Tag Archive | BITs

Government stirs on intellectual property plans

New approach to SA intellectual property 

……sent to clients Aug 1trademark logo6…. The Cabinet has agreed that a new intellectual property (IP) framework is needed and has asked that discussions commence with all stakeholders in order to set out a future IP policy for South Africa.

In 2013 the South African government released a draft IP policy which ran
into heavy weather because of ambiguities and anomalies at law. This previous attempt was rejected by Parliament.

dti-logo2Since that time, the private sector has complained of no movement from the Department of Trade and Industry (DTI) on the subject, or even the Department of Justice and Constitutional Affairs.

Hidden agendas?

Suspicions existed that a lot more was written “between the lines” by DTI in the light of a feeling that government medical authorities, including the Minister of Health and a large number of public sector entities, were favouring the case for making it easier for generics to come on to the market in view of the wish to introduce national health insurance and cheaper medicines.

copyright graphicThe law courts, always sticklers in their respect for the international word of law, favoured, it seemed, external legal international precedent as the basis for a new approach.

Discussions with DTI surrounded their attitudes and their not so transparent views on the Trade-related Aspects of Intellectual Property Rights agreement (TRIPS). However, that approach may have altered with DTI now more openly favouring Bi-lateral Trade Agreements (BITs).

Bad influence

In 2014, the whole question of IP policy became mired in controversy with a statement from a US-based lobby group based from Washington who surprised all by stating they were working with the local pharmaceutical
industry to influence the SA government and also the Department of Health (DOH) in particular in order to gain more ear to the international view. This was subsequently denied by the pharmaceutical world in SA (IPASA).

The whole matter appeared to inflame the incumbent Minister of Health, Dr Aaron Motsoaledi, who will no doubt be a key player in the new discussions.
After this the 2013 proposals seemed to fall away. Parliamentary hearings were at the time controversial, to say the least.

The major complaints boiled down to the fact that there were no time frames in the government proposals; no regulatory impact assessment had been done; and there was no appearance of a follow through of the effect of the Bill on international commercial ties.

Expert patent lawyers complained of ambiguity and lack of clarity at law.

Where it stood

After some heated debates at the time it appears that TRIPS, despite BITs copyright symboleven then being a new DTI “hobby horse”, has been respected by DTI and the generalised view accepted by most that there would be compulsory local patent registration based on a localised validity acceptance and acceptance by a localised body of all medicines dispensed. The query remained, however, on the skills available to undertake such a policy and time lags.

Whether the originally proposed patents tribunal will have final say in dispute or the High Court of SA will no doubt now be debated, as well as the critical issue of the length and duration of registered patents in a transparent manner with experts and a broad based body to represent the private sector.
As before, probably a “workshop” will be called for to air views.
Previous articles on category subject
Impasse on intellectual property rights – ParlyReportSA
Intellectual property law still in limbo – ParlyReportSA
Intellectual Property Laws Bill goes forward – ParlyReportSA
Medical and food intellectual property tackled – ParlyReportSA

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International Arbitration Bill to replace BITs

Arbitration Bill gets SA in line with UNCTRAL …..

global trade graphicThe tabling of the International Arbitration Bill in Parliament will see ‘normalisation’ on a number of issues regarding arbitration between foreign companies operating in South Africa. This is if the Department of Trade and Industry (DTI) policy recently expressed in Parliament by Minister of Trade and Industry, Rob Davies, is to be understood.

The Bill, as is the case with all international legal matters, will  be tabled by the Minister of Justice and Constitutional Development according to a government notice recently published.      Not all investors are necessarily impressed however, some preferring state-to-state bilateral trade treaties (BITs).   South Africa is now adopting the broader approach adopted by some international countries, including China.

Allowing arbitration outside of local courts

As far as is understood, as non-legal observers, formal agreement on the allowance on arbitration proceduresarbitration according to agreed procedures between trading parties will be instituted and local court procedures can be avoided if so wished.  The fact that South Africa has also very recently announced the launch of the China Africa Joint Arbitration Centre (CAJAC), “symbolising the deepening economic relationship between China and African economies”, seems to provide a background to the proposed Bill.

The route now to be followed by South Africa, it appears, is one of a number of limited ways that can improve access to justice services for companies doing business outside the country and foreign companies operating in South Africa and this seems to be the basis of DTI thought on the matter.

Down the track

Legal advice is better followed but a draft Bill it would now appear is being concluded in parliamentary terms.

unictral 1Such arbitration methods have terms which are non-country-specific.  In terms of adoption, the standards of ethical conduct devised by the UN trade body, the UN Commission on International Trade Law (UNCTRAL) and its manifesto, according to the background of the draft Bill, have been included.

BITs on way out

International arbitration can then be operated,it is proposed, between companies or individuals in different states usually by including a provision for future disputes in a contract with UNCTRAL. This is the next stage of the DTI’s moves to finalize the policy of discontinuation of bi-lateral trade agreements (BITs) with individual countries. The whole issue is based upon disputes that may arise and the new Bill now before Parliament follows the new route, which may mollify those parties complaining of BITs discontinuation.

More importantly DTI states, it lines South Africa up with the Model Law on International Commercial Arbitration, which has been adopted by UNCTRAL.   This model law is not binding but individual states may adopt such legislation by incorporating it into their own domestic law, which is now proposed.

It is understood that the current legislation could bind South Africa as a UN member of UNCTRAL but the rules to be adopted are a separate issue at the moment and will govern individual companies in any dispute that may arise under the new circumstances.

Again, specialist advice should be sought on this whole subject.

Previous articles on category subject

Protection of Investment Bill finally passed – ParlyReportSA

Changes to Protection of Investment Bill – ParlyReportSA

Promotion and Protection of Investment Bill re-tabled

Promotion and Protection of Investment Bill opens up major row – ParlyReportSA

Posted in Earlier Stories, Facebook and Twitter, Finance, economic, Justice, constitutional, LinkedIn, Special Recent Posts, Trade & Industry0 Comments

Sept workshop: Protection of Investment Bill

Report to clients 15 Sept. Two more posts to follow…

Initial discussions on Investment Bill…

In a parliamentary Trade and Industry Committee workshop, two professors of law at South AfricanCOMMITTEES_large universities stated that the Promotion and Protection of Investment Bill (as it was then called) seemed to be little about promotion of investment but more about local protection.

Nevertheless, both felt that localised jurisdiction was the more appropriate way to settle issues under arbitration conditions in the South African context; was in line with SADC modelling and introduced the elements of national interest and “fairness”, which they said international arbitration often precluded.

Both added that some of the vague wording and definitions had to be tightened up upon if the Bill was to be a useful tool in encouraging developmental investment and that, in purely legal terms, their view was that the Bill would pass constitutional muster.

Legal minds

joan fubbsMs. Joanna Fubbs, chairperson of the committee, had invited a number of legal and trade entities to share opinion on the new Bill under relaxed workshop discussion rules and on the invite list was Prof. Riekie Wandrag of University of Western Cape and Prof. Jonathan Klaaren of Wits University.

Department of Trade and Industry (DTI) also made a presentation by Ms. Xolelwa Mlumbi-Peter, who was to be leading DTI’s briefing of Parliament on the PPI Bill in the coming days.

 International views

An international guest to report on the PPI Bill was a United Nations Conference on Trade and Development (Unctad) representative, James Zhan, who noted that the proposals contained in the Bill seemed to be following the new trend, particularly in developing countries.

It was now becoming standard practice, he said, not to have traditional bilateral trade treaties (BITs) butzahn rather an agreement that favoured economic development in the host country and subject to the laws of that country.

Unctad led most of the discussions during the debate and stated that any such legislation as proposed by the PPI Bill could “fill an important gap in the developmental role of a country and help with economic development.”

The trend in many countries such as South Africa, Mr Zhan said, was to move away from BITs which tended to be a legacy from the past. However, he added that this was not the whole story. What was put in its place, such a Bill as proposed, had to be part of a whole regulatory framework that encouraged development strategies as well as investment. One could not be without the other.

 Part of a state policy perhaps

D Macpherson DAWhen asked by DA member, Dean Macpherson, if he was aware that the PPI Bill was part of a whole number of Bills that were part of the South African government’s present land and state expropriation policy, such as the Expropriation Bill and a draft Land Holdings Bill, Mr Zahn said he was not asked to talk on these further Bills or discuss any state policy nor was he asked to study the wording of the Bill before them in detail.

His brief, he said, was merely to comment on the Bill as this was a workshop and on the basis of what was happening elsewhere in the world and the role of Unctad. Each government had its own policies and laws and it was not Unctad’s role to get involved in specific national issues.

On issues of arbitration on BITs resulting from disagreements with host countries, he said globally there were over 3,500 treaties of some sort in operation in 160 countries on trade at any one time and, on average, a new treaty is signed every week including mega regional BITs.   He said “few countries were satisfied with the current international trade regime” and it was fast changing.

 Where the argument comes

He said most arbitration matters or points of disagreement arose over waste collection, treatment and disposal (3%); transportation and storage (3%); the manufacture of food products (4%); real estate (4%); telecommunications (6%); construction (8%); financial services and insurance issues (9%); mining and gas (16%); supply of electricity (19%); and other varied issues (28%).

65% of arbitration cases were decided in favour of the businesses involved and 35% in favour of the state involved.    Zahn said that “the world was going through a period of reflection on trade agreements” and whilst companies in the major trading nations in some cases might prefer BITs, most of them were coming to terms with the fact that many smaller nations, especially those with poor communities, were asking for national priorities to be included in packages.

History of up and down

In terms of foreign direct investment (FDI), South Africa was amongst the world’s top recipients but South Africa’s graph of incoming funds since 1994 was “lumpy” he said, “sometimes up and sometimes down due to the fact that most projects in South Africa were very large infrastructure projects and only occurred now and then”.

FDI graphAs far as FDI was concerned, the UK was by far the largest supplier of FDI in South Africa (48%), with the Netherlands coming in at 16%; the US at 6%; Germany at 5%; and China at 4%.  Financial destinations provide 40% of FDI applications in SA; mining, quarrying and petroleum at 28%; and manufacturing at 17%.   Transport, storage and communications was at 10% and gas, water and electricity, at this stage, almost 0%.  The reason for the odd groupings was not given.

Zahn said Unctad saw this Bill as a natural bridge to the country’s own developmental strategies and it was in general was in line with Unctad’s core principles. When asked by Opposition MPs if the wording regarding “the public interest” and vagaries of allowing the Minister to decide if an investor may use international arbitration methods on disagreements worried him at all, Chairperson Joanna Fubbs stepped in and said that the meeting was a workshop, not a clause by clause debate on the Bill.

 Findings often obscure

However, Zahn did say that he could only opinionate in broad terms and state what the rest of the world was doing in general terms. The point was that arbitration under BITs was a different issue to the state to state relationships envisaged by the Bill before the workshop but he noted that many international arbitration findings in favour of the investing company were on obscure technical points and had little to do with the investment itself and the country in which the investment was made.

He understood, however, that whilst the Bill might not be coming at a good time from the point of global economic factors, “it was a good Bill generally in broad principle and it was a good time to set up new structures”.

Gives policy space

 Jonathan klaarenProf. Jonathan Klaaren of Wits University said in broad terms BITs probably do not affect a leaning towards good developmental investment but do not hurt inward flows of capital. Thus he felt that DTI, by giving protection for inward and outward SA investments and retaining “policy space for a legal and policy framework attuned to sustainable development”, allowed South Africa to do some of “the agenda setting”.

He agreed with the recent Policy Review on trade treaties which stated that BITs tended to open the door to narrow commercial interests and that matters of national interest became subject to unpredictable international arbitration outcomes if they went wrong. “This may lead to a result that may constitute a direct challenge to legitimate, constitutional and democratic policy making”, he said.

In his view, procedural “fairness” contained in a domestic jurisdiction approach was superior to the arguments often given in favour of “fairness” at international level. He said the “fairness” was guaranteed with a robust judicial system such as existed in South Africa whereas in the international environment of arbitration, quite often “fairness” was not reached because of obscure legal issues. The national interest of a country was therefore made irrelevant because of a technical point at law.

He noted that issues of economic development could not be addressed outside of borders but human rights issues such as land grabs in Zimbabwe were coming into the matter and involved the SA Law Society at the moment who were deciding upon such issues. At the moment the SADC Arbitration Tribunal was only state to state, so matters raised in this workshop fell away.

The future with SADC

reikie wandragProf. Rieikie Wandrag of the Faculty of Law, UCW, gave a detailed comparison with existing SADC investment protocols and hoped-for changes being negotiated. She also drew comparisons with the East Africa COMESA trading bloc.

She said the Bill was generally in line with the regional perspective in SADC and Africa generally and that the PPI Bill attempted to address most of the concerns currently being expressed in many developmental regions. Prof. Wandrag undertook a comparison of expropriation wording; the use of the expression “in like circumstances” in each region, which was usually the contentious area in any such Bill; and how each region dealt with the area of “fair and just compensation”.

DTI’s view

DTI’s Xolelwa Mlumbi-Peter complained that arbitration panels produced inconsistent interpretations even on similar matters and undermined in their view the predictability of investment law.   She said that with international arbitration, DTI had noted that matters were shrouded in secrecy; rulings were not published because of confidential rules and which affected governments; whilst matters were not generally conducted on a “proper state-to-state basis”.

 Social imperatives to be included

She said the trend was now to have state-to-state international investment agreements, where implications for countries was involved and arbitration issues could not avoid local courts or the laws of the country where the investment took place. Broader social and public imperatives would have to be considered when considering investment because, DTII said, it had to be understood that South Africa was engaged in a process of socio-economic transformation.

The agenda in South Africa was set by the NDP, New Growth Plan and IPAPs in addition to the local laws of the land, Mlumbi-Peter said, and the implementation of this “ambitious development agenda required the development of new policies and regulations whilst ensuring that South Africa remained open to foreign investment and trade”.

The workshop concluded with the chairperson pointing out that the idea had been to “set the scene” for parliamentarians on the forthcoming hearings and the reasons for introducing such a Bill.
Other articles in this category or as background
Promotion and Protection of Investment Bill re-tabled
Promotion and Protection of Investment Bill opens up major row – ParlyReportSA
Protection of Personal Information Bill almost concluded

Posted in Special Recent Posts, Trade & Industry0 Comments

Promotion and Protection of Investment Bill re-tabled

Revised Investment Bill gives some ground…..

Rob+DaviesA crucially re-amended version of the Promotion and Protection of Investment Bill has been re-tabled in Parliament by DTI that gives ground to some degree on the question of rights of investors regarding international arbitration regarding disputes in terms of the new ground breaking  legislation.

During his budget vote speech, Trade and Industry Minister, Rob Davies, stated that the Promotion and Protection of Investment Bill would finally be retabled in Parliament, meaning that it will definitely not be signed into law as it was and that it would be subject to changes.

That Bill has now been re- tabled and no doubt being studied by all.

Past bilaterals respectedPromotion and Protection of Investment Bill 

Promoted by Minister Davies specifically, the Bill as it was voted through but not signed by the President ignored existing bilateral investment treaties (BITs) between South Africa and other countries in the EU whilst extending protection to new investors from all other countries. The new Bill as amended clarifies that this does not apply retrospectively.

Minister Davies said at the time, which was worrying to many foreign companies, that there was a trend he felt amongst developing countries to ignore such treaties although they might have been agreed to by previous governments.

Impediment to investment

Africa-map-with-coinsUnder BITs at present, trading investors are allowed to have arbitration proceedings as laid down by World Bank rules.   International arbitration, for obvious reasons, is preferred by investors as it is impartial and not in the hands of the country invested in, as is promoted the Promotion and Protection of Investment Bill making it localised.

Minister Davies is on record as saying that that “South Africa had significant foreign direct investment from the US, Japan, Malaysia, India and other countries, and we have no bilateral investment treaties with them”. He commented in Parliament, some time before this budget vote speech, that such bi-lateral agreements on the whole were “irrelevant”.

The Bill as it stood allowed for acquisition by the state in the ownership of foreign companies “in a just and equitable manner”.  Such nebulous wording was rejected by the international business community in South Africa. Minister Davies said at the time when the Bill was passing through the portfolio committee on trade and industry, that “protection for overseas investors will be in terms of South Africa’s Constitution”, which he said, “provided significant and robust protection for investors and for property, both domestic and foreign.”

A “Bit” better

legalWhat the re-written Bill contains is a clause granting an investor the right to be treated no less favourably than South African investors as long as their investments are ‘‘in like circumstances’’. This is qualified by the clause which states, “The Bill provides for the security of investors and their investments. It seeks to clarify that the Republic bears no greater obligation to foreign investors than to its own investors in respect of their investments.”

However, on the rights under BITs agreements for arbitration or mediation internationally on new investment, it would appear that DTI have relented to some degree. After describing the whole process of local mediation which has to be undertaken first, the re-drafted Bill still insisting on this, a clause has been inserted that “the government may consent to international arbitration in respect of investments covered by this Act, subject to the exhaustion of domestic remedies. Such arbitration will be conducted between the Republic and the home state of the applicable investor.”

The Bill is now being digested and presumably Parliament will announce new hearings and call for further submissions.

Other Bills coming

ack bdlive

ack bdlive

In his budget vote speech a few weeks ago, Minister Davies confirmed that a Copyright Amendment Bill would also come before Parliament in the current financial year, together with a National Gambling Amendment Bill (as distinct from the Remote Gambling Amendment Bill before Parliament at present).

He also referred to a Liquor Amendment Bill which is suspected of being somewhat draconian. The whereabouts of the Intellectual Property Rights policy paper is also long outstanding from the Department of Trade and Industry.

Other articles in this category or as background
Promotion and Protection of Investment Bill opens up major row – ParlyReportSA
Private Security Industry Bill comes closer – ParlyReportSA

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