Investment Bill: Nedlac responds favourably to investors
22 December 2014
The draft Promotion and Protection of Investment Bill (Investment Bill) has been under deliberation by the National Economic Development and Labour Council (Nedlac) for the last couple of months following criticism regarding a number of its initial provisions. According to Business Day (27 November 2014: Foreign investors' fears eased with draft bill by Linda Ensor), Nedlac has responded favourably to foreign investors’ concerns regarding the expropriation and dispute settlement provisions of the Investment Bill.
The Investment Bill, which is intended to replace individual bilateral investment treaties and serve as a single point of regulation of foreign investors’ property rights, has been a source of apprehension among various market participants due to various inconsistencies and vagueness pertaining to a number of its provisions. Delegates representing various South African trading partners, including the European Union and the United States, have expressed their concerns that the draft Investment Bill did not offer investors assurance that the government would treat foreign investors in a predictable and equitable manner.
While a revised draft has not been released, Business Day has reported that expropriation of foreign investor's property rights will now be conducted in accordance with the draft Expropriation Bill, which is a law of general application in South Africa. This draft bill will provide investors with more certainty and consistency in respect of potential expropriation procedures. The draft Expropriation Bill also includes a more market based valuation method of property rights instead of the “public interest” based method included in the previous Investment Bill. While international arbitration is not expressly provided for in terms of the draft Expropriation Bill, it is also not expressly prohibited as it is in the old Investment Bill.
Furthermore, according to Business Day, the powers of government to expropriate investments have been limited in terms of the revised Investment Bill. Labour's request for inclusion of obligations on all foreign investors to contribute to transformation in terms of the Investment Bill has also been rejected on the grounds that such provisions are covered by the Broad-Based Black Economic Empowerment Act.