Controversial clause on state ‘custodianship’ of assets cut from bill

The controversial clause in the draft Promotion and Protection of Investment Bill allowing for the state to take “custodianship” of private-sector assets as an alternative to expropriation has been removed from the bill.
Parliament’s trade and industry portfolio committee was informed about the move on Tuesday by Department of Trade and Industry officials during a briefing on the bill, due to be sent to the Cabinet in the first quarter of this year.

The original version of the draft bill averred that various state actions “do not amount to acts of expropriation”. These included “measures which result in the deprivation of property, but where the state does not acquire ownership of such property”. The owners could be local or foreign, and would not be compensated as there would be no expropriation, only custodianship of the assets in the public interest.

According to The South African Institute of Race Relations head of special research, Anthea Jeffery, the offending clause would have covered companies, equities, land, movables and intellectual property, along with mining rights and similar “licences, authorisations or permits … to carry out economic and commercial activities”.

The draft bill, which has already been processed by the National Economic Development and Labour Council (Nedlac), will create an alternative legal framework to the bilateral investment treaties, which are being terminated.

The Nedlac process strengthened protection for investors and removed the expropriation provisions in favour of a generally applicable draft Expropriation Bill. This will provide greater certainty.

The Democratic Alliance and Freedom Front Plus welcomed the withdrawal of the custodianship clause, saying it would have heightened uncertainty among foreign investors, driving them away.

Department of International Relations acting deputy director-general Xolelwa Mlumbi-Peter said the bill provided for the use of domestic courts rather than international arbitration to settle disputes. International arbitrators had tended to favour of “narrow commercial interests” rather than states acting in the public interest.

The bill was needed, she said, to give the government the policy space to legislate in the public interest. – BDLive