New bill makes local solutions a priority

FOLLOWING a review of its bilateral investment treaties (BITs), the government has withdrawn seven such treaties with European countries and introduced the Promotion and Protection of Investment Bill, which is set to replace these agreements and provide a framework for both foreign and local investment.

Despite the fact that similar reform is being sought by 40 to 50 other governments, the bill has faced a lot of criticism from the business sector, most of it about the manner in which the bill aims to deal with potential dispute resolution.

The bill states that investors will first have to use domestic mechanisms to resolve disputes and may approach international bodies, such as the International Centre for Settlement of Investment Disputes, only if the South African government consents. Many are concerned that the investors may feel that they will not receive fair treatment and that domestic legislation may not appear as attractive as before. The concern is that the bill offers investors less protection than most BITs and limits investors’ rights.

Few people have applauded the importance of the bill in tackling inequality and lack of transformation in the business sector. The drafters’ intention is to avoid investors going straight to international arbitration to solve disputes, which is a characteristic of BITs. The use of domestic forums will ensure equality in accessing dispute-resolution proceedings, as local communities and businesses affected by an investment project may not have the resources to access international forums.

Our Constitution entrenches the right of everyone to have any dispute that can be resolved by application of the law to be decided in a fair public hearing before a court or an independent and impartial tribunal or forum. Our judicial system is capable of adjudicating in disputes relating to investments.

It is imperative to look at the historical context of BITs in light of SA’s development agenda. In the past, BITs have been concluded against the backdrop of unbalanced power relations between developed and developing countries. This means countries that host foreign investors, often developing countries such as SA, have been required to maintain policy frameworks that favour foreign investors, sometimes for as long as 99 years. Some BITs do not further the interests of an impoverished population and this has resulted in uneven wealth creation, where the main beneficiaries do not live in SA.

As the chair of Parliament’s portfolio committee on trade and industry said, “SA must uphold its Constitution and discriminate to a degree … to address inequality”. In defending the bill, the government says its aim is to ensure SA’s broader social and economic priorities are not undermined.

We are of the view that the bill is a progressive measure by the Department of Trade and Industry and will ensure that investment in the country meets objectives such as sustainable development. However, to achieve this, the bill needs to be improved in a number of ways.

The bill allows for dispute resolution, but does not cater for the concerns and needs of communities that may be affected. The bill could be improved by including such points as dispute resolution for community members and inclusive sustainable and socioeconomic development.

More often than not, community members are left out of discussions when the decision or outcome may affect them. Mediation, arbitration and/or court challenges in resolving any disputes should include affected community members.

We applaud the department for referencing sustainable development. However, the environment needs to be protected for development to be long term. Further, development should not only be sustainable, but must also include and relate to the socioeconomic conditions of people living in SA.

Madi and Nase are candidate attorneys at the Centre for Applied Legal Studies.

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