WILL INTERNATIONAL OBLIGATIONS STYMIE EXPROPRIATION PLANS?

This article appeared in the 28 November edition of Legalbrief Today, under Policy Watch

Ruling party members of the ad hoc National Assembly committee responsible for drafting amendments to section 25 of the Constitution to explicitly allow for land expropriation without compensation appeared to have been caught on the back foot by last Wednesday’s briefing on the implications of existing international investment agreements. Apparently requested at ‘short notice’ from the Department of Trade & Industry (DTI), the briefing made it very clear that, when foreign-owned property is expropriated, international standards require compensation to be paid at market value. This is noting that, while ‘most’ post-1994 bilateral investment treaties have been terminated, the ‘survival clauses’ now in place are underpinned by international standards. Should the amount offered not be considered ‘satisfactory’, legal challenges and international arbitration would inevitably ensue.

While this information was described by Deputy DG for International Trade & Economic Development, Xavier Carim, as ‘a terrible message’ for the committee to hear and came as ‘a bombshell’, ‘a shock’ and ‘a hard pill to swallow’ in the view of one ANC representative, EFF deputy president Floyd Shivambu was unfazed. Interestingly, he was the only committee member familiar with the 2015 Protection of Investment Act (in force since July 2018) and measures he understands to be in place to safeguard the property rights of foreign investors in SA’s special economic zones. In Shivambu’s view, ‘there is no crisis’ – especially given that the founding provisions of the Constitution not only ensure its status as the supreme law of the land but also SA’s sovereignty. DA representative Werner Horn’s question about international trade agreements at least clarified that these do not ‘speak to property rights’. However, his request for insight into provisions in international law for changes in the status of these rights pointed to the need for detailed information on the survival clause of each terminated bilateral investment treaty.

In anticipation of informed discussions at the next meeting, committee chair Mathole Motshekga asked members to study the presentation document thoroughly. Unfortunately, it was not made available to observers – and, although parliamentary legal adviser Charmaine van der Merwe was present, she was not asked for her views. However, when the committee met on 13 November, Van der Merwe assured members that section 25 can be amended ‘in a way that ensures that SA does not breach its (international) obligations’ (Parliamentary Monitoring Group). It was nevertheless on her recommendation that the DTI was asked to brief members on the implications of treaties to which SA is signatory. A media statement on last Wednesday’s meeting made it very clear that the briefing was a first ‘engagement’ and that ‘further information’ will be requested ‘if necessary’.

On 16 October, in answer to questions posed in the European Parliament, the European Commission confirmed that, in line with European Union (EU) policy, ‘the commission does in general not endorse expropriation without compensation’. ‘Current proposals to allow for expropriation without compensation compound EU concerns (about the unilateral termination of investment treaties), especially in the absence of adequate levels of protection for EU investors,’ the commission noted. ‘The commission pursues the interests and protection of EU companies worldwide through its free trade and investment agreements with those partners who are willing to engage’. A similar position underpins the US African Growth and Opportunity Act, in terms of which certain South African products enjoy ‘significantly enhanced market access’. China (whose bilateral investment treaty with SA is apparently still in force), Germany (whose bilateral investment treaty with SA was terminated in 2013) and the US are SA’s top trading partners (South African Market Interests).