conclusion of interim EPA or full comprehensive EPA has further compounded confusion as to the legal basis for additional negotiations, when in fact both EPAs meet the Cotonou Agreement core objective of WTO compatibility in trade in goods. GATT Article XXIV technically only differentiates between fully liberalised FTAs and interim tariff dismantling FTAs, while WTO practice finds that almost none of the near 300 regional trade agreements notified under Article XXIV to the WTO RTA Committee, have been notified as interim agreements. In practice however, interim EPAs are expected to rapidly migrate beyond goods into full comprehensive EPAs, by concluding on a range of rules, some of which the WTO has not even considered, such as the Singapore issues. 

This migration plunges ACP States into a minefield of multilaterally unregulated trade territory and one with almost no disciplines for regional trade agreements. The graduation of the interim EPA also moves against the negotiating procedures of the Cotonou Agreement Article 37, which mandates that EPAs would progressively eliminate barriers in accordance with relevant WTO rules. Furthermore, the development objective of negotiations in areas the WTO has not even considered remains questionable given various documented research findings that comprehensive EPAs would not support the development objectives of many poor countries. Nonetheless, taking into account the limited to non-existent negotiating capacity including incoherent regional participation in some EPA regions which dismally constitute only one or two ACP countries, its not clear how or whether the additional negotiations scheduled for 2008 would be consummated on the part of the ACP EPA Parties. 

At the WTO, reciprocal parties to FTAs with developed countries will for the first time include LDCs, in essence contradicting the developmental arguments put forth in the Doha Round by the poorest countries. The same can be said of the Small Economies whose vulnerabilities have been acknowledged by trade and development experts globally and considered in the Doha negotiations. On this basis, the role of the WTO in the area of development could be eventually eroded as the negotiating positions and coalitions among developing and LDCs are thrown into further disarray and possible fragmentation.

The second phase of EPA negotiations could also potentially worsen what is already an uncomfortable situation in trade in goods both in the regional and WTO context. Regionally EPAs may provide EC goods access into the wider ACP markets. At the WTO, EPAs appear to have compromised the potential development benefits of the Doha Round, given concluded provisions reverse some of the Doha negotiating positions of developing countries. These include EPA commitments even by LDCs, to reduce up to 80% of tariffs, to eliminate export taxes and other useful development tools. Further negotiations with the EC, before the conclusion of the Doha round could further detract from development objectives of developing countries and their negotiating leverage at the WTO. 

Additionally, future negotiations on the development dimension of Article XXIV may have been compromised by these agreements. It remains doubtful if the threshold for substantially all trade even for LDCs will be reviewed or whether additional flexibilities for developing countries under GATT Article XXIV will be permissible in the WTO negotiations, beyond that agreed upon in the EPAs. 

Finally, EPAs may essentially determine or provide advance impetus for a possible agenda for the next round of multilateral trade negotiations. This agenda may include the formerly rejected Singapore issues such as investment, competition, public procurement, among other areas now agreed as part of the interim EPA, but not presently regulated by the WTO. If the interim EPAs are fully concluded by most ACP States, this may compromise future multilateral negotiations, when these issues do come under the ambit of the WTO. 

ACP States and the EU Members combined, constitute close to two thirds of the 150 WTO Membership. So far about half the ACP membership has concluded an EPA with the EC, with more ACP countries likely to do so to safeguard their regional integration efforts. Which raises the question; what impact could EPAs have on the multilateral trade and development agenda as a whole?

President's Obama 2010 Trade Policy Agenda

 President's Obama's 2010 Trade Policy can be accessed here. 


The policy has a distinctly Asian and Pacific slant (understandably so) and in particular mentions China, India, ASEAN, APEC and a proposed FTA- the- Trans-Pacific Partnership (TPP) Agreement, with Australia, Brunei, Chile, New Zealand, Peru, Singapore, and Vietnam.  

EU, Russia and Brazil are also addressed (i.e. all the BRICs).

Snippets of the policy priorities include:

a). Support and Strengthen a Rules-Based Trading System

b). Enforce Our Rights in the Rules-Based System

c). Enhance U.S. Growth, Job Creation and Innovation

d). Work to Resolve Outstanding Issues with Pending FTAs and Build on Existing Trade and   Investment Arrangements

e). Facilitate Progress on National Energy and Environmental Goals

f). Foster Stronger Partnerships with Developing and Poor Nations: 

• "The United States stands by our Hong Kong commitment to provide duty-free and quota-free market access to least-developed countries as part of the implementation of a successful conclusion to the Doha Round.
• Sub-Saharan Africa is the location of the world’s largest cluster of extremely poor countries, but the beginnings of growth and reform are evident. The United States will continue to partner with African countries to perpetuate positive changes. Building on the success of last summer’s AGOA Forum in Nairobi, USTR will work with Congress and stakeholders toward a new U.S.-Africa trade paradigm that takes into account new and evolving global trade developments. The next AGOA Forum of U.S. and African trade ministers, to be hosted by the United States this year, can promote the benefits of U.S.- Africa trade to the American public, develop plans to better incorporate small- and medium-sized businesses into trade with Africa, and work with Congress to help African countries take better advantage of AGOA and other trade opportunities. The United States also will continue to work on a bilateral investment treaty with Mauritius, to work with African partners through existing Trade and Investment Framework Agreements (TIFAs), and to consider what other types of trade arrangements the United States can advance with African nations".

g). Reflect American Values in Trade Policy

Comment: On the new policy approach to Sub Saharan Africa,the newly proposed trade agenda, is expected, among other things, to foster regional integration in Africa and increase investment by offering incentives for US investors in Africa. See previous post here.

What Could the Doha Round Mean for Africa?

The Doha Debates continued….

Recently, This is Africa held an exclusive interview with Mr Pascal Lamy, the Director General of the WTO, to discuss the status of the Doha Negotiations and Africa. Lamy said “What is on the table for Africa is huge,” referring to issues such as the possibility of duty free-quota free access to developed markets for Least Developed Countries, many of which are in sub-Saharan Africa.  He added that "the reduction of export subsidies by the EU, US, Japan and other developed economies, as well as reducing tariff escalation, both of which are often seen to stifle low income countries’ ability to compete on the export of manufactured goods, can also have a potentially significant impact on African trade".

However, according to a study by the Carnegie Endowment for International Peace entitled “What Could the Doha Round Mean for Africa?”, the actual benefits for low income African countries would be minimal, with the exception of South Africa.   In addition, the study found that, assuming FULL Duty Free Quota Free (DFQF) access to developed markets for LDCs was provided, this would allow Africa to benefit from the Doha Round. The estimate sees the region gaining $1.2bn or 0.63 percent of GDP, clearly highlighting the importance of this particular metric.

Indeed at the October 2009 Sixth LDC Ministerial meeting in Dar Es Salaam Tanzania, LDCs called on the WTO Membership to fully implement, the decision on DFQF market access for all products originating from all LDCs, as contained in Annex F of the Hong Kong Ministerial Declaration, accorded through Agricultural and Non-Agricultural Market Access modalities and ensure market access for at least 97 per cent of products originating from LDCs, at the tariff-line level.  Lamy reportedly attended this meeting and informed Ministers that there was no mandate for an early harvest and that LDCs would have to wait until the round was concluded to reap any benefits.

Meanwhile, products from LDCs have enjoyed DFQF access to the EU market since 2001 under the Everything But Arms initiative which gives the 49 LDCs duty free access to the EU for all products, except arms and ammunition.

Additionally,the Canadian Africa PACCIA/PACT program also implements DFQF for LDCs.

The US market benefits some African countries under the AGOA regime however it excludes other LDCs due to the eligibility criteria established in the Act.  For instance, of the 47 GSP eligible Sub-Saharan African countries, only 34 are AGOA eligible. A non discriminatory regime for LDCs would be ideal however, at the December 2009, 7th WTO Ministerial meeting in Geneva, the US Trade Representative Ambassador Ron Kirk instead called on major developing countries to offer DFQF access to LDCs and indeed Brazil and India have extended such offers.  China has extended a similar offer to African LDCs with diplomatic relations with China.

One could say Africa is already enjoying the huge benefits- ahead of the conclusion of the Doha round. However, recent DFQF offers do not immediately extend 100% market access.  In addition, most LDCs, exports to these markets have not materialized due to: the immediate exclusion of non commodity products they are able to produce competitively; the high costs of doing business; transport costs to distant markets; non-tariff barriers, and the lack of capacity to produce diversified exportables.   

Developing Countries, Special & Differential Treatment in the WTO

Developing countries account for over two thirds of the 153 Members of the World Trade Organization (WTO), with over 32 of them classified as Least Developed Countries (LDCs), as designated on the UN list of 50.  Despite this, there is still no official definition of a “developing country” within the WTO framework which complicates the discussion on “development”.  Nonetheless, WTO Members have agreed on an extensive set of provisions addressing the flexible rights and obligations of LDCs, given this category is already defined by the UN.  

Given the lack of a definition of "developing countries", these countries use this designation " on the basis of “self selection” and as a consequence, Singapore with a per capita income of US$34,761, United Arab Emirates with a per capita income of US$54,606 and Kenya with a per capita income of US$766 (World Bank, 2009) are all expected to benefit from the same Special and Differential (S&D) treatment and development provisions and S&D negotiation.  

There is a crucial need to redefine criteria to access S&D treatment.  Suggestions has been put forward for a “needs based”, more customized approach to S&D whereby countries are given the opportunity on an ongoing basis to explain in developmental terms why they need access to S&D provisions.  Measuring economic need against legal provisions can be accomplished using a threshold such as $ 1000 GDP per capita, which is already used in determining subsidies under Article 27.2(a) and Annex VII of the Agreement on Subsidies and Countervailing Measures.  Members could also use staggered time frames, thresholds, benchmarks, multi-tiered phase-in periods, economic criteria at disaggregated and/or provision-specific levels. 

Additionally, current country groupings need to be renegotiated.  Specifically, this would mean that developing countries would cease to self-select their developing country status and would be categorized into a larger number of sub-groups than is presently the case.  It is contended that a LDC plus group of small and poor developing countries determined by size and per capita criteria as defined by international institutions, would by and large capture those countries in real need of S&D across all WTO agreements.  

However, a common critique of all of the above approaches is the emphasis on the creation of new developing country categories.  Among the reasons why WTO Members resist such an exercise, even if assured of its limitation to S&D provisions, is the fear of spill-over effects in the overall negotiations, where the impression of belonging to a sufficiently advanced sub-group receiving comparatively less S&D treatment is likely to lead to extensive demands by negotiating partners.  

As a compromise, Members could however consider the providing S&D benefits to all developing countries, based on a monitoring mechanism which would systematically evaluate the basis for requesting the S&D treatment.  Analysis of credibility would be based on a set of indicators or aggregate data, the basis of which an appropriate solution would be provided. Without a new approach to S&D treatment among developing countries, it is difficult to see how African developing countries could benefit from development measures and flexibilities when  other developing countries oppose any differentiation.