Expert backs move to cancel EU investment treaties

THE GOVERNMENT was right to unilaterally cancel the bilateral investment treaties (BITs) with European countries because they were used by companies from those countries to challenge government policies, especially black economic empowerment, an expert said yesterday.

Catherine Grant Makokera, the head of the SA Institute of International Affairs’ economic diplomacy programme, said: “The Department of Trade and Industry knows all of this but it is communicating badly.”

She said that while she agreed with the review of the treaties by the government, she was not sure if she agreed entirely with the bill that was aimed at replacing them.

The government’s review of the bilateral treaties was initiated in 2008, gazetted for public input in 2009, and was adopted as the new investment framework in 2010. But Makokera questioned whether South Africa’s communication with the EU on the intended policy changes was handled poorly.

Karel de Gucht, the EU’s commissioner for trade, said on Monday that the bloc became aware of South Africa’s intentions only in 2012.

Makokera said of the Promotion and Protection of Investment Bill: “It has a broadly defined public interest clause. It is quite clear the government wants to reclaim its space to make public policy.”

At a recent press conference Trade and Industry Minister Rob Davies denied that the new bill was driven by challenges made under the bilateral treaties. It is, however, believed that one case that influenced the decision was Foresti’s challenge of the government’s policy.

A group of investors of the Italian-owned mining company sued South Africa at the International Centre for Settlement of Investment Disputes for its policy on black ownership in mining. The case was settled in favour of Foresti and the government agreed to reduce the company’s black ownership requirements substantially.

Lionel October, the directorgeneral at the Department of Trade and Industry, said the Foresti case reflected the ability of people to use the treaties to force concessions from the state. “It was a victory for Foresti but they abused the BITs.”

Although lengthy legal challenges using BITs have become a global phenomenon South Africa has been subjected to very few. Apart from Foresti, the only other known case is that of the controversial German shareholder in the Reserve Bank, who threatened action under the bilateral treaty with Germany. The Department of Trade and Industry said it would oppose the action and to date nothing has happened.

The DA said yesterday that it would propose the necessary amendments to the bill to ensure the effective protection of all investments in South Africa when it is tabled for deliberations in the portfolio committee on trade and industry.

DA spokesman on trade and industry Wilmot James said Davies should be creating the conditions to attract more foreign direct investment from the EU and not dissuade potential investors by seeking to replace BITs with the inferior bill. In order to sustain strong economic growth, he said, it was essential to halt and reverse South Africa’s declining relative attractiveness as an investment destination. –