The ad hoc committee on legislation amending Section 25 of the Constitution was on Wednesday briefed by the department of trade and industry's deputy director-general of international trade and economic development, Ambassador Xavier Carrim.
The dti presented to Parliament their inputs on the possible impact on SA's international treaties in respect of land reform without compensation. Carrim said that the inputs are not legal opinions, but based on the department's experience with bilateral investment treaties to which SA is a signatory.
"If land of a foreign investor were expropriated and that investor is from a country that has a bilateral investment treaty with South Africa, including if the survival clause [of a terminated treaty] is in effect, the investor could invoke a legal challenge under the bilateral investment treaty against the government, if the investor is not satisfied with the amount of compensation," Carrim said.
International arbitrators will then make a decision on the matter, and will take into account the national law and constitution, Carrim said. However, experience has shown that the standard is for the government to compensate the investor the market value of the investment immediately before expropriation takes place. Carrim explained that between 2008 and 2010, the dti had been a process of reviewing bilateral investment treaties and has even terminated some since then.
While bilateral investment treaties do not make specific reference to land, they do extend protection to investors' assets, he said. These international treaties trump the law of the land. In other words, government can't invoke internal law as justification for not meeting international treaty obligations, he said.
Carrim said the review found that treaties had been discriminatory to domestic investors, and favoured foreign investors. This is not unique to South Africa, but is observed in across the world. There are mounting legal challenges against governments globally in light of various treaties.
South Africa itself has faced two cases. While one matter was withdrawn, in another matter regarding government's failure to adequately protect the property of a Swiss investor, international arbitrators ordered government to compensate the investor with €5bn (around R81bn).
Government has formally terminated 12 agreements, including those with EU countries and Argentina. Government intends to have four agreements with African countries – Nigeria, Zimbabwe, Mauritius and Senegal – to be dealt with through the African Continental Free Trade Agreement.
Government is also still in discussions regarding agreements with China and Russia. Two agreements – Cuba and South Korea – require permission from Parliament to terminate. Carrim explained that the terminated agreements still have "teeth" through survival clauses attached to them.
With the survival clause, even if an agreement is terminated, there is a period of time allowing an investment which was made during the period the treaty was active, to remain protected for a period afterwards. The period could be as long as 20 years, Carrim said. The investor remains empowered to challenge government policy, which might undermine the protection of their assets for the period in which the survival clause is in effect, he explained. Chairperson of the committee Dr Mathole Motshekga said the inputs submitted by the dti will discussed at the meeting next Wednesday.