The majority of the bilateral investment treaties (BITs) South Africa has with countries it has trade and investment relationships with are near completion, or in the process of being terminated by the South African government – pursuant to the relevant BITs terms. This as the intention is for South Africa to in future regulate the protection of foreign investments by means of national legislation in the form of the draft Promotion and Protection of Investment Bill, 2013 (Investment Bill) released for public comment on 1 November 2013.
According to Jackwell Feris, Director in the Dispute Resolution Practice at Cliffe Dekker Hofmeyr, “The intention of the Investment Bill is to incorporate international investment protection principles usually found in BITs into South Africa’s domestic legislation to ensure that all investors (whether foreign or national) are treated equally in all aspects of investment in South Africa. It is proposed that the Investment Bill will have retrospective application in respect of commercial investments made prior to the Investment Bill being proclaimed as law.
Feris says that the Investment Bill incorporates the various principles of investor protection. The first is National Treatment and in this regard South Africa must give effect to national treatment and treat foreign investors, their foreign investments and returns not less favourably than it treats South African investors in their business operations that are in like circumstances.
“The principle of Security of Investment means that South Africa must accord foreign investors and their investments and returns, equal level of security as may be generally provided to other investors and subject to available resources and capacity.
“In terms of the Expropriation principle, an investment in South Africa may not be expropriated except in accordance with the Constitution and in terms of a law of general application for public purposes or public interest, under due process, against just and equitable compensation effected in a timely manner.
“The Transfer of Funds principle notes that a foreign investor may, in respect of any investment, transfer funds, subject to taxation and other applicable legislation.
“Lastly, the Dispute Resolution principle states that a foreign investor who raises a dispute in respect of its investment against the government of South Africa may resolve the dispute either by means of a mediation with Department of Trade and Industry (DTI); by independent tribunal or statutory body for the resolution of a dispute relating to investment; by court action and/or application and by domestic arbitration in terms of the Arbitration Act,” he explains.
“All interested and affected parties has three months from 1 November 2013 to provide DTI with comments whether the proposed Investment Bill will provide sufficient legislative protection to investors in its current form,” Feris says.
“It is still early days to ascertain the views of the investor communities, but it would appear that a major concern is the limitation of the dispute resolution mechanisms available to foreign investors to domestic courts, tribunals or arbitration as oppose to international arbitration as provided for in the BITs South Africa has concluded.
“A further concern appears to be the proposal that foreign investors will not be guaranteed compensation at full market value in the event of an expropriation by the state, but merely as provided for by the Constitution. DTI can expect opposition to certain of the proposed sections to the Investment Bill which are deemed not to provide sufficient protection or recourse to foreign investors aggrieved by the conduct (perceived as a threat to their investment) of the South African government,” Feris adds.
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