South African Trade and Industry Minister, Rob Davies, says the introduction of the draft Promotion and Protection of Investment Bill will enable a comprehensive and uniform legal framework to govern investments.
The draft Bill, which is intended to replace old bilateral investment treaties (BITs) in at least 13 European Union countries, has sent widespread apprehension among investors, who say the new legislation would provide less protection for foreign investors.
The draft Bill was adopted by Cabinet and gazetted for public comment on 1 November 2013.
Speaking to the media on 4 November 2013, Davies was quick to reassure that the Bill seeks to achieve several balances between the rights and obligations of investors.
Davies said the Bill will strike a balance and provide adequate protection to all investors, including foreign investors, and it will ensure that South Africa’s constitutional obligations are upheld, while allowing government to retain the policy space to regulate in the public interest.
Davies said their review found that there was no correlation between the existence or absence of a bilateral treaty and the flow of foreign direct investment (FDI).
“For example, we have a significant [amount]of FDI from the US, Japan, Malaysia, India and other countries, and we have no bilateral investment treaties with them, compared to other countries that we hold these bilateral treaties with.”
South Africa was not the only country engaged in this process, on the grounds that the treaties infringed on policy space, said Davies.
According to the minister, the Bill is based much on the country’s Constitution, which provides that there cannot be expropriation without a law of universal application or just equitable compensation. The treaties, on the other hand, were based on outdated laws before the country’s Constitution came into effect.
“The country’s Constitution provides significant and robust protection for investors and for property both domestic and foreign. The Bill therefore sets out a transparent and open investment environment for our investors, while modernising investment regime.”
He said foreign investors from any part of the world can expect the same level of protection and security for their investments as domestic investments.
“Foreign investors coming from places where we don’t have bilateral treaties will get the same treatment for the first time,” said Davies.
With regards to dispute settlements, the minister said there will be a judicial court, statutory body or tribunal with arbitration authority, in terms of the act.
In the past, South Africa has been taken to international arbitration under bilateral investment treaties after the introduction of black economic empowerment and the mining sector.
In the event of expropriation, investors are no longer assured of compensation at full market value. However, in line with the Constitution, the compensation will be fair and equitable.
Davies said the compensation will consider “both market value and a range of interest concerns.”
The minister said both his ministry and Department of International Relations and Cooperation have been talking to foreign countries informing them about the intention to introduce the Bill.
“While South Africa has given the intention to terminate the treaties, the termination only takes place six to 12 months after, depending on the agreement in place.”
Furthermore, investors covered by existing or already cancelled bilateral investment treaties would continue to have recourse to international arbitration during the transition period of the treaties, which extend 10 to 20 years beyond their termination date.
The Bill is out for public comment for three months ending 31 January 2014.