South Africa's move away from international investor-state dispute: a breakthrough or bad omen for investment in the developing world?

Abstract

In late 2015, the South African government terminated all bilateral investment treaties it had signed with European countries and promulgated the Protection of Investment Act. Among the changes to the country's foreign investment regime introduced by the new Act is the removal of international investment arbitration at the International Centre for the Settlement of Investment Disputes (ICSID). An overview of recent developing-world trends points to an eagerness to facilitate a better balance between foreign investors' interests and those of the host state. In most instances, this is done by introducing domestic courts and tribunals as both first and last resort for foreign investment disputes. Against this backdrop, South Africa's move away from investor-state dispute settlement was not completely unexpected. Questions can however be raised as to whether this is an outright rejection of investor-state dispute settlement, without first establishing some sort of alternative capacity-wise. The article concludes that, in resource-constrained times, it might have been more prudent to safeguard valuable inflows of investment and resist scrapping investor-state dispute settlement in its entirety, at least until workable alternatives-such as the creation of a regional, custom-made investment arbitration system-have been secured.