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Bilateral Investment Treaties Under the Spotlight

December 2, 2019


2 December 2019

49 Bilateral Investment Treaties (BITs) containing legal undertakings on the expropriation and compensation of the property of investors from relevant countries have been signed.

The trade and industry department recently briefed the Ad Hoc Committee to Initiate and Introduce Legislation Amending Section 25 of the Constitution on the impact of land expropriation without compensation on international law and treaties to which South Africa is a signatory.

According to a committee statement, the BITs “do not refer to “land”, but extend protection to investments defined in open-ended terms in an asset-based approach”.

The department informed the committee that “if the land of a foreign investor is expropriated and that investor is a citizen of a country with a BIT with South Africa (including where the survival clause is in effect), the affected investor would be in a position to invoke a legal challenge against the South African government if the investor is not satisfied with the compensation offered”.

In cases of investment disputes, the primary reference for arbitrators is the terms of the relevant BIT.

“On the question of compensation, past cases indicate that the standard has tended to be the “market value” of the investment immediately before the expropriation took place.”

Ambassador Xavier Carim, deputy director-general international trade and economic development division, pointed out that government may face a challenge if proposed legislation was construed to impact negatively on the value of land belonging to a foreign investor.

In response to some committee members’ statements that the Constitution trumps international law and BITs, Ambassador Carim recommended that the committee seek legal opinion on the matter.