Is South Africa Alone in the FDI Regulation Revisionism? By Azwimpheleli Langalanga*

Since President Mbeki’s administration gave way to that of President Jacob Zuma, South Africa has taken a back seat on international issues.

This does not bode well for a country like South Africa with so much political capital accrued over the past two and half decades.

The general disinterestedness in international affairs, could explain why a naturally international issue such as FDI regulation has assumed such a domestic and localized space within the South African policy making discourse. It is however not too late for South Africa to consider syncing the revision of its FDI regulatory policy framework where it belongs – at the global level.

South Africa reviewed its BIT policy from 2008 to 2011. This was after the country had been hounded before an arbitration tribunal challenging its black economic empowerment policy. The action brought by the Italian investors raised alarm bells within the government and policy-making circles. Foreign investors and the international community felt that the move in a way exposed foreign investors to potentially intrusive government policies. This was because the termination of BITs and their replacement with a domestic statute coincided with a lot of talk with the African National Congress on nationalization.

This was however to be dispelled quite early by the governing party at its Mangaung Conference. Despite the reassurances by the ANC that nationalization was not going to be part of industrial policy, the promulgation of the Promotion and Protection of Investment Bill and other related statutes which are on the pipeline such as the Minerals and Petroleum Resources Development Act Amendment Bill, the Private Security Industry Regulation Act Amendment Bill, the Expropriation Bill, Valuation Bill among others have left foreign investors uncomfortable.

This is because they point to a government eager to secure more space for its industrial policies. This makes sense within South Africa context considering that the country comes from a history of apartheid and therefore the government has a larger role to play in evening the apartheid induced inequalities.

The debate on South Africa’s FDI regulation has largely cantered around the domestic implications of the FDI Bill and how it relates to the constitution. However, a much broader and maybe most important discussion on South Africa’s FDI policy should be located within an international investment law and policy environment. The location of such a debate within a global context is precipitated by two main factors. The first is that post-Apartheid South Africa made it a point that it joined the international community and abandoned its hitherto pariah status. South Africa therefore became a member of the World Trade Organisation, the Non-Aligned Movement, the G-20, IBSA, BRICs among others. It has also chaired the UNSC twice underscoring its multilateral character.

One of the most notable contributions in multilateral debates by South Africa has been its emphasis on the need for the reformation of the Bretton Woods Institutions particularly the IMF, its sister institution, the World Bank and the United Nations Security Council. The argument by South Africa, which also echoes a general sentiment among the community of nations, is that these institutions which were generally formed by the victors of the Second World War and aimed at post war reconstruction are not reflective of a much diverse and almost multipolar contemporary society. Secondly, zooming down to the regulation of foreign investment, it is imperative to locate South Africa’s FDI policy within an international framework because besides the country being a multilateral player, the calls for the reformation of the bilateral investment treaty regime first and foremost find succour within the international community.

The need for the revision of the FDI regulatory framework at an international level was mainly triggered by the actions brought against the US and Canadian governments after the conclusion of the NAFTA. The trio of Canada, US and Mexico entered into the NAFTA, which is a deeper regional integration agreement with an investment chapter (chapter 11).

The investment chapter contains an investor-state arbitration clause which allows for a private foreign investor to sue a government which is party to the agreement at an international arbitration tribunal. When these countries entered into the NAFTA and incorporated such a clause they did not envisage that it would be invoked by foreign investors.

However, when foreign investors started suing them alleging violation of their rights under the NAFTA, and challenging what would normally be regarded as legitimate regulatory powers in areas such as the environment, health, culture and other public policy measures, these countries felt that time was ripe to reform the system.

Since then, there has been a critical mass of countries, which have realized that bilateral investment treaties do not suffer from benign neglect as they had anticipated but actually bite. These countries have decided to lead the charge in reforming the system. In addition to the US and Canada, such countries include India, Indonesia, the EU, Venezuela, Ecuador among others.

The US, Canadian, Indian, German (with the expropriation cases on nuclear reactors) experience within the NAFTA mirrors the South African experience with the Foresti case when the latter’s affirmative action policies were challenged at an ICSID arbitration for allegedly violating the South Africa-Italy BIT.

The difference between the approaches taken by the countries mentioned above, save for Ecuador and Bolivia, is that they sought to rally a critical mass of countries to push for a drive to reform the system. South Africa was part of the aborted attempt to push for a multilateral agreement on investment within the OECD as an observer in the late nineties. It is surprising that South Africa which entered into so many BITs with a view to signalling to the world that it was now part of an international community has decided to take a lone approach in reforming a system which sui generis resides within a transnational environment.

Besides the discomfort caused to foreign investors within South Africa and potential investors, the decision to deal with the lack of contentment with the international investment regulatory regime in a unilateral sense, has the effect of having the international community doubtful of South Africa’s commitment to multilateralism. This is because BITs in general besides anything else serve to highlight an unequivocal commitment to international law. They serve as guarantors of good faith in countries’ domestic legal systems. If a country can lock in its domestic legal ethos at an international level it reflects its own confidence to its institutions and legal culture.

South Africa could therefore, post the current FDI bill debate, draw lessons from fellow emerging economies such as Indonesia and India. The salient lessons from these two countries is that FDI regulatory reform is best negotiated at an international level as this preserves the much needed political and diplomatic capital in international relations. It also legitimizes the outcomes of such reforms. South Africa as an anchor country within the SADC region could also lead FDI regulatory reforms within the region as a whole. In addition, South Africa is a capital exporter into the rest of the continent and therefore has to be learning from other leading nations on how third generation BITs could be used to promote and protect sustainable investment.

South Africa could therefore salvage its current stance by coming up with a Model BIT, pushing for the SADC Model BIT to be adopted within the region and ultimately fully participating in global debates on the direction of third generation BITs.

* Research Associate at South African Institute of International Affairs


Third Party Rights – Arbitrability, Locus Standi and Precipate Action in Arbitration Proceedings in Nigeria, by ‘Funke Adekoya, SAN

Statoil (Nigeria) Limited & Anor v. Federal Inland Revenue Service & Anor

In a landmark decision, which rolls back the giant strides that Nigeria was said to have recently achieved in asserting its arbitration–friendly nature, the Court of Appeal has seemingly reversed its previous position on Section 34 of the Arbitration and Conciliation Act[1] on the extent of court intervention in arbitration proceedings.[2] An earlier decision had also upheld the court’s limited ability to intercede in arbitration proceedings.[3] Continue reading »

Africa’s Sub-regional Courts, Infrastructure Development and Sustainability: Insight from the Serengeti Decision by Uche Ewelukwa Ofodile*


On 20 June 2014, the East African Court of Justice (hereinafter “EACJ” or “the Court”) issued a decision barring the United Republic of Tanzania (hereinafter “Tanzania”) from constructing and maintaining a road known as the “Natta-Mugumu – Tabora B-Kleins Gate – Loliondo Road” (hereinafter, “the Road” or “the Superhighway”) across the northern wilderness of the Serengeti National Park (hereinafter “the Serengeti”). Continue reading »

Africa and the System of Investor-State Dispute Settlement: To Reject or Not to Reject? Uche Ewelukwa Ofodile*


This paper examines the position of countries in Sub-Saharan Africa (SSA) regarding proposals to reform the investor-State dispute settlement (ISDS) system. Despite their silence on ongoing discussions about the future of the ISDS system and possible pathways for reform, SSA countries are making their position on the issue known. The paper argues that the position of SSA countries can be gleaned from instruments that these countries have pushed for at the sub-regional level. In particular, in the Investment Agreement for the COMESA Common Investment Area (CCIA),[1] in the SADC Bilateral Investment Treaty Template (SADC Model BIT),[2] and even in the SADC Protocol on Investment, countries in SSA appear to express a desire for a radically transformed ISDS system. However, closer inspection suggests that SSA countries are inconsistent in their actions when it comes to reforming the ISDS mechanism. Although these countries espouse a vision of an ISDS mechanism that is different from the existing mechanism, their actions tell a different story. For example, the CCIA is not operational, the SADC Model BIT is not binding and very few countries, if any, have taken steps to model their bilateral investment treaties (BITs) after it. And in their BITs and related treaties, SSA countries still cling to the traditional approach to ISDS and BITs more generally. Furthermore, while SSA countries would prefer to limit investor access to ISDS, the demise of the SADC Tribunal in the wake of Mike Campbell (Pvt) Ltd and Others v. Republic of Zimbabweundermines efforts to project domestic and regional institutions in Africa as credible alternatives to international arbitration. The paper suggests that the inconsistent position of SSA countries on the ISDS question deserves closer study. Also deserving closer study is an assessment of the experience of SSA countries with the ISDS system since the system emerged some forty years ago. Finally, attention must be paid to the myriad of factors that presently limit the capacity of countries in Africa to negotiate tailored and development-oriented international investment agreements (IIAs) as well as factors that undermine their effective participation in the international investment law regime more generally.  Continue reading »

Mediation use in ISDS by Fatma Khalifa*

Investor State Dispute Settlement (ISDS) has been largely dominated by arbitration as a means of dispute settlement. The problems encountered by parties in ISDS cases and the concerns voiced by multiple stake holders call for attempting new mechanisms, such as mediation, for settling Investor State Disputes (ISD). Mediation in ISDS is rather a new combination of terms. In this paper I will first identify mediation (1), compare it to other dispute settlement mechanisms (2), identify the players in the mediation process and the consent of the Parties (3), briefly explain the mediation process (4), and finally conclude by shedding some remarks on the current status and proposals for a way forward. Continue reading »

South Africa’s Promotion and Protection of Investment Bill: A Brief Outline, by Muhammad Mustaqeem De Gama*


The Cabinet decision of 20 July 2010 specified that an inter-ministerial work group should commence work on an investment protection act for South Africa. Such an act would incorporate, codify and interpret core international law concepts and clarify the level of protection that investors may expect in South Africa. On 1 November 2013 the draft Bill on the Promotion and Protection of Investment [NOTICE 1087 OF 2013 in Government Gazette (GG) No. 36995] (hereinafter “the Bill”) was published for public comment. The notice provided for a three month public comment period. This period came to an end on 31 January 2014. The Department of Trade and Industry is currently assessing the public comments and will introduce the Bill to Parliament as soon as the required technical and constitutional processes have been completed. Continue reading »

Bolivia found to be in Breach of the UK-Bolivia BIT, by Antonio Delgado

On 31 January 2014, an arbitral tribunal consisting of arbitrators José-Miguel Júdice, President, Manuel Conthe and Raúl Vinuesa, found Bolivia liable under the UK-Bolivia bilateral investment treaty for the unlawful expropriation of the 50 per cent stake owned by Rurelec, a UK power investor, in the Bolivian electricity generation company Empresa Eléctrica Guaracachi SA (“EGSA”). According to Rurelec, it is the first known investment treaty case against the state to reach a final award.[1] Continue reading »

New ICSID Statistics (issue 2014-1) made public, by Antonio Delgado

On 31 December 2013, ICSID issued its updated caseload statistics on cases registered and administered by the Centre.[1] As of 31 December 2013, ICSID had registered 459 cases under the 1965 ICSID Convention and the 1978 Additional Facility Rules (AFR). The total number of cases for 2013 has been 40: a 20% drop in the case load compared to 2012.[2] Continue reading »

Africa-China Bilateral Investment Treaties: A Critique by Dr. Uche Ewelukwa Ofodile*

This Article was first published in the Michigan Journal of International Law, Vol. 35(1), 2013.  If you wish to make references to the article please follow the pagination in the Michigan Journal of International Law. 


The purpose of this Article is to draw attention to, raise questions about, and generate discussions regarding the emerging norms, legal context, and long-term development-implications of South-South foreign direct investment (“FDI”) and South-South bilateral investment treaties (“BIT”). This Article seeks to refocus the discourse about FDI and BITs on developing countries in their role as exporters of capital and in the context of the much-touted new geography of investment. Can South-South BITs play a positive role in promoting development in sub-Saharan Africa any more than the Africa-North BITs? Is China concluding development-focused BITs with countries in Africa? The Article identifies the BITs between China and countries in Africa, analyzes the main provisions and the development-dimension of these BITs, and examines the extent to which they differ from model BITs used by Western countries. Continue reading »

Arbitration of Commercial Disputes: Myanmar’s Evolution, by Michael Ramirez*

Myanmar is in the throes of substantial political and economic reform. Investors are eager to engage in the economic opportunity Myanmar has on offer, but are understandably concerned about the lack of certainty in the legal process and particularly when it comes to the resolution of commercial disputes. Continue reading »

Mongolia enacts a new Law on Investment, by Antonio Delgado

Mongolia has recently passed a Law on Investment strengthening the rights of investors and increasing the certainty and predictability of its tax regulations. In addition, the Law creates a State Administrative Body in Charge of Investment Affairs (the “agency”) to promote investments and provide services to investors. The Law, which took effect on 1 November 2013 pursuant to its Article 24, is expected to increase foreign investment flows.[1] Economic growth in Mongolia, which has a population of less than 3 million people, is mainly driven by its copper and coal resources, making investment a top priority for its government.[2] Continue reading »

South Africa’s approach to the implementation of its Investment Policy Framework by Mustaqeem De Gama & Rafia De Gama*

  1. Background

In July 2010[1], the South African Cabinet adopted a new investment policy framework which was aimed at modernising and strengthening the country’s investment regime.[2] Five core measures were mandated by Cabinet for the implementation of the new policy framework: (i) development of foreign investment legislation;[3] (ii) review and termination of existing old generation BITs; (iii) development of a new model BIT; (iv) BITs will only be entered into on the basis of compelling economic and political reasons; and (v) the establishment of an Inter-Ministerial Committee (IMC) to oversee the implementation of these measures. Continue reading »

South Africa’s Foreign Investment Regulation: A revisit, by Azwimpheleli Langalanga*

History of South Africa’s BIT regime

South Africa emerged from international isolation in 1994 after ushering in a majority governance system. It was the last country in the African continent to gain freedom. Most countries which had gained independence during the decolonisation period had engaged in economic nationalism. In Southern Africa, Zambia was one of them. South Africa as the last African country to attain political freedom had to signal to the world and foreign investors in particular that it was a safe investment destination.[1] Continue reading »

ICSID Tribunal Declines Jurisdiction when Confronted with Corruption, by Antonio Delgado

On 4 October 2013, ICSID dispatched the arbitral tribunal’s award in Metal-Tech Ltd v the Republic of Uzbekistan.[1] The tribunal declined jurisdiction after finding that corruption had been established “to an extent sufficient to violate Uzbekistan law in connection with the establishment of the Claimant’s investment in Uzbekistan.”[2] Continue reading »

The OHADA Celebrates its 20th Anniversary, by Antonio Delgado

On 17 October 2013, the Organisation pour l’Harmonisation en Afrique du Droit des Affaires (Organisation for the Harmonization of Business Law in Africa) or OHADA celebrated its 20th anniversary under the presidency of Burkina Faso. A series of events have been organised to commemorate the event, including a meeting of business law experts in Ouagadougou to discuss the achievements and the future prospects of the organisation.[1] Continue reading »

Awaiting the Trans-Pacific Partnership, by Antonio Delgado

Last month, the leaders of Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States and Vietnam announced that the negotiations for completion of the Trans-Pacific Partnership (“TPP”) were on track. Progress was made on the legal texts and annexes that will regulate a diverse range of sectors that include goods and services, investment, financial services, government procurement, and temporary entry markets. The focus of the TPP is now aimed at resolving the outstanding issues and achieving a final agreement by the end of this year.[1] Continue reading »

New ICSID Statistics (2013-2) made public, by José Ángel Rueda

On 31 July 2013 ICSID issued its updated caseload statistics on cases registered and administered by the Centre.[1] As of 30 June 2013 ICSID had registered 433 cases under the 1965 ICSID Convention and the 1978 Additional Facility Rules (AFR). It had registered 14 cases in 2013 until the closure of that document.[2]  Continue reading »