Tag Archive | geordin hill-lewis

Changes to Protection of Investment Bill

sent to clients 13 Oct…. updates yet to be posted ….

Unpopular Bill on its way to final vote….

After some marathon debates in the Portfolio Committee on Trade and Industry, Parliament put aside the newly named Protection of Investment Bill (previously the Promotion and Protection of Investment Bill) until after the recent winter recess for members to consider two important substitution clauses suggested by an Opposition member.

Whether the final Bill will meet international expectations still remains a query despite being finally hammered through. (report and details still with clients)

lionel octoberThe Trade and Industry Department (DTI) was represented throughout the two days of clause by clause debate by director-general, Lionel October; Mustaqeem De Gama: DTI Legal Director: International Trade and Investment (ITED) and Counsellor to the WTO; with Ms. Phumelele Ngema: Parliamentary Legal Advisor. This followed earlier hearings which included many submissions from business, industry and institutions such as the Institute of Race Relations.

Taking it seriously

Bearing in mind that a full back-up team from DTI was also present for the first clause-by-clause debate, including Ms. Xolelwa Mlumbi-Peter: DTI Acting Deputy Director General: ITED who promoted the Bill from DTI, it could said that DTI fielded their full team on the issue with a full bench of reserves and consequently had taken all submissions during the Bill’s hearings a week before in a serious light.

Main objections to the Bill had come in the areas in the definition of investment; fair and equitable treatment of both local and international investors on equal terms; the definitions of “property” in the case of expropriation and disputes, particularly the issue of arbitration and the locale and parties involved in such determinations.

Lack of clarity

Specifically complaints were received that Bill as tabled was unclear on the obligations of investors;

ack bdlive

ack bdlive

there appeared to be differences in standards of fair and equitable treatment for international investors; many disliked the omission of a favoured nation clauses; lack of reference in the Bill to exactly what was meant by expropriation; and the fact that DTI in the form of the Minister had express rights to regulate in the public interest and in dispute resolution remedies.

The fact that the Minister “may” allow cases to be referred to international arbitration was, by some, expressed as an objectionable approach to international business relations.

No movement on national bias

In the first meeting  to provide responses to submissions received, Lionel October assuring members that DTI had no intention to act in a manner that reduced investment flows into South Africa.    He said government had a duty to regulate in the public interest and needed the political space to do so. He insisted that any dispute resolution is to be limited at first to domestic remedies with the option, now, of state-to-state arbitration once domestic remedies had been exhausted.

Further, he said, DTI was amenable to deleting the part of the definition of ‘dispute’ that read “provided that a dispute will only arise once the parties agree, or as prescribed by law”. He explained that the proposal that the definition of “measure” could be changed to a definition reading “measure refers to binding governmental action directly affecting an investor or its investment, and includes laws, regulations, and administrative actions…etc.”

Cosmetic change to title

de GamaMustaqeem De Gama, in agreeing to the point that the title of the Bill should be changed to “The Protection of Investment Bill” in the light of the argument that there was little in the way of Promotion, said that he wished to assure all that the phrase regarding “use of available resources” in the clauses on security of investment as only referring to physical security and policing.

It was agreed that the state must provide this type of security on an investment. Wording would apply as such. It was also agreed that the word “dispute” would not be defined as such in the Bill allowing a court to fall back to the normal dictionary definition of the term.

Rights to establish investment

On the right of international enterprises to invest and the restrictive clauses in this respect referred to under Clause 6 as the “ Right of Establishment’”, De Gama said the clause does not seek to deal with or create a right of establishment up front but only sought to require that an investment be established in accordance with domestic laws. He claimed that any state had an inherent right to regulate who does and does not “establish” in their territory.

Opposition members said that wording as such was another investment barrier and Dean Mcpherson (DA) pointed to the Regulation of Land Holdings Bill where it is proposed that no foreign person may own agricultural land.  He felt that South Africa should not be limiting investment but rather welcoming all investment of whatever kind in order to grow the economy. He was wary of specifying who can and cannot invest in South Africa, particularly in the light of other Bills now being processed by Parliament.

State to hold rights on access

DTI responded with the view that “no investors have ever been so bold as to attempt to exempt themselves from following domestic law”. De Gama continued that international law gives any state the right to regulate the access of foreigners to their land. “If the investment negatively impacts the economy, the state should have a right to take action to mitigate these negative effects through various policy spaces”, de Gama concluded.

If expropriation is ever necessary in an extreme case, the Constitution requires just compensation be paid and that was clearly stated in the Constitution, DTI pointed out. Opposition members complained that the exact definition of expropriation per se “in terms of the laws of the country” was still being debated in another Bill, the Expropriation Bill, currently before the Portfolio Committee on Public Works.

Double talk

The chairperson, Joanna Fubbs, refused to allow debate on the subject to continue on the basis that joan fubbs“this definition was the responsibility of another department”. DA member, Geordan Hill Davies, complained that Committee was “just side stepping the issue insofar as The Protection of Investment Bill was concerned” and the apparent avoidance in “debating this issue in this forum just added to the uncertainty of South Africa’s intentions”.

Fair and equitable treatment

Also under the microscope was the issue raised during a submission from American Chamber of Commerce in SA and others during hearings that any form of iron clad promise of fair and equitable treatment of investments by foreign companies was not evident in the Bill. In this regard, Lionel October argued that this could not possibly be the case as South Africa needed investment and the Bill was designed to protect such.

However, the phrase “subject to national legislation” could not be deleted as a matter of state policy and the expression at the outset of the Bill of “in like circumstances” also had to stay in view that “national treatment” was necessary to avoid ambiguity, as previously stated.

Like circumstances issue

Lionel October argued that the SA government would be applying “national treatment” in line with WTO practice. The DTI had never discriminated based on place of origin, he said. The only reason for the ‘like circumstances’ clause in the Bill before them was because, for example, “minor abuses of black empowerment policies”, such policies and others being specific to South Africa, he said.

He said a dispensation had been granted on the issue that international arbitration was only to be allowed at the Minister’s discretion after all domestic legal avenues had been exhausted and to allow state-to-state arbitration to take place. Opposition members argued that in some cases in the world of modern investment this was both an impractical and unenforceable suggestion.

No “certainty”

geordin hill-lewisGeordin Hill-Lewis said this whole section was the crux of the Bill’s weakness in encouraging investment. He felt that the essence was that foreign investors wanted be treated in like manner to domestic investors and the wording of the Bill still implied, or gave the impression, that SA would treat foreign investors less favourably.  In addition, SA could legislate in the future to the further disadvantage of foreign investors. “There was no certainty in the wording at present”, he said.

New clauses

Geordin Hill-Lewis produced two amending clauses, one on “Standards of Treatment” (to be inserted after Clause 7 to become Clause 8) and a further on “Legal Protection of Investments” (to replace Clause 9 which would become Clause 10 because of the above addition). These had been prepared overnight by the DA’s legal advisors.

DTI and all members were asked to study these two clauses during the two week recess when the Bill would be finally concluded. The Chairperson noted that this issue was not closed. DTI confirmed that they would study the recommended changes. In addition, seven issues within the Bill were carried over for further discussion before the Bill could be recommended to go forward until after the recess.

The hearings conducted before the debate included submissions from Anglo-American, SA Institute of Race Relations, Banking Association of SA, The Mandela Institute of Wits University, NUMSA, the EU-SA Chamber of Commerce and the American Chamber of Commerce in SA. All expressed disquiet to varying degrees on the Bill as originally proposed.

(further articles to be posted in due course leading to final committee vote)

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

Expropriation Bill phrases could be re-drafted – ParlyReportSA

Land Holdings Bill joins state acquisition trend – ParlyReportSA

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AGOA : Parliament this week 3 Nov 2015

cropped-sa-parliament-2.jpg

 

Editorial…….

AGOA : What and who to believe….

Reported to clients 5 November……On June 10 2015, a meeting took place in Parliament between the Department of Trade and Industry (DTI) and the Portfolio Committee on Trade and Industry, chaired by Ms. Joanna Fubbs, during which DTI was reporting back on its progress with B-BBEE.

The meeting was interrupted by the appearance of Faizel Ismail, the special SA Trade Ambassador to thefaisel ismail AGOA talks, who dramatically made an announcement with the Chair’s agreement despite nothing on the agenda, to all members of the Committee. To sum up the statement he said that the negotiations on the AGOA trade agreement could be considered a success. There was considerable joy amongst MPs generally.

Then on September 8, Lionel October, Director General of the Department of Trade and Industry (DTI), surely “Mr. Big” when it comes to knowledge of trade relationships and policy with other countries, made the following rather obtuse statement to the PC on Trade and Industry when asked for the current position with regard to the AGOA.

He answered, “As for SA’s US relationship, no one relationship would save SA. The US has decided to re-industrialise with an emphasis on energy development in Africa after a previous emphasis on the service industry. The AGOA had been reviewed, and meat trade issues needed to be resolved but in general the AGOA had grown in its relationships.”

What this was supposed to mean was difficult to interpret. But then discussions were on-going at the time between SA representatives and the US congress over poultry, meat and pork issues and relationships were admittedly difficult. Dumping by the US was the accusation. Lack of certification of SA exports was the reply. Most were downcast.

The context

The occasion for DG October’s remark was DTI’s presentation of its annual report to Parliament, with Minister Rob Davies present, and it was in answer to an Opposition member on the subject. It was apparent to all at the time that the AGOA had not been mentioned as one of the “achievements” of DTI for the year 2014/5 and the first quarter of the present year. That’s as close as Parliament can get to being up-to-date.

Then newspapers announced that South Africa’s inclusion had been agreed to by Congress and the AGOA Bill had been sent to President Obama for signature. The poultry and meat issue had been resolved apparently.

lionel october 3Everybody relaxed and Lionel October told Parliament in a further PC Trade and Industry meeting, this time on the Protection of Investment Bill, that indeed the Bill had indeed gone for signature and all was done and dusted.

Reverse gear

The we heard from the media, not DTI, that everything is held up again after DTI had admitted under pressure that they had failed to meet a poultry declaration deadline under the AGOA. A war of words started on whose fault that was, DTI claiming that the fault was mutual between the US and South Africa.

In the meanwhile we had put the AGOA behind us, the focus having shifted in the meanwhile to watching the Portfolio Committees of Police and awaiting the return of Private Security Industry Bill, President Zuma staying “mum” on the subject and the Cabinet saying nothing in their regular statements from GCIS.

Clearly the preamble to the AGOA agreement had fallen foul with the US Constitution finding this particular Bill objectionable in terms of international obligations on expropriation, presumably connecting AGOA to US investments in the security sector industry where US owned interests stood to lose control of their investments in South Africa. This time it was the US media reporting, not the negotiating parties.

Just recently, Ms. Joanna Fubbs, chairperson of the Trade and Industry Committee, refused Oppositionjoan fubbs members the right to discuss the issue of the Private Security Industry Bill in her Committee, stating that the subject matter was the domain of another Committee. The subject at the time was the Protection of Investment Bill, now passed at committee level, and whether this Bill would contribute further to poor US relationships, as was apparent with the Security Industry Bill already.

 Passing the cushion

But that was not the full truth. The PC Committee on Police, as far as we can establish, has never discussed in depth the implications of the Private Security Industry Bill as far as the AGOA is concerned. Meanwhile President Zuma, who had the Bill and still has, must be perfectly aware of the implications as must the whole Cabinet, since it is not just the poultry industry that is affected but the security industry, the automotive industry and a whole lot more.

This is especially in the light of the fact that, according to reports, this Bill has been mentioned in Congress in front of the SA Ambassador called to Congress to answer on the subject. Nobody knows therefore, if Parliament will again verbalise on the Bill because nobody will come clean on why the Private Security Industry Bill is stuck where it is in the Presidential office.

 AGOA vs Security Bill

Is AGOA on the altar of ideology, one must ask therefore.

courtesy iol

courtesy iol

During a very recent briefing to the PC on Trade and Industry on AGOA progress, Minister Davies told parliamentarians that everything “was in the hands of veterinarians, both on the US side and in South Africa, both parties taking the issues of animal disease and sickness very seriously“. He continued, “It has been more than we dare do in DTI to interfere or intervene in this process. It is supposed to be an independent process. Avian ‘flu in the US is a repeating disease but, however, all is now resolved from an SA perspective.”

The Minister added, “Furthermore on our side we, the Department of Agriculture and Fisheries and their veterinarians have written to the US side to say we are ready to implement all conditions so President Obama can sign. All the deals are done in both the US and SA industries and we just await the US response”, he concluded with Faizel Ismail present.

Dave MacPherson (DA) pointed to the fact that the whole of AGOA would be torpedoed anyway if the Private Security Industry Bill were to go through. Minister Davies responded that the Private Security had not come up once in the AGOA talks with the US. “Too much of this has been a media debate”, he said.

Under pressure

Consequently Minister Davies is fully aware the situation but dealing with the issues as if they were not connected, which could be considered slightly disingenuous. It is known that Minister Davies very much wants the AGOA deal signed but Oppositions members conclude, when asked, that they also cannot think of a single reason for pushing through the Private Security Industry Bill if it is at the expense of the AGOA and growth.

Unless it can be put down to disharmony within the Cabinet or intransigence on the part of the Minister of Police, they say.

As for the future of the AGOA then, for the moment don’t hold your breath but rather cross your fingers that Cabinet as a whole will come out of its ideological bubble, if this is the case.

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