International treaties will make expropriation without compensation even trickier

The ad hoc committee on Section 25 – appointed by parliament to initiate the possible amendment to section 25 of the constitution last week – learnt that there were 49 bilateral international treaties it has to observe if it intended to change the constitution to be in line with appropriation without compensation.

The treaties contained legal prescripts on the expropriation and compensation on property of any investors from countries it was co-signatory within those treaties.

The SA government may face a challenge if the new legislation could be construed to impact negatively on the value of land belonging to a foreign investor.

According to Xavier Carim, deputy director-general: international trade and economic development division in the department of trade and industry, who was invited by the committee to brief it, article 10 of the 2015 Investment Act on legal protection of investment reads: “Investors have the right to property in terms of section 25 of the Constitution,” Carim said.

He said a change to the Investment Act may be required if Section 25 of the constitution is adjusted. Some of the jurisprudence on investment treaties refer to a standard of “legitimate expectation” in respect to returns from investment.

This process could not only prove to be challenging for the committee, but it added to fears expressed by many economists that such expropriation would scare investors.

Committee chairperson Dr Mathole Motshekga said the bilateral treaties did not refer to “land”, but was to extend protection to investments defined in open-ended terms in an asset-based approach.

“This covers ‘every kind of asset’ of an investor in the territory of the host country,” Motshekga said.

Carim said that if the land of a foreign investor is expropriated and that investor was a citizen of a country with a bilateral investment treaty with South Africa, the affected investor would be in a position to invoke a legal challenge against the South African government if the investor is not satisfied with the compensation offered.

The committee is expected to finish its work, including consultations, by March.

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