Implications of ‘BITs’ for Cross-border Insolvency Regulation in Sub-Saharan Africa

There is a clear nexus between the bilateral investment treaties (BITs) and cross-border insolvency regulations. This article takes this point further by examining the principles and standards that emerge from the standardised form of the BITs as they link and implicate cross-border insolvency regulations in sub-Saharan African (SSA) where the majority of BITs have been concluded with developed countries. Lessons drawn from several BITs are used to assess the policy space left by the BITs to host SSA countries in making cross-border insolvency policy choices commensurate with their situations. The article argues that although BITs do not explicitly provide for cross-border insolvency, they embody general principles of law that dictate the nature and content of SSA countries’ cross-border insolvency regulations and enhance the potential for cross-border insolvency through the interactions of SSA countries with multinational enterprises in international business. The article invokes cross-border insolvency theories to determine the theoretical nature and type of regulatory approach to which the regime established by BITs point, and issues for consideration that emerge. It is consequently submitted that the workings of BITs effectively pull cross-border insolvency frameworks in SSA countries towards a universalist stance and away from territorialist approaches.

There is extensive scholarship acknowledging that globalisation of trade and investment and the consequent increase in international business have enhanced the challenges for cross-border insolvencies in the world. However, there is a dearth of empirical or descriptive scholarship that has delved into the relationship between the two. In the same vein, while it is well known that the growth and expansion of international business has been enabled by liberalisations of markets and investments, there is no scholarship that has dealt with the linkage between the prevailing arrangements for facilitation of trade and investment as depicted in BITs and cross-border insolvency, or that has explored the extent to which such BITs’ arrangements implicate cross-border insolvency regulation. This article, therefore, examines the principles and standards that emerge from the standardised form of the BITs as they link and implicate cross-border insolvency regulations in SSA, where the majority of the BITs have been concluded with developed countries. It considers the extent to which, and how, they implicate cross-border insolvency regulation in SSA countries. It points to the policy space available to SSA countries in making policy choices commensurate with their situations, before considering a framework for cross-border insolvency regulation to which the implications of the BITs arrangements for cross-border insolvency regulation point. The article invokes theoretical aspects of the cross-border insolvency landscape in considering the nature and type of regulatory approach to which the BITs arrangements point and issues for consideration that emerge. It consequently argues that the facilitation of cross-border trade and investment through such arrangements effectively pulls cross-border insolvency frameworks in SSA countries towards a universalist stance and away from territorialist approaches. The key finding of this article is that, although such arrangements do not explicitly provide for cross-border insolvency, their implications for cross-border insolvency regulation are essentially twofold. First, they embody general principles of law that inform and determine the nature and content of SSA countries’ cross-border insolvency frameworks. This implication is reinforced by the requirements explicitly advanced by interregional economic arrangements for undertaking and maintaining liberalisation, rule of law and good governance. And, secondly, the arrangements effectively enhance the interactions of SSA countries with the multinational enterprises involved in international business and hence the potential of SSA countries being involved in cross-border insolvencies.

With the liberalisation of markets, there has been a growing number of BITs concluded by developing countries in SSA with developed countries. Quite recently, there has been an emerging pattern of cross-border investment arrangements among developing countries. This new pattern signifies the emergence of emerging economies in East Asia.¹1

It is interesting that there have emerged a more or less standardised format of bilateral investment treaties. As such, even the treaties concluded between SSA countries and the emerging markets have tended to be a replica of those concluded with developed countries. See generally, J. W. Salacuse, The Law of Investment Treaties, OUP (2010).

While European countries remain the dominant contracting partners in the majority of the BITs concluded by SSA countries, the emergence of China and other countries from Asia, such as India, Malaysia and Indonesia, is noteworthy.⁵5

The leading European countries in concluding such treaties are the UK, Germany, Switzerland, Italy, France, Netherland, Belgium and Luxembourg.

There are various reasons that have been attributed to the surge in bilateral investment treaties starting from the 1990s. While the growth of the use of such agreements reflects both trade liberalisation and, in particular, cooperation with preferred partners on ‘behind the border policies’,⁹9

This is a terminology used to refer to facilitation measures regarding trade and investment competitiveness that a country might adopt in guiding its cross-border cooperation in trade and investment. They ‘…include regulations and institutions overseeing local and foreign investment, capital markets, customs, taxation, labor, private ownership, legal recourse, and so on’. See, World Bank, ‘Regional Challenges’, available at http://go.worldbank.org/E96ILDA2Y0 (accessed 17 August 2014).