Treaty-based arbitration plays a major role in dispute settlement between host states and
investors. In so doing, it has the added advantage of promoting flow of Foreign Direct
Investment (FDI), as investors feel that arbitration before a neutral dispute settlement fora
potentially provides a fair hearing.

In Africa, as countries push for improved infrastructure and communication, fight hunger
through increased agricultural output, boost tourism, as well as development of crucial
sectors such as the health sector, etc. many investment opportunities will be available,
consequent to which FDI inflow to Africa is expected to increase.
The World Investment Report of June 2024, (UNCTAD/WIR/2024), in support of this trend,
notes that against a decline in the previous year, a growing interest in the global greenfield
mega projects is causing a boom in FDI flows to Africa, while McKinsey & Co. forecasts that
by 2025, investment in infrastructural projects (in Africa) to be completed will stand at
approximately US$ 2.5tn.

With increased FDI inflows to Africa, the potential for disputes arising between host states
and investors can be expected to increase, which necessitates devising mechanisms for
avoiding them or when they arise, mechanisms for ameliorating their effects on the
parties.

This Article discusses Investor-State Dispute Settlement (ISDS) mechanisms in Africa, and
draws on the Latin American states’ experiences on how ISDS awards can have adverse
effects on states. The Article proposes precautions which African countries can take to
guard against exposure to the adverse effects of ISDS when disputes end up before
investment tribunals. Focus will be on claims filed before the International Center for
Settlement of Investment Disputes (ICSID).