INTRODUCON
1.1 Background
The people of Somaliland are suffering due to the complex issue of International Law. On 26 June 1960, Somaliland gained its independence from Britain after 80 years of colonization with the name, the „British Protectorate of Somaliland.‟3 After 5 days of independence, Somaliland united with Somalia or the „Italian Protectorate‟, which took her independence from Italy on 1 July 1960.4 During these 5 days, Somaliland was recognized as an independent state. After that, Somaliland compromised its sovereignty and united with Somalia with the optimism that the two nations would create a more viable state based on equal justice of wealth and power sharing.5 This did not happen and the ambitions of the people of Somaliland became6 dashed.
After a long civil war, 1991 was the year that the Somalia Democratic Republic ceased to exist.7 The government fell and the state collapsed. Brutal civil war and famine seized the population.8 Hundreds of thousands of refugees fled the country. A decade of bloodshed, chaos and human suffering ensued; threatening that Somalia would enter the 21st century as a black hole‟ of despair.9
1991 was also the year that Somaliland was reborn.10 Legitimate government was restored and statehood reclaimed, ushering in a period of healing, reconciliation, and growth.11 A decade of bloodshed, chaos and human suffering came to an end. Hundreds of thousands of refugees returned home. Somaliland looks forward to the 21st century with confidence and hope.12
For the last two decades, Somaliland has embarked upon the path to recovery. 13 The road has not been easy. By 1991, the long civil war had left the country physically devastated and socially scarred.14 Tens of thousands of people had been killed and hundreds of thousands displaced, their homes reduced to rubble, their property looted or destroyed, and their land sown with mines.15 The economy had virtually grounded to a halt.16 The army, police and civil service had disintegrated; most government offices, banks, hospitals and schools stood derelict, their contents ransacked.17 In those early days, the task of reconstruction appeared so immense as to be insuperable. But today it is easy to forget how far the country has come, and how much has already been achieved.18
On the other hand, the country has showed peaceful and stable democratic development for the last 20 years, yet the international community and regional states showed its segregation position on the Somaliland use and still Somaliland remains invisible and a victim of 21 years of political non-recognition status.19 Political non-recognition has a huge negative impact upon the lives of its people.20 The government of Somaliland, setting economic growth as its first priority, has committed to undertake deep economic reforms in order to make the country more attractive for foreign investors. Many observers have stressed in this respect that foreign investment is key to Somaliland‟s economic and ultimately, political viability as an independent State.21
1.2 Problem Statement
As indicated above, despite of Somaliland‟s achievements, its citizens have been suffering due to the siege imposed on it by the lack of recognition.22 Somalilanders are isolated from the international community.23 They cannot travel easily or trade with the world of which they are part, despite the strategic geographical location they occupy.24 Education and health facilities are hardly accessible.25 This is because the government is unable to deliver basic services due to the lack of access to international financial institutions or direct bilateral assistant, trade and investment are handicapped as result of the lack of recognition.26 Foreign Investors banks and insurance companies are reluctant to invest in a territory that is internationally part of failed state Somalia.27 Thus, this study seeks to analyse the legal implications of non-recognition of Somaliland in international law in her quest to attract foreign investment for socio-economic development. It explores the real constraints on the capacity to function as a modern state, both domestically and internationally.28 In clarifying these issues, the study will be conducted with a specific focus on how foreign investors may do business within Somaliland, what is the legal environment for foreign investments like and how Somaliland may overcome the legal conundrum.
1.2.1 Research Questions
The study poses a number of questions which it will attempt to answer:-
i.
What is the legal status
of Somaliland in international law?
ii.
What are the legal consequences of non-recognition of Somaliland‟s overseas investment?
iii.
How can Foreign Investors legally
deal with Somaliland in spite of non-recognition in international law?
iv.
What are the legal remedies available to foreign investors in the event of breach
of contractual obligations and investment treaties by Somaliland?
v.
How can Somaliland overcome this legal conundrum?
1.3 Thesis Statement
It will be argued in this thesis that Somaliland‟s quest to attract foreign investment for socio- economic development still remains an impediment due to the image deficit of Somalia. Consequently, investing in Somaliland comes with a deal of risk largely due to the uncertainties stemming from the normalisation of Somalia situation‟s before Somaliland get recognition. Somalia can claim Somaliland as part of their territory. Nevertheless, Foreign Investors considering possibility of threats that may endanger that investment.
1.4 Significance of the Study
The study is extremely significant because it will contribute to the literature on interface of trade law and investment relating to Somaliland. This is a vital because Somaliland has a strategic significance; therefore, its study may lead to ease of commerce to the benefit of the world. The non-recognition of Somaliland is by implication hindrance to economic upliftment of the world in general. The reason is, Somaliland geographically locates in one of the most strategic regions in the world; the Gulf of Aden.29 The Gulf of Aden links the three major continents of the world; Asia, Africa and Europe.30 The Gulf of Aden is one of the most important trade route in the world.31
The study will also examine the implications of non-recognition of territories and how to overcome them legally in so far as international trade, investment and law are concerned.
The research will also be part of the literature which will put Somaliland in the lime light as her efforts to get recognised are under way. The study will expose the legal and political impediments of non-recognition in relation to the investment opportunities which are being lost in so far as Somaliland is concerned. The study will also focus on how investors may deal with Somaliland in the absence of such recognition. This will achieved by a comparative study on Taiwan and Kosovo.
1.5 Limitation of the Study
The study does not provide in-depth analysis on the
political and economic aspect of the study, but is rather limited to the legal
implications of non-recognition of Somaliland in her quest to attract foreign
investment. Also this study is limited because of lack of literature on the
local and international legal and investment aspects of Somaliland.
1.6 Literature Review
There is little comprehensive literature on legal personality in International Law.32 Because of the controversy on the issue, scholars have tackled different angles. Gerhard Erasmus writes on the criteria for statehood.33 He extensively discusses the criteria to be met for a geographical entity to be recognized as a state. While reputable organisations have made significant contribution to the ongoing problem of Somaliland‟s statehood through a number of publications ICG report advances that the denial of Somaliland‟s state recognition has a real constraints on the capacity to function as modern state internationally.34 ICG specifically deals with that the government has no access to Banks and Insurance Companies, which insurer political risks for foreign investment projects.35 Proff Geldenhuys stated a Somaliland ceremony in Johannesburg „that Somaliland has a strategic significance in terms of fishing, minerals as well as oil.‟36
A study by Dolzer and Schreuer recently stresses that Foreign Investment Law consists of layers of general international law, of general standards of international economic law, and of distinct rules peculiar to its domain. 37 This assertion proves particularly pertinent in the context of the question brought up here. The scarcity of the case law and academic commentaries on State succession specifically contemplated under the angle of international Investment Law.38 Indeed, leads the study to refer to solutions drawn from general international law, as well as from other fields of international law such as State responsibility.39
Several scholars studying international business recognize that one cannot separate businesses from the environment they operate in. Morrison40 argues that the relationship between businesses and environment can be characterized as dynamic interaction; social influences shape business activities and businesses create changes in the society.41 One can analyze the external environment with the help of a best analysis, which consists of political, economic, socio-cultural and technological factors.42
However, Korhonen argues that the political environment is superior to others, because it creates the basis for other elements in the society.43 When companies engage in international operations they enter the political sphere of host governments, which determines their rights and obligations in those locations.44 Also, as host governments are able to interfere on the operations of companies, since they operate under their legal authority, governments are the most important actors in companies‟ political environment. Thus, the political environment of countries determines the framework of economic activities and therefore political factors are an essential aspect influencing international operations of businesses.45 It is probable that political factors are especially important when operating in Somaliland, as the country is not recognized as sovereign by other states.
Consequently, it can be argued that both businesses and governments are major players in shaping the world‟s economic environment Meier,46 Morrison and Dicken argue that the relationship between states and corporations is a relevant and interesting issue as they are at the centre of global economic transformation.47 On the one hand, companies are a major influence on the global economy as they create wealth through production activities and build extensive inter-firm and intra-firm networks that reach across national borders. Governments, on the other hand, shape the global economy by regulating cross-border transactions and creating the infrastructure needed for economic activities. 48
Hence, this study concentrates on the interplay of the two most important actors, states which is not recognised and firms, in shaping bilateral business activities.49 Interaction between governments and companies is born from their differing interests; business organizations aim at maximizing profit and shareholders‟ value, whereas states are concerned about the welfare of the society. Businesses can shape the environments they operate in through investments.50 Governments, on the other hand, usually carry out activities that shape the national economy both directly through public sector projects and indirectly through policy formation.51 Policy formation can influence the stableness of the national economy as an operating environment, and determine the level of constraints a government places on companies. Consequently, government actions can have an effect on the operating environment of Multinational Corporations (MNC) and thus influence their decision-making on whether to invest or divest in a particular national economy.52
However, businesses do not need to take the political environment as given; companies can usually negotiate with host governments to reduce political risks related to their operations Accordingly, Morrison argues that interaction between governments and businesses has grown and thus the political system of a country can be an important aspect determining the attractiveness of the location and success of investments.53
More specifically regarding the case of Somaliland, Jhasbhay concludes on actual full- fledged recognition by the AU and the international community.54 The AU mission report clearly advances Somaliland‟s case for attracting international donor aid and foreign investment that should go far in helping Hargeisa55 overcome Somaliland‟s international isolation.56 If nothing else, Somaliland‟s international isolation has been virtually overcome. Most of the authors concluded that it is unfair for the international community to let the people of Somaliland suffer because of the faults of others.57
The literature above reveals that for foreign investors to operate in a host country, the home state are involved too. The home states have interests in their foreign investing entities and they usually enter into Bilateral Investment Treaties (BITs) with host states to protect such interests. The case of Somaliland in light of the idea of being host country or home state is different, as the international legal regime does not recognise her as a legal personality. This entails that the international system whether it be on investment or trade and other social and political aspect thereto are not applicable to Somaliland. Therefore, this study will contribute what no one has addressed to the existing literature a new dimension on the legal and investment implications of non-recognition.
1.7 Research Methodology
There are few literatures available on the subject under study in relation to Somaliland. Fortunately, literature on state recognition/non-recognition under international law and international investment law is available for analysis. Therefore, this study will analyse the above stated literature in light of Somaliland‟s.
There is so much literature on Taiwan which is doing very well on trade and investment yet it is not internationally recognised as a legal personality. Kosovo was also faced with similar issues before her recognition, but, still had investment relations with other states. Therefore, comparative analysis of Somaliland with Kosovo and Taiwan will be of paramount use in this study.
The approach of this study is desktop-based library
research which entails the use of text books and journals. Internet research of
online articles and study reports will also be used. The study will be legal
although other areas of knowledge will also be useful because of the nature of the subject
which requires an understanding of economic, political
and other areas
of the issue. Therefore, this study is a qualitative study on how an investor may deal with the case of Somaliland and how Somaliland may overcome the legal conundrum.
1.8 Synopsis of Chapters
The study consists five chapters:
Chapter One: Introduction
As presented above, this chapter introduces the study and poses the problem statement. For this purpose, the chapter raises several questions and also identifies the relevant literature to the study.
Chapter Two: International Legal Personality: Conceptual Framework
This chapter will analyze the international legal framework on state recognition viz a viz legal personality. It will also deal with international Investment Law. It will emphasize by discussing the interface between international law on statehood and international Investment Law.
Chapter Three: Legal Status of Somaliland under International Law
This chapter will discuss overview of Somaliland‟s historical background and their claim of recognition as a state. It will also attempt to highlight the factors behind the non-recognition of Somaliland and finally will provide an overview of socio-economic situation of Somaliland.
Chapter Four: Impact of the Non-recognition of Somaliland on Foreign Investment
This chapter will reveal the problems investors may face in relation to the legal personality of Somaliland in light of the regime on investment law. The chapter will then deal with how investors may deal with Somaliland in an absence of recognition. Finally, the chapter will cover the similarities and differences between the International Investment Law and Investment Law in Somaliland.
Chapter Five: Conclusion and Recommendations
This chapter will recommend ways if any on how Somaliland may deal with the legal conundrum. Finally, this study will underline recommendations on area for future research
