Investment Treaty Arbitration

Investment Treaty Arbitration: South Africa

Overview of investment treaty programme

1. What are the key features of the investment treaties to which this country is a party?

South Africa

BIT Contracting Party or MIT

Substantive protections

Procedural rights

Fair and equitable treatment (FET)

Expropriation

Protection
and security

Most-favoured-nation (MFN)

Umbrella clause

Cooling-off period

Local courts

Arbitration

Angola (not in force)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Argentina (1 January 2001)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Austria (terminated)

Yes

Yes

Yes

Yes

Yes

3 months

No

Yes

Belgium / Luxembourg (terminated with effect from 7 September 2012, protections continue for 10 years)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Canada (not in force)

Yes

Yes

Yes

Yes

No

6 months

No

Yes

Chile (not in force)

Yes

Yes

Yes

Yes

No

3 months

Yes

Yes

China (1 April 1998)

Yes

Yes

Yes

Yes

Yes

6 months

Yes, but fork-in-the-road

Yes1

Democratic Republic of Congo (not in force)

Yes

Yes

Yes2

Yes

Yes

6 months

No

Yes

Republic of Congo (not in force)

Yes

Yes

Yes3

Yes

Yes

6 months

No

Yes

Cuba (7 April 1997)

Yes

Yes

Yes4

Yes

Yes

6 months

No

Yes

The Czech Republic (17 September 1999)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Denmark (terminated)

Yes

Yes

Yes

Yes

No

6 months

No

Yes

Egypt (not in force)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes5

Equatorial Guinea (not in force)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Ethiopia (not in force)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Finland (3 October 1999)

Yes

Yes

Yes

Yes

No

6 months

No

Yes

France (terminated)

Yes

Yes

Yes

Yes

No

6 months

No

Yes

Gabon (not in force)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Germany (terminated with effect from 22 October 2014, protections continue for 20 years)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes6

Ghana (not in force)

Yes

Yes

Yes

Yes

Yes

3 months

No

Yes

Greece (5 September 2001)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Guinea (not in force)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Iran (5 March 2002)

Yes7

Yes

Yes8

Yes

No

6 months

No

Yes9

Israel (not in force)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Italy (16 March 1999)

Yes10

Yes

Yes

Yes

No

6 months

Yes

Yes

Korea (6 June 1997)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Kuwait (not in force)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Libya (not in force)

Yes

Yes

Yes11

Yes

Yes

6 months

No

Yes

Madagascar (not in force)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Mauritius (7 October 1998)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Mozambique (28 July 1998)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Netherlands (terminated with effect from 1 November 2013, protections continue for 15 years)

Yes

Yes

Yes

Yes

Yes

3 months

No

Yes

Qatar (not in force)

Yes

Yes

Yes12

Yes

Yes

6 months

Yes (facultative)

Yes

Russian Federation (12 April 2000)

Yes

Yes

Yes

Yes

No

6 months

Yes (facultative)

Yes13

Rwanda (not in force)

Yes

Yes

Yes14

Yes

Yes

6 months

No

Yes

Spain (terminated with effect from 23 December 2013, protections continue for 10 years)

Yes

Yes

Yes

Yes

No

6 months

Yes (facultative)

Yes

Sudan (not in force)

Yes

Yes

Yes15

Yes

Yes

6 months

No

Yes

Sweden (1 January 1999)

Yes

Yes

Yes16

Yes

No

6 months

No

Yes

Switzerland (terminated with effect from 1 November 2013, protections continue for 20 years)

Yes

Yes

Yes

Yes

No

3 months

No

Yes

Tanzania (not in force)

Yes

Yes

Yes

Yes

Yes

6 months

Yes (facultative)

Yes

Tunisia (not in force)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Turkey (not in force)

 

Yes

 

Yes

No

6 months

No

Yes

United Kingdom (terminated)

Yes

Yes

Yes

Yes

No

3 months

No

Yes

Yemen (not in force)

Yes

Yes

Yes

Yes

Yes

6 months

No

Yes

Zimbabwe (15 September 2010)

Yes

Yes

Yes17

Yes

Yes

6 months

Yes, but fork-in-the-road

Yes

FTAs/EPAs

Substantive protections

Procedural rights

Fair and equitable treatment (FET)

Expropriation

Protection and security

Most-favoured-
nation (MFN)

Umbrella clause

Cooling-off period

Local courts

Arbitration

Southern African Development Community Protocol on Finance and Investment18 (16 April 2010)

Yes

Yes

No

Yes (for FET only)

No

6 months

No

Yes1 9

Qualifying criteria - any unique or distinguishing features?

2. What are the distinguishing features of the definition of “investor” in this country’s investment treaties?

South Africa

Issue

Distinguishing features in relation to the definition of ‘investor’

Seat of the investor/place of business/economic activity

The majority of South Africa’s BITs require an investor company only to be incorporated in the home State, with no requirement for seat or economic activity. Eight BITs require the investor company to be incorporated and have its seat or head office in the home State. The Iran-RSA BIT requires an investor company to have either its headquarters or ‘real economic activity’ in the home State, while the Greece-RSA BIT requires an investor company to be incorporated and ‘have their effective economic activities’ in the home State. The Ethiopia-RSA BIT (not yet in force) requires ‘total ownership’ or ownership which provides for ‘a significant grade of influence to the investor in the management of the assets’.

The SADC Protocol defines an investor simply as ‘a [legal or natural] person that has been admitted to make or has made an investment’ in an SADC State. The investor is not required to be a national of an SADC State.

Control by non-nationals / indirect control

The Austria-RSA BIT includes non-national investors which ‘exercise a dominant influence’ over any company incorporated in the home State, while the Sweden-RSA BIT and the Switzerland-RSA BITs allow for non-national investors which ‘effectively control’ a company incorporated in the home State. The France-RSA BIT and the Netherlands-RSA BIT allow for control ‘directly or indirectly’ by non-national investors.

Permanent and domiciled residents

The Denmark-RSA BIT allows non-national persons who have permanent residency in either home State to be classed as investors of that State. The Argentina-RSA BIT does not apply to investments made by South African nationals who have been domiciled in Argentina for more than two years, unless ‘it is proved that the investment was admitted into its territory from abroad’.

Dual nationals

The Iran-RSA BIT precludes dual nationals from being investors. The France-RSA BIT defines investors as ‘persons possessing the nationality of either Contracting Party’ which could imply that persons with the nationality of both States may not be included.

Right granted by home State for its national to make a foreign investment

The Russia-RSA BIT requires that natural persons who are citizens of either State must also have a legal right in accordance with the laws of the investor’s home State to make investments in the host State.

3. What are the distinguishing features of the definition of "investment" in this country’s investment treaties?

South Africa

Issue

Distinguishing features in relation to the concept of ‘investment’

Assets which qualify for protection

All South African BITs provide a form of ‘every/any kind of asset’ language plus non-exclusive list of assets. These are generally classed as property; shares and securities; claims to money or for economic value; IP rights etc.; and concession rights.

Indirect control of assets

The Spain-RSA BIT provides that investments nominally made by home State investors but which are ‘actually controlled’ by host State investors are to be treated as investments made by host State investors (ie, denied foreign investment protection by the host State).

Inclusion of certain specified assets

All RSA BITs expressly include commercial concessions for the exploitation of mineral and natural resources, and only the Iran-RSA BIT excludes from its non-exclusive list other types of concessions (but includes mineral concessions). Three South African BITs expressly include returns on investments. The Italy-RSA BIT includes a further category of numerous specified commercial activities. The South Korea-RSA BIT and the Sweden-RSA BIT expressly include an additional category of goods under a leasing agreement.

Commencement of treaty protection

The Russia-RSA BIT covers pre-agreement investments made as of 1 January 1987. All other RSA BITs expressly include investments made prior to the entering into force of the relevant BIT. Eleven South African BITs exclude disputes or disagreements which arose before the entering into force of the relevant BIT.

Investment in accordance with local law

Five South African BITs do not expressly require foreign investments to be made in accordance with local host State law, while the remaining BITs do.

Prior approval of investment

The Iran-RSA BIT applies only to investments which have been approved by the host State’s competent authority, and applicability of the protections to pre-BIT investments is subject to the approval of the host State’s competent authority. The BIT notes the name of the Iranian authority which approves foreign investments into Iran.

Substantive protections - any unique or distinguishing features?

4. What are the distinguishing features of the fair and equitable treatment standard in this country’s investment treaties?

South Africa

Issue

Distinguishing features of the fair and equitable treatment standard

Illustration of the FET standard

Almost all South African BITs provide that each Contracting Party shall ensure/accord fair and equitable treatment to investments, and most BITs expressly extend this treatment also to investors. Exceptionally, the Iran-RSA BIT provides only for ‘fair treatment’.

Customary international law

While no South African BIT contains an express provision limiting the FET standard to the customary international law standard, the France-RSA BIT and the Spain-RSA BIT provide that each State shall accord fair and equitable treatment in accordance with ‘international law’.

Express forms of treatment

The France-RSA BIT provides that, in addition to the standard ‘fair and equitable treatment’ wording, restrictions on the purchase or transport of materials, energy and fuel, or restrictions on the means of production and operation, or restrictions on sales, or other measures having a similar effect, shall be considered impediments to fair and equitable treatment.

5. What are the distinguishing features of the protection against expropriation standard in this country’s investment treaties?

South Africa

Issue

Distinguishing features of the ‘expropriation’ standard

Measure of compensation

A number of South African BITs require compensation at ‘market value’ or ‘fair market value’. The Italy-RSA BIT requires compensation for expropriation at the ‘real international market value’, while the Netherlands-RSA BIT and Cuba-RSA BIT require compensation representing ‘genuine value’. The Russia-RSA BIT requires compensation corresponding to the ‘real market value’ and the France-RSA BIT requires compensation at the ‘real value’.

Principles of valuation

The Austria-RSA BIT requires compensation to be determined in accordance with ‘recognised principles of valuation’ and provides a list of these principles.

Indirect expropriation

All South African BITs provide for both direct and indirect expropriation, in a variety of formulations. The SADC Protocol does not provide for indirect expropriation.

Right of review by local courts

The majority of South African BITs offer foreign investors the right of review by local courts of the amount of compensation.

Expropriation in accordance with ‘due process of law’

Most of South African’s BITs require expropriation to be carried out in accordance with local law, in a variety of formulations.

Foreign exchange restrictions

A number of South African BITs contain clauses restricting the free transfer of compensation funds for investors of the host State permanently resident in South Africa, in accordance with the foreign exchange regulations of South Africa.

Special provisions on shareholding

Five BITs provide that the host State’s expropriation obligations (compensation, due process, etc.) also extend to treatment of a foreign investor’s shareholdings in a local company. The Italy-RSA BIT provides that the evaluation of a foreign investor’s share in a joint venture shall be assessed as not lower than the capital amount invested minus capital reductions/losses and other operational losses/profits.

Currency of compensation

The Italy-RSA BIT provides that compensation is to be paid in the currency in which the investment was made. A number of South African BITs require compensation to be paid in any freely-convertible currency.

Re-purchase rights

The Italy-RSA BIT provides that if the expropriated property has not been utilised for the purpose of the expropriation, the foreign investor may repurchase the property at the ‘market price’ (in comparison, compensation for expropriation is to assessed be at the ‘real international market value’).

MFN treatment for expropriation rights

The Germany-RSA BIT provides that investors shall enjoy most-favoured nation treatment with respect to the expropriation provisions.

Right to regulate in public interest

The SADC Protocol confirms member States’ right to regulate in the public interest and to maintain or adopt measures that it considers appropriate to ensure respect for health, safety or environmental concerns. The investment protections of the SADC Protocol are subject to this right to regulate.

6. What are the distinguishing features of the national treatment/most-favoured-nation treatment standard in this country’s investment treaties?

South Africa

Issue

Distinguishing features of the ‘national treatment’ and/or ‘most favoured nation’ standard

Illustration of the MFN standard

All South African BITs contain some variation on the usual form of wording providing for treatment no less favourable than that accorded to nationals of other States.

Exceptions to MFN treatment

The majority of South African BITs contain an exception excluding MFN treatment in relation to special advantages, such as taxation, accorded to development finance institutions. Most South African BITs also exclude MFN treatment in relation to benefits from treaties arising from customs, economic or monetary unions or other regional integration organisations, or international agreements regarding taxation. In addition to these exceptions, the Argentina-RSA BIT also excludes extending to South African investors the benefits of treatment agreed by Argentina in bilateral agreements for concessional financing with Italy and Spain. The Russia-RSA BIT and the Mauritius-RSA BIT exclude extending MFN treatment arising from domestic laws promoting equality or redressing previous discrimination. The SADC Protocol provides for MFN treatment only with respect to an SADC member State’s FET obligations, and not for other obligations.

Scope of MFN treatment

Generally, most South African BITs extend MFN treatment to both ‘investors’ and ‘investments’ of the other Contracting Party, some of which extend treatment further to include ‘returns’. Certain South African BITs provide for MFN treatment to ‘investments by investors’. The France –RSA BIT extends MFN treatment to ‘nationals or companies’ without mentioning treatment of investments.

Scope of national treatment

All South African BITs contain provisions regarding national treatment, extended in a similar manner to the MFN treatment noted above.

Exceptions to national treatment

The Iran-RSA BIT, China-RSA BIT and Mauritius-RSA BIT exclude extending to foreign investors the treatment by South Africa of its own nationals arising from its domestic laws promoting equality or redressing previous discrimination. The SADC Protocol allows member States to grant preferential treatment to certain particular investors or investments ‘in order to achieve national development objectives’ in accordance with local law, without extending this as national treatment generally.

7. What are the distinguishing features of the obligation to provide protection and security to qualifying investments in this country’s investment treaties?

South Africa

Issue

Distinguishing features of the ‘protection and security’ standard

Extent of obligations

The formulation of the standard varies in South Africa’s BITs. The majority provide for ‘full protection and security’ or ‘full protection’. The Iran-RSA BIT and the Argentina-RSA BIT provide for ‘full legal protection’ while the Netherlands-RSA BIT provides for ‘full physical protection and security’. The Italy-RSA BIT notes that each Contracting Party ‘shall create and maintain ... legal conditions favourable to investors’ but does not otherwise require a particular standard.

8. What are the distinguishing features of the umbrella clauses contained within this country’s investment treaties?

South Africa

Issue

Distinguishing features of any ‘umbrella clause’

Scope of the umbrella clause

12 of South Africa’s BITs contain an umbrella clause formulation obliging the contracting parties to observe ‘any obligation’ or ‘any other obligation’ that they may have entered into with regard to investments of foreign investors. The Iran-RSA BIT obliges each State to ‘guarantee the observance of the commitments’ it has entered into with foreign investors.

9. What are the other most important substantive rights provided to qualifying investors in this country?

South Africa

Issue

Other substantive protections

Free transfer of funds, exchange controls and permanent residents

The majority of South Africa’s BITs contain protocols excluding nationals of the other Contracting Party who are permanent residents of South Africa from benefitting from the right to free transfer of funds, in order to safeguard South Africa’s foreign currency controls.

Types of funds that can be freely transferred

Subject to the exchange control restrictions, while some South African BITs (including those with the Czech Republic, Mauritius, Spain) contain a non-exhaustive list of payments that may be freely transferred by an investor, other BITs (including those with Denmark, France, Iran) provide a limited and exhaustive list of transfers related to investments.

Non-impairment

The majority of South Africa’s BITs impose an obligation not to impair the management, maintenance, use, enjoyment or disposal of investments.

Armed conflict / civil unrest

All of South Africa’s BITs contain some form of obligation for the host State to compensate a foreign investor for losses arising from armed conflict, generally expressed as being no less favourable than compensation provided to a local investor.

Procedural rights in this country’s investment treaties

10. Are there any relevant issues related to procedural rights in this country’s investment treaties?

South Africa

Issue

Procedural rights

Fork-in-the-road

South Africa’s BITs with Zimbabwe and China are the only South African BITs to contain fork-in-the-road provisions.

Waiver of local remedies

The Austria-RSA BIT notes that consent to arbitration ‘implies’ that the exhaustion of local remedies requirement is not applicable.

Agreement on choice of forum

Five of South Africa’s BITs provide that the investor and host State may agree to submit a dispute to a choice of different fora, or if no agreement is reached after three months the investor may unilaterally submit the dispute to the investor’s preferred forum. The Switzerland-RSA BIT applies a similar provision but limits the investor’s unilateral choice to ICSID arbitration only.

Choice of forum for arbitration

19 of South Africa’s BITs offer the choice of ICSID arbitration, although only 14 BITs expressly include the use of the ICSID Additional Facility during the period that South Africa is not an ICSID signatory. Five BITs offer ICC arbitration. Ad hoc arbitration (UNCITRAL Rules or no rules specified) is offered as a choice in 17 BITs. The Iran-RSA BIT and China-RSA BIT offer ad hoc arbitration as the only available forum. The Russia-RSA BIT also offers arbitration in Stockholm in addition to ad hoc proceedings.

Resolution before local courts

Six of South Africa’s BITs offer dispute resolution through local courts, while the Iran-RSA BIT expressly excludes recourse to local courts. The remaining BITs are silent on the use of local courts, but all contain consent to arbitration.

Time limits/cooling-off period

The majority of South Africa’s BITs contain a six month cooling-off period from the start of negotiations before arbitration can be commenced, while four BITs require only a three-month cooling-off period (Netherlands, Switzerland, UK, Austria).

Use of MFN/national treatment to expand procedural rights

The South Korea-RSA BIT allows a foreign investor to expand its procedural rights in order to benefit from local remedies made available to local investors or to investors of any other State.

Allocation of costs of dispute

South Africa’s BITs with China and France provide that each disputing party is to bear its own costs, unless the tribunal decides otherwise ‘in accordance with special circumstances’.

Applicable law

South Africa’s BITs with Belgium/Luxembourg, Spain and Zimbabwe provide that both domestic law and principles of international law apply.

Automatic termination of BIT

Most of South Africa’s BITs are expressed to continue for a term of ten years. The Russia-RSA BIT and the Netherlands-RSA BIT expire after 15 years, while the BITs with Finland, Cuba and Sweden expire after 20 years. (See section 11 below for discussion of South Africa’s policy of terminating BITs.)

Survival clauses extending BIT obligations

Eight of South African BITs have survival clauses extending the protection obligations for a further ten years following termination of the BIT. Four BITs extend for a further 15 years following termination, while the majority of South Africa’s BITs extend for 20 years following termination.

Ratification of BITs

Section 231(4) of the Constitution of South Africa provides that ‘a self-executing provision of an [international] agreement that has been approved by Parliament is law in the Republic’ but the South African Constitutional Court has given no interpretation of this provision. This creates uncertainty as regards the South African BITs not yet in force, but on the other hand there is no South African jurisprudence to indicate that any particular BIT provision would be self-executing, without the need for parliamentary ratification.

11. What is the status of this country’s investment treaties?

South Africa

Following a detailed review of its BITs in 2010, current South African government policy is progressively to terminate its entire matrix of BITs to be replaced with foreign investment protection legislation in local law giving equal protection to all foreign investors regardless of their origin. There is no fixed timetable for termination. The government also has no intention to ratify its BITs which are not yet in force. All BITs contain provisions extending protections for many years following their termination.

The termination process will likely follow a regional pattern, starting with BITs with EU States. BITs with Austria, Denmark, France, the UK, Belgium/Luxembourg, Spain, Germany, the Netherlands and Switzerland have recently been terminated and terminations of other EU BITs are expected. There is, however, uncertainty over the fate of South Africa’s BITs with other African States as South Africa is a capital exporter to Africa. A political decision on its African BITs has not yet been made.

South Africa introduced the Protection of Investment Act 2015 to implement a new regime of foreign investment protection. (See 21 below for details.)

Practicalities of commencing an investment treaty claim against this country

12. To which governmental entity should notice of a dispute against this country under an investment treaty be sent? Is there a particular person or office to whom a dispute notice against this country should be addressed?

South Africa

Government entity to which claim notices are sent

Claim notices are to be sent to (1) the Minister of Trade and Industry at the Department of Trade and Industry; and (2) the head or minister of the relevant government Department to which the claim relates (eg, the Department of Energy, Department of Mineral Resources, Department of Public Works, etc).

13. Which government department or departments manage investment treaty arbitrations on behalf of this country?

South Africa

Government department which manages investment treaty arbitrations

Investment treaty arbitrations are generally managed jointly by the Department of Trade and Industry (as the department responsible for foreign investment and investor claims) and the Department to which the claim relates.

14. Are internal or external counsel used, or expected to be used, by the state in investment treaty arbitrations? If external counsel are used, does the state normally go through a formal public procurement process when hiring them?

South Africa

Internal/external Counsel

South African has no standing policy of instructing external counsel (local or foreign) in investment treaty arbitrations. Decisions on representation are taken on an ad hoc basis as required by a claim. If external counsel are to be instructed, there may be some form of tender process which could be public tender or by invitation only.

Practicalities of enforcing an investment treaty claim against this country

15. Has the country signed and ratified the Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1965)? Please identify any legislation implementing the Washington Convention.

South Africa

Washington Convention implementing legislation

South Africa has not signed the ICSID Convention and has no intention of doing so in the future.

16. Has the country signed and ratified the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (the New York Convention)? Please identify any legislation implementing the New York Convention.

South Africa

New York Convention implementing legislation

South Africa ratified the New York Convention in 1976. The Recognition and Enforcement of Foreign Arbitral Awards Act of 1977 gives effect to the New York Convention in South African law.

17. Does the country have legislation governing non-ICSID investment arbitrations seated within its territory?

South Africa

Legislation governing non-ICSID arbitrations

The Arbitration Act 1965 governs all arbitrations seated in South Africa. This legislation predates the UNCITRAL Model Law and international arbitration practitioners generally agree that this is outdated. The Arbitration Act 1965 does not provide for fundamental principles such as separability of the arbitration agreement or the power of the arbitrator to determine his own jurisdiction, although the South African courts have upheld these principles through their jurisprudence (see section 20 below). Attempts to introduce updated arbitration legislation based on the Model Law have not (yet) succeeded.

18. Does the state have a history of voluntary compliance with adverse investment treaty awards; or have additional proceedings been necessary to enforce these against the state?

South Africa

Compliance with adverse awards

South Africa has faced two investment treaty claims. The first, brought under the Italy-RSA BIT,20 was withdrawn by the Italian investor and the tribunal awarded South Africa a portion of its legal costs. The second claim was confidential and was brought under the Switzerland-RSA BIT.21 It is reported to have resulted in a monetary award in favour of the investor, but no information is available on whether South Africa complied with this adverse award.

19. Describe the national government’s attitude towards investment treaty arbitration

South Africa

Attitude of government towards investment treaty arbitration

After a group of Italian investors brought an investment arbitration against South Africa arising from its post-apartheid legislation to redress the structural effects of apartheid on the local mining industry,22 the South African government embarked on a review of its BIT matrix. The government concluded that there was, at best, an ‘ambiguous’ relationship between inward foreign direct investment and South Africa’s BITs as a significant proportion of South Africa’s foreign investment came from jurisdictions without BITs, and that existing BITs could restrict South Africa’s legitimate policy objectives in the future.

Retaining the right to regulate is a major concern for the government, as its policy objectives include redressing the historic imbalances of the apartheid era and promoting development of the nation. The government felt that these objectives could be challenged by foreign investors before international tribunals relying on existing BITs, while local investors did not have such rights. Accordingly, the matrix of BITs is to be replaced with foreign investment legislation providing the government with the right to regulate for legitimate policy objectives.

The South African court system is generally acknowledged to be impartial, robust and fiercely independent of government, and its jurisprudence is well-respected. The draft foreign investment legislation provides that the courts will resolve foreign investment disputes.

20. To what extent have local courts been supportive and respectful of investment treaty arbitration, including the enforcement of awards?

South Africa

Attitude of local courts towards investment treaty arbitration

Direct questions of investment treaty arbitration have not come before the local courts, but local courts have addressed broader questions of international arbitration.

Notwithstanding the outdated Arbitration Act 1965, the local courts (particularly the sophisticated superior courts) are supportive of international arbitration. Certain important decisions evidence the courts’ understanding of and commitment to fundamental principles of international arbitration such as: the consensual nature of arbitration,23 finality of international arbitration,24 the court’s discretion to enforce a foreign arbitral award based on public policy considerations25 and the court’s general reluctance to intervene in international arbitral proceedings.26 The courts have also recognised the government’s constitutional obligation to assist its nationals making foreign investments, in that the government is obliged to offer diplomatic protection (where a BIT does not exist).27

National legislation protecting inward investments

21. Is there any national legislation that protects inward foreign investment enacted in this country? Describe the content.

South Africa

National legislation

Substantive protections

Procedural rights

FET

Expropriation

Other

Local courts

Arbitration

Protection of Investment Act 2015

The Act does not offer FET protection for foreign investors. Rather, it requires the government to provide ‘fair administrative treatment’ to foreign investors in accordance with the Constitution. This requires administrative, legislative and judicial process which are not arbitrary or which do not deny justice to the foreign investor. The government is also required to provide written reasons for government decisions and the right for an investor to administrative review of government decisions.

The Act does not expressly address expropriation. However it provides that foreign investors retain the right to property pursuant to the Constitution, which in turn provides that direct expropriation may only be carried out in the public interest of for a public purpose, under due process of law, and for the payment of ‘just and equitable’ compensation. Protection from indirect expropriation is not included.

The Act provides for national treatment of foreign investors as compared with local operations ‘that are in like circumstances’.

Foreign investors are to be accorded an equal level of physical security as may generally be provided to other investors, subject to available resources.

South Africa expressly retains the right to regulate in the public interest.

The legislation must be interpreted in accordance with (i) the South African Constitution, which includes rights to property and access to justice, and due process obligations; (ii) international law consistent with the Constitution; and (iii) South Africa’s international treaties. The purpose of the legislation is to protect investment in a manner consistent with the public interest and with a balance between the rights and obligations of investors

Foreign investors may approach local courts for resolution of investment disputes (see section 17 above for discussion of the attitude and independence of local courts).

Foreign investors may invoke mediation, or alternatively domestic arbitration in accordance with South African arbitration legislation and subject to the jurisdiction of local courts (see sections 17 and 20 above). South Africa ‘may consent to international arbitration in respect of investments covered by this Act, subject to the exhaustion of domestic remedies’. However, ‘such arbitration will be conducted between [South Africa] and the home state of the applicable investor’ and must be a ‘fair public hearing’ It is not year clear how this would function in practice. There is no direct offer of arbitration available to the investor.

National legislation protecting outgoing foreign investment

22. Does the country have an investment guarantee scheme or offer political risk insurance that protects local investors when investing abroad? If so, what are the qualifying criteria, substantive protections provided and the means by which an investor can invoke the protections?

South Africa

Relevant guarantee scheme

Qualifying criteria, substantive protections provided and practical considerations

Export Credit Insurance Corporation (ECIC)

ECIC provides insurance cover to South African financial institutions which have negotiated financial agreements with foreign entities, including governments. The loan may be structured as project finance, corporate finance, asset backed finance or sovereign finance deal. For South African financial institutions providing commercial loans to foreign enterprises for projects in emerging market economies, ECIC provides political risk insurance for breach of contract by the host government. A qualifying financial export should contain 50% South African content if exported to Africa, or 70% South-African content if exported beyond Africa.

ECIC also offers political risk insurance cover to South African entities investing abroad. A qualifying investment should be either a new investment or should involve the privatisation of formerly state-owned enterprises. To qualify, the South African investor should purchase at least 26% of the share capital of the foreign entity.

Awards

23. Please provide a list of any available arbitration awards or cases initiated involving this country’s investment treaties.

South Africa

Awards

Confidential proceedings known as the ‘ Swiss Investors v South Africa ’ claim, investors’ details are not known. Brought pursuant to the Switzerland-RSA BIT, award reportedly issued in 2003.

Piero Foresti, Laura de Carli & Others v The Republic of South Africa , ICSID Case No. ARB(AF)/07/01. Brought pursuant to the Italy-RSA BIT, proceedings withdrawn by claimants.

Pending Proceedings

None as of March 2016.

24. Reading list

Article/Book

Government of the Republic of South Africa – Government Position Paper ‘Bilateral Investment Treat Policy Framework Review’, dated June 2009.

Press release from Department of Trade and Industry dated 28 June 2012: ‘Minister Davies Launched UNCTAD Investment Policy Framework’.

Article from Muhammad de Gama, Director, Legal International Trade and Investment, Department of Trade & Industry: ‘Standard of Expropriation and Compensation under South African law’ dated 14 January 2014, published at www.youngicca-blog.com.

Article by Muhammad de Gama, Director, Legal International Trade and Investment, Department of Trade & Industry: ‘Draft bill no threat to foreign investors in South Africa’ dated 1 April 2014, published at www.bdlive.co.za.

Article by Kwadko Sarkodie: ‘The Sleeping Giant’ dated 17 June 2014 published in Global Arbitration Review .

Article entitled ‘South Africa – New Legal Framework for Direct Investments’, undated (2014), published by Southern Africa Initiative of German Business.

Reading List

24. Please provide a list of any articles or books that discuss this country’s investment treaties.

South Africa

Notes

1 The China-RSA BIT provides for ad hoc arbitration only.

2 The DRC-RSA BIT provides for ‘full protection’.

3 The Congo-RSA BIT provides for ‘full protection’.

4 The Cuba-RSA BIT provides for ‘full protection’.

5 In addition to offering ICSID or ad hoc arbitration, the Egypt-RSA BIT offers arbitration at the Cairo Regional Centre for International Commercial Arbitration.

6 The Germany-RSA BIT provides for ICSID arbitration only.

7 The Iran-RSA BIT provides for ‘fair treatment’.

8 The Iran-RSA BIT provides for ‘full legal protection’.

9 The Iran-RSA BIT provides for ad hoc arbitration only.

10 The Iran-RSA BIT provides for ‘just and fair treatment’.

11 The Libya-RSA BIT provides for ‘full protection’.

12 The Qatar-RSA BIT provides for ‘full protection’.

13 In addition to ICSID or ad hoc arbitration, the Russia-RSA BIT offers arbitration at the Stockholm Chamber of Commerce.

14 The Rwanda-RSA BIT provides for ‘full protection’.

15 The Sudan-RSA BIT provides for ‘full protection’.

16 The Sweden-RSA BIT provides for ‘full protection’.

17 The Zimbabwe-RSA BIT provides for ‘full protection’.

18 Contracting Parties are Angola, Botswana, Congo, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe.

19 Annex 1 of the SADC Protocol on Finance and Investment provides for investor-State arbitration via ad hoc, ICSID or arbitration before the SADC Tribunal. The SADC Tribunal has been suspended since May 2011.

20 Piero Foresti, Laura de Carli & Others v The Republic of South Africa , ICSID Case No. ARB(AF)/07/01.

21 This claim is generally referred to as the ‘ Swiss Investors v South Africa ’ claim, but the investors’ details are not known.

22 Piero Foresti, Laura de Carli & Others v The Republic of South Africa , ICSID Case No. ARB(AF)/07/01.

23 Lafuno Mphaluli & Associates (Pty) Ltd v Andrews and Another [2009] ZACC 6.

24 Telecordia Technologies v Telkom SA Ltd (26/05) [2006] ZASCA 112.

25 Phoenix Shipping Corporation v DHL Global Forwarding SA (Pty) Ltd and Another (AC70/2011) [2012] ZAWCHC 11.

26 Lafuno Mphaluli & Associates (Pty) Ltd v Andrews and Another [2009] ZACC 6.

27 Von Abo v Government of South Africa [2009] ZACC 15.

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