Disputed bill passes the first hurdle

THE Promotion and Protection of Investment Bill is one step closer to being passed into legislation after being accepted by the National Assembly.

The bill has been widely criticised and garnered little support from opposition parties in parliament yesterday. International investors also showed their disdain for it during the public participation phase.

Minister of Trade and Industry Rob Davies said yesterday investment protection agreements created in the 90s were “extremely expansive” and opened up governments to increased litigation and international arbitration with the average cost of such litigation running at around R142-million.

The bill, a “new-generation of protection” essentially seeks to “balance” the protection offered to international investors which Davies said had been “skewed” in the original agreements.

Davies said internationally, tobacco manufacturers had sought to take governments to court over health policy issues such as labelling of tobacco products, and in South Africa, an investor had sought legal recourse because they were a victim of crime and their agreement had included a clause about physical protection.

He said South Africa had been an “early mover” on this issue, driven by a decision to do away with bilateral investment treaties. But he said the decision to do away with these treaties, while criticised at the time, had not impacted on investment.

“There is no correlation between having or not having bilateral agreements in place and investment,” he said pointing to trade partners USA and Japan who were “significant” investors despite not having such agreements.

The European Union Chamber of Commerce said in August the Bill “promotes discomfort leading to discouragement related to new investments.”

Most problematic for investors was uncertainty around expropriation. The original bi-lateral agreements provided guarantees against expropriation.

But Davies said the uncertainty was covered by the property clause of the Constitution which provided “adequate protection” in cases of expropriation.

The DA’s Geordin Hill-Lewis told parliament that every investor that came before the committee had been against the bill. “This Bill is no welcome sign to the world. It is the big neon sign on the shopfront door of SA Inc saying ‘closed for business’.”