Policy Framework

Bilateral Investment Treaty Policy
Framework Review
Briefing to Portfolio Committee on Trade & Industry
6 October 2009
Presented by:
Mr Xavier Carim- Deputy Director General
&
Ms Sureiya Adam
Director- Special Projects
International Trade & Economic Development Division
1
Background
• Rapid increase in BITs during 90’s and

investment related disputes globally
• Recent litigation- Italian investors
• BITs review processes initiated in other
jurisdictions, including developed countries
• Increased momentum in debate around the
lack of flexbility and erosion of
developmental imperatives in traditional
BITs
• Lack of guiding principles informing process
2
What is a BIT?
• Treaty between two countries to protect and
promote investments in the territory of the
other party
• Also referred to as:
Investment Promotion and Protection
Agreements (IPPAs) or
Bilateral Investment Promotion Agreements
(BIPAs) or
Reciprocal Investment Promotion
Agreements (RIPAs)
3
RSA BITs at a Glance
RSA BITs concluded since 1994
14 1998
12
10
8
6 1995
1997
4 2000
2004
2 1996 2002
1994 2007
0
Year
4
RSA BITs at a Glance
RSA BITs concluded per region

Africa Europe
16
14
12
10 Africa
8 Asia
Middle East Europe
6
Americas Middle East
4
Asia Americas
2
0
Regions
5
Structure of Review
Mandate
• Review BITs
• Identify legal risks and other
contingencies
• Develop Model BIT
• Make recommendations to Cabinet in
light of findings
6
Structure of Review
Methodology
- Stock-take and assessment of existing BITs
– Reconciliation of records within ITED as well as

DIRCO
– Macro review- conducted on basis of interviews at

desk manager level
– Micro review- legal analysis of texts

7
Macro Review
• Questionnaire
– Bilateral desk managers
– SACU, SADC, AU and NEPAD desks
– DFA
– Presidency
• Purpose
– Identification of BITs with bilateral partners
– Strategies underpinning conclusion of BITs – focus on
outward and inward investment strategies
– Emerging challenges and needs assessment in respect of
BITs
8
Macro Review
Basis of FDI policy
• Conclusion of early BITs historic – coincide with RSA’s entry
into global community
• Ad-hoc basis - generic mix of agreements with bilateral partner
• Lack of clear FDI policy
Outward Investment Strategies
• Varying approaches
• Driven by need for protection of SA investors
Inward Investment Strategies

• Perceived risks associated with investing in Africa
9
Macro Review
Observations
• Significant increase in BITs globally
particularly between developing nations
• Review of BITs in several jurisdictions
including both developed and developing
countries
• Independent research also points to the need
for greater developmental emphasis in BITs
10
Micro Review
• Analysis of 11 standard clauses found typically in BITs
concluded by RSA
• Preamble
• Definition of investment and investor
• Geographic application
• Duration and termination
• Standards of treatment
• Expropriation
• Transfer of funds
• Dispute resolution
11
Standard Clauses
• National Treatment and Most-Favoured Nation
Neither Contracting Party shall in its territory subject
investments or returns of
nationals or companies of the other Contracting Party to
treatment less favourable
than that which it accords to investments or returns of its
own nationals or companies
or to investments or returns of nationals or companies of
any third State. (RSA-UK BIT, 1994)
12
Standard Clauses
Expropriation
Early BITs provide for “immediate, full and
effective compensation”
Developing countries prefer “appropriate
compensation”
RSA Constitution refers to “just and
equitable compensation” (Section 25(2))
13
Standard Clauses
Dispute Resolution
BITs gave rise to investor-state disputes
Extensive powers to tribunals to rule on
issues related to public policy
Permits investors to leapfrog domestic
legal systems
New approach to dispute resolution
sought
14
Micro Review
Observations
- text of 1st generation BITS one-sided
- based on OECD model of BITs
- later BITs clearly reflect changing
investment context
- future BITs need to provide for
developmental objectives of host state &
exhaustion of domestic legal remedies
15
Status and Progress
• March 09 -1st draft finalised & circulated for intra-govt
comment
• April 09- government stakeholders workshop
• May 09- extension for further government input
• June 09- 2nd draft circulated for public comment
• Aug 09- external stakeholders workshop
• Sept 09- additional comments received from SAHRC
& UN
• Oct 09 – 3rd draft in progress in preparation for
submission to Cabinet
16
Comments Received
Reflect concerns pertaining to:
• Upholding human rights
• Ensuring developmental policy space
for RSA
• Compliance with the Constitution
• Need for data on FDI trends
• Need for protection of SA business
interests
17
Recommendations
• Assessment of current position & risks
• Learning from experience of others
• Lapsing of existing 1st generation BITs
• Negotiation of new texts based on template in
future
• Empirical data and analysis of FDI trends
important
• Safeguarding RSA policy space and
developmental priorities
18
Thank You
19

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Bilateral Investment Treaty Policy

• Rapid increase in BITs during 90’s and

RSA BITs concluded per region

- Stock-take and assessment of existing BITs

– Reconciliation of records within ITED as well as

– Macro review- conducted on basis of interviews at

– Micro review- legal analysis of texts

Inward Investment Strategies

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