Travelling the National Route: South Africa's Protection of Investment Act 2015
| Pages | 242-263 |
| Date | 01 May 2018 |
| Published date | 01 May 2018 |
| DOI | 10.3366/ajicl.2018.0230 |
| Author |
This note examines the main features of the South African Protection of Investment Act 2015 (hereinafter the ‘Act’),
The process started with a three-year review of the bilateral investment treaties (BITs) concluded by South Africa and their impact on both economic growth and regulatory powers.
At the international level, the government of South Africa decided to terminate nine BITs with European countries (Austria, Belgium and Luxembourg Economic Union, Denmark, France, Germany, Italy, the Netherlands, Spain, Switzerland and the United Kingdom), thus reducing the number of BITs in force to 14, according to the UNCTAD database.
At the domestic level, a draft of the investment act was published in October 2013 and open to public comment. It ignited a hot debate between the government and the different stakeholders.
The Act contains a rather sophisticated definition of investment composed of three categories. Under Section 2.1, an investment is:
any lawful enterprise established, acquired or expanded by an investor in accordance with the laws of the Republic, committing resources of economic value over a reasonable period of time, in anticipation of profit;
the holding or acquisition of shares, debentures or other ownership instruments of such an enterprise; or
the holding, acquisition or merger by such an enterprise with another enterprise outside the Republic to the extent that such holding, acquisition or merger with another enterprise outside the Republic, has an effect on an investment contemplated by paragraphs (a) and (b) in the Republic.
Section 2.2 further provides a comprehensive but non-exhaustive list of assets. The term ‘assets’, which is presumably used here as synonymous with ‘resources’ under section 2.1, includes: (a) shares, stocks, debentures, securities or other equity instruments of the enterprise or another enterprise; (b) a debt security of another enterprise; (c) loans to an enterprise; (d) movable or immovable property or other property rights such as mortgages, liens or pledges; (e) claims to money or to any performance under contract having a financial value; (f) copyrights, know how, goodwill or intellectual property rights such as patents, trademarks, industrial designs and trade names; (g) returns such as profits, dividends, royalties or income yielded by an investment; or (h) rights or concessions conferred by law or under contract, including licences to cultivate, extract or exploit natural resources.
The Act does not contain any precise definition of investor. Instead, section 1 laconically defines it in a rather circular manner as an enterprise making an investment. The definition of investor is completed by that of ‘enterprise’, which clarifies that the Act protects both natural and legal persons, regardless of their incorporation in South Africa. Since nationality is irrelevant for the purpose of the substantive protection granted under the Act, there seems to be no need for a definition of investor similar to those that can be found in investment treaties. However, the nationality of foreign investors is relevant for the purpose of international arbitration between South Africa and the home state, even if such mechanism – whose recourse has been rather exceptional in foreign investment law – is not mandatory under section 13(5) of the Act.
The Act's aims are threefold as enunciated in section 4. First, the Act purports to protect investment in accordance with and subject to the Constitution, with a view to striking a balance between the rights and interests of the different stakeholders. Second, it affirms and safeguards the sovereign right of South Africa to regulate investments in the public interest. Third, it confirms the application to all investments made in South Africa of the Bill of Rights in the Constitution as well as of all relevant laws.
Section 3 of the Act, which deals with the interpretation of the Act, is an intriguing provision. It provides that the Act must be interpreted and applied in accordance with its purposes, the Constitution – including the
Section 39 (Interpretation of Bill of Rights) reads:
When interpreting the Bill of Rights, a court, tribunal or forum (a)
When interpreting any legislation, and when developing the common law or customary law, every court, tribunal or forum must promote the spirit, purport and objects of the Bill of Rights.
Interestingly, section 3 of the Act does not contain any reference to section 231.4 of the Constitution, the equivalent for international treaties of section 232. Section 231.4 states that international treaties become law in the Republic when enacted into law by national legislation, whereas self-executing provisions contained in international treaties approved by the Parliament are considered as law of the Republic, provided they are not inconsistent with the Constitution or an Act of the Parliament.
According to section 233, finally, when interpreting any legislation, South African courts must prefer any reasonable interpretation of the legislation that is consistent with international law over any alternative interpretation that is inconsistent with it.
The Act applies to all investments falling within the definition of section 2, or, using the terminology of section 5 of the Act, ‘to all investments made in accordance with the requirements set out in Section 2’. It also provides that all investments must be established in accordance with domestic law (section 7.1) and clearly excludes any pre-establishment rights (section 7.2).
The catalogue of provisions on investment protection of the Act is limited to five. Under section 6, the government must ensure that ‘administrative, legislative and judicial processes do not operate in a manner that is arbitrary or that denies administrative and procedural justice’ to investors in accordance with the Constitution and relevant legislation. In spite of the absence of any reference to fairness apart from fair public hearing before a court, the section is titled ‘Fair administrative treatment’ (without any mention of administrative and judicial treatment).
The standard embodied in section 6, which did not appear in the draft submitted in July, is essentially national and based on the prohibition of arbitrary treatment as well as on denial of administrative and procedural justice as provided in domestic legislation. It is then further substantiated by three
Reminiscent of the so-called Calvo doctrine,
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