Abstract
Many states use investment treaties to spur economic development by granting legal protections to foreign investors and providing for direct enforcement before international arbitral tribunals. Yet South Africa has taken a different course. As explained below, South Africa originally signed onto a number of investment treaties despite barely considering how the resulting obligations would affect its constitutional commitments and the authority of its domestic courts. After the shock of losing its first two treaty-based investment disputes, the country shifted from avidly entering into bilateral investment treaties (BITs) to opposing BITs absent compelling economic and political reasons to conclude them. Today South Africa seeks to replace investment treaties and investor-state arbitration with protections under domestic legislation, along with mediation and dispute resolution before domestic courts. In this essay, I describe this shift and explore three difficult and yet-to-be-resolved questions that it presents: (1) Will foreign investors still be able to rely on protections under international law when bringing domestic cases? (2) If so, will the South African Constitution, as a matter of domestic law, displace any relevant commitments under international law? And (3) is the new South African approach consistent with international law?
Highlights
Many states use investment treaties to spur economic development by granting legal protections to foreign investors and providing for direct enforcement before international arbitral tribunals
South Africa originally signed onto a number of investment treaties despite barely considering how the resulting obligations would affect its constitutional commitments and the authority of its domestic courts
After the shock of losing its first two treaty-based investment disputes, the country shifted from avidly entering into bilateral investment treaties (BITs) to opposing BITs absent compelling economic and political reasons to conclude them.[1]
Summary
Many states use investment treaties to spur economic development by granting legal protections to foreign investors and providing for direct enforcement before international arbitral tribunals. The most well-known case concerned whether certain mineral law amendments implemented as part of the socioeconomic reforms related to South Africa’s Black Economic Empowerment policies were compatible with national treaty commitments.[3] These complaints emerged alongside a growing international discomfort with the system of investor-state dispute settlement (ISDS). Nine BITs with European states were terminated from 2012 to 2014, the BIT with Argentina was terminated in 2017, and another two BITs will terminate soon (Italy in 2019 and Greece in 2021), leaving only ten in force.[4] In place of its initial preference for these agreements, South Africa has developed a new domestic framework for promoting and protecting foreign investment,[5] including by enacting the Protection of Investment Act of 2015, which entered into force on July 13, 2018.6.
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