Bilateral investment treaties: Has South Africa chartered a new course?

• Jurisdiction: South Africa
• Author: Davis, D.M.
• Citation: 2018 Acta Juridica 1
• Published date: 19 December 2019
• Pages: 1-16
• Date: 19 December 2019

1

Bilateral investment treaties: Has South

Africa chartered a new course?

DENNIS M DAVIS*

This essay explores the history of the South African government’s

conclusion of a series of bilateral investment treaties (BITS) after 1994.

It then examines the reasons why South Africa decided that BITS

subverted a number of critical developmental goals, many of which

were enshrined the Constitution. The legislation that followed revealed

that the government was prepared to eschew certain forms of foreign

investment pressure and to carve out an independent set of investment

policies. This in turn raises the question explored in this paper about the

scope of national sovereignty to trump global demands for a specied

investment framework.

I INTRODUCTION

Rather than neutralising the protectionists, trade agreements may

empower a dierent set of rent-seeking interests and politically

well-connected rms, international banks, phar maceutical com-

panies and multinational rms. They may serve to internationalise

the inuence of these powerful domestic interests. Trade ag reements

could still result in freer, mutually benecial trade, through the

exchange of market access. They could result in the global upgrading

of regulations and standards, for labour, say, or the environment. But

they could also produce purely redistributive outcomes under the

guise of ‘freer trade’. As trade agreements become less about taris

and non-tari barriers at the border and more about domestic rules

and regulations, economists might do well to worry more about

the latter possibility. They may even adopt a stance of rebuttable

prejudice against these new-type trade deals; a prejudice that should

be overturned only with demonstrable evidence of their benets.1

* BComm LLB (UCT) MPhil (Cantab); LLD (hc) (UCT); Judge President of

the Competition Appeal Court.

1 D Rodr ik ‘What do trade agreements really do?’ NBER Working Paper Series:

Working Paper 24344 (2018) 21. Although Rodr ik was writing about multilateral

trade agreements his criticism is equally applicable to the consequences of bilateral

treaties for reasons advanced in this paper.

2018 Acta Juridica 1

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2 FOREIGN DIRECT INVESTMENT AND THE LAW

After 1994, as democracy dawned in South Africa, the country

enthusiastically endorsed the idea of entering into bilateral

investment treaties (BITs). By 2012, South Afr ica had concluded 48

foreign investment protection and promotion treaties.2 It is necessary

to contextualise this apparent rush to conclude treaties. When the

African National Congress (ANC) came to power, it was anxious to

ensure that the international community regarded the country as a

sound investment destination. The history of post-colonial African

states that embarked on a course of economic nationalisation,

together with a proclamation of redistribution of economic

growth, had been a problematic one that engendered little investor

condence.3 With this history in mind, it appears that the British

government, under the leadership of then Prime Minister John

Major, was concer ned that the ANC might expropriate Br itish assets

in South Africa. The British government was therefore the rst to

approach the newly installed South African government with a BIT

proposal.4 This initiative was launched during a BIT frenzy: over 3 600

treaties were concluded worldwide during the decade that followed.5

At the very moment that democracy dawned in South Africa, the

so-called Washington Consensus, which encompassed a particular

macro-economic model propagated by both the World Bank and

the International Monetary Fund, had achieved hegemonic status.

In terms of the Washington Consensus, developing countries were

encouraged to enter into BITs with capital-exporting countries as

a means of ensuring that key economic values were incorporated

into the particular model of economic development chosen by the

developing country. This would ensure that the national regulatory

systems of developing countries were congruent with a dominant

transnational, legal and policy regime fashioned by these key

institutions, together with governments from the developed world.6

At the same time, the Washington Consensus induced a belief that

2 A Langalanga ‘Imagining South Africa’s foreign investment regulatory regime

in a global context’ SAIIA Occasional Paper 214 (2015).

3 Langalanga (n 2).

4 Langalanga (n 2).

5 UNCTAD ‘International Investment Agreements Navigator: South Afr ica’

available at https://investmentpolicy.unctad.org/country-navigator/201/south-

africa (accessed on 10 October 2019).

6 See the letter wr itten by more than 200 academics in law and economics,

including Professors Laurence Tribe and Joseph Stiglitz, to Members of the

US Congress concerning the bias in respect of the implementation of BITs by

arbitration under the International Centre for Settlement of Disputes, quoted by

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