Legal protection of property under the Protection of Investment Act 22 of 2015

• Jurisdiction: South Africa
• Citation: 2018 Acta Juridica 17
• Date: 19 December 2019
• Published date: 19 December 2019
• Author: None
• Pages: 17-42

17

Legal protection of property under the

Protection of Investment Act 22 of 2015

CHARLOTTE-SOPHIE PICKER*

Foreign direct investment (FDI) constitutes an important tool for

generating capital inow and economic growth and development,

particularly in developing countries. The prevalent global mechanism

for regulating and protecting is the bilateral investment treaty (BIT).

After the apartheid era, and the associated economic isolation of

South Africa, the country concluded numerous BITs, particularly with

capital-exporting European countries. However, following an extensive

review of its BITs in 2008, the South African government promulgated

the Protection of Investment Act 22 of 2015 (PIA) in December 2015

to replace several of its BITs with national legislation.

This essay will show that the PIA constitutes a highly uncertain and

vague legal framework for foreign investment, which is likely to

decrease investor condence. Particularly in regard to international

law, the PIA provides a signicantly narrower concept of expropriation

and lacks sucient provisions regarding the compulsory payment

of compensation in the case of indirect expropriation. This essay

concludes that the manner of practical implementation and application

not only of the PIA but of all legislation related to foreign investment

will be decisive in order to achieve a reasonable balance between the

domestic public interest and policy space and foreign investors’ need

for predictable and reliable investment protection. The government

will have to show its dedication and commitment to the establishment

of a balanced investment regime in order to maintain South Africa’s

status as a foreign investment-friendly venue.

I INTRODUCTION

Subsequent to the G20 Summit in September 2016, the G20

published the G20 Guiding Principles for Global Investment

Policymaking. These principles state that investment constitutes

* After obtaining an LL.M. from the University of Cape Town in 2017,

the author is currently pursuing a doctorate from Georg-August-Universität

Göttingen, Germany.

2018 Acta Juridica 17

© Juta and Company (Pty) Ltd

18 FOREIGN DIRECT INVESTMENT AND THE LAW

the ‘engine of economic growth in the global economy’.1 The G20

advises governments to ‘avoid protectionism in relation to cross-

border investment’.2 Although these principles are non-binding and

aim to provide only general guidance, they illustrate the importance

of Foreign Direct Investment (FDI) at an international level.

The main sources of foreign investment law are general

international law, which includes international custom, investment

treaties, and arbitral decisions in the eld of investment,3

international standards peculiar to the protection of investments,

and the domestic law of the host state, particularly areas such as

property law, commercial law, labour law and tax law.4

International investment agreements, particularly Bilateral Invest-

ment Treaties (BITs), have become the prevalent international

instrument for regulating and protecting foreign investments.5 By the

end of 2015, 2 946 concluded BITs existed globally.6 BITs generally

provide for the security of investments from expropriation without

1 OECD ‘G20 Guiding Principles for Global Investment Policymaking’, available

at http://www.oecd.org/daf/inv/investment-policy/G20-Guiding-Principles-for-

Global-Investment-Policymaking.pdf (accessed on 23 February 2019).

2 OECD (n 1).

3 Article 38(1) of the Statute of the Inter national Court of Justice (ICJ Statute)

is interpreted as one of the most generally accepted and recognised statements in

terms of the sources of general international law, and reads as follows:

1. The Court, whose function is to decide in accordance with international

law such disputes as are submitted to it, shall apply:

a. international conventions, whether general or particular,

establishing rules expressly recognized by the contesting states;

b. inter national custom, as evidence of a general practice accepted as law;

c. the general principles of law recognized by civilized nations;

d. subject to the provisions of Article 59, judicial decisions and the

teachings of the most highly qualied publicists of the various

nations, as subsidiary means for the determination of rules of law.

According to this stipulation, the fundamental sources of international law

are (1) international conventions; (2) international custom; and (3) general

principles of law. Whereas judicial decisions and writings of publicists and legal

scholars do not constitute autonomous sources of international law but are

regarded as authoritative evidence in regard to the state of law (see I Brownlie

Principles of Public International Law 7 ed (2008) 19, 24).

4 R Dolzer & C Schreuer Principles of Inter national Investment Law 2 ed (2012) 12.

5 A Guzman ‘Why LCDs sign treaties that hurt them: Explaining the popularity

of bilateral investment treaties’ (1997 1998) 38 Virginia J of International Law 640.

6 UNCTAD World Investment Report 2016: Investor Nationality: Policy Challenges

(2016) 101, available at http://unctad.org/en/PublicationsLibrary/wir2016_en.pdf

(accessed on 23 February 2019).

© Juta and Company (Pty) Ltd