CENTRE FOR CONSTITUTIONAL RIGHTS Upholding South Africa s Constitutional Accord

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1 CENTRE FOR CONSTITUTIONAL RIGHTS Upholding South Africa s Constitutional Accord Patron: The Hon Mr Justice Ian G Farlam Ms J Fubbs, MP Chairperson: Portfolio Committee on Trade and Industry Parliament of the Republic of South Africa Parliament Street Cape Town 8000 Attention: Mr A Hermans Per ahermans@parliament.gov.za 25 August 2015 Dear Ms Fubbs CONCISE SUBMISSION ON THE PROMOTION AND PROTECTION OF INVESTMENT BILL [B ] Introduction 1. The Centre for Constitutional Rights (CFCR) is a unit of the FW de Klerk Foundation a nonprofit organisation dedicated to promoting and upholding the Constitution of the Republic of South Africa, 1996 (the Constitution). To this end, the CFCR seeks to promote the values, rights and principles provided for in the Constitution; to monitor developments including conduct, policy and draft legislation that might affect the Constitution and the values, rights or principles provided therein; to inform people and organisations of their constitutional rights; and to assist them in claiming their rights. We do so in the interest of every person in South Africa. 2. As such, the CFCR welcomes the opportunity to make a concise submission to the Portfolio Committee on Public Works (the Committee) regarding the Promotion and Protection of Investment Bill [B ] (the Bill) in response to your call for submissions as published on In this regard, please find attached our submission for the Committee s attention and consideration. 3. It is not the purpose or intention of this submission to provide comprehensive legal analysis or technical assessment of the Bill, but rather to draw attention to key concerns in relation to the A UNIT OF THE FW DE KLERK FOUNDATION PO Box 15785, Panorama, 7506, South Africa / Zeezicht Building, Tygerberg Office Park, 163 Uys Krige Drive, Plattekloof, 7500, South Africa Tel: Fax: info@cfcr.org.za Website: NPO //PBO Adv Johan Kruger (Director) Panel of Advisors FW de Klerk (Chairperson Emeritus) Dr Theuns Eloff (Chairperson), Dave Steward (Executive Director), The Hon Mr Justice Ian Farlam (Patron), Sheila Camerer, Prof George Devenish, Prof Pierre du Toit, Adv Paul Hoffman SC, Dr Anthea Jeffery, Dr Penuell Maduna, Johann Marais, Prof Francois Venter, Prof David Welsh, Prof Marinus Wiechers

2 Bill particularly in so far as it relates to the aforementioned constitutional values, rights and principles. 4. The CFCR will be available to elaborate on this submission by way of oral submissions, whether during public hearings, or at any other time as the Committee may deem appropriate. 5. We trust that our submission will be of assistance in guiding the Committee in its deliberations regarding the Bill. Yours sincerely ADV JOHAN KRUGER DIRECTOR: CENTRE FOR CONSTITUTIONAL RIGHTS

3 CONCISE SUBMISSION ON THE PROMOTION AND PROTECTION OF INVESTMENT BILL Legal and Constitutional Framework 1. Vague legislation violates the Rule of Law, a founding value of the Constitution. Moreover, vagueness leads to indeterminacies in the application of the law. 1 In order for legislation to meet the requirements of the Rule of Law, it must be reasonably clear and certain. As such, the law must indicate with reasonable certainty what is required of those bound by it. 2. Policy makers and legislators should draft laws in such a manner that it is clear enough for the average reasonable person to understand what is required by the law. In determining whether a law is unconstitutionally vague, the test is twofold: First, whether the law gives the person of ordinary intelligence a reasonable opportunity to know what is prohibited so that one may act accordingly; and secondly, whether the law provides explicit standards for those applying them to avoid arbitrary and discriminatory enforcement The doctrine of vagueness is founded on the Rule of Law which is a foundational value of our constitutional democracy. It requires that laws must be written in a clear and accessible manner. The law must indicate with reasonable certainty to those who are bound by it what is required of them so that they may regulate their conduct accordingly. 4. Section 36 of the Constitution provides that the rights in the Bill of Rights may be limited, by law of general application and that the limitation should be reasonable and justifiable. The limitation should be subject to considerations such as the nature of the rights and the importance of the purpose of the limitation. Importantly, for the purposes of this submission, section 36(1)(d) states that the relation between the limitation and its purpose should be one such consideration. 5. The right not to be arbitrarily deprived of property is enshrined in section 25 of the Constitution which states in section 25(1) that No one may be deprived of property except in terms of law of general application, and no law may permit arbitrary deprivation of property. A deprivation is arbitrary when the law referred to in section 25(1) either fails to provide sufficient reason for the deprivation or is procedurally unfair. In determining the legitimacy of a deprivation, the purpose of the law and the subsequent deprivation, the Constitutional Court in First National Bank of SA Ltd t/a Wesbank v Commissioner for SARS 3 defined a deprivation of property as being arbitrary if the law in question either fails to provide sufficient reason for the deprivation or is procedurally unfair. In determining the legitimacy of a deprivation, the purpose of the law and the subsequent deprivation must be evaluated. Where the purpose of the law bears no relation to the property and its owner, then it is arbitrary. There should be sufficient justification for the deprivation, otherwise the deprivation is arbitrary. The nature of the relationship between the means and the ends that must exist to justify the deprivation depends on the nature of the property, as well as the extent of the deprivation be it permanent or far- reaching. The greater the extent of the deprivation, the more compelling the purpose and the closer the relationship between the means and ends must be. 1 Affordable Medicines Trust and Others v Minister of Health and Another BCLR 529 (CC) par 34, 36, Grayned v City of Rockland 408 U.S. 104, 109 (1972). Similar sentiments are echoed by Ngcobo J in Affordable Medicines Trust and Others v Minister of Health and Another BCLR 529 (CC)at par SA 768 (CC).

4 6. Section 39(1)(a) and (b) provide that When interpreting the Bill of Rights, a court tribunal or forum must consider international law and may consider foreign law. Application Ad Clause 11 Right to Regulate 7. In terms of clause 11 the government or any organ of state may take any unspecified measures that are necessary for the fulfillment of the Republic s obligations in regard to the maintenance, compliance or restoration of international peace and security, or the protection of the security interests including the financial stability of the Republic. The measures are unspecified and are presented as a set of goals without any apparent limit. So worded, this provision is vague and fails to lend guidance in the exercise of these powers. In the absence of precise wording, the wide powers which are made available to any organs of state may be open to abuse. Moreover, certain matters related to maintaining international peace and security are specifically regulated by the Constitution for instance how the security services may be employed. The aforementioned clause appears to have no regard for those relevant constitutional provisions. 8. The wide powers may possibly contravene the doctrine of vagueness, which requires that laws be clear and accessible. Ad Clause 9 Protection of Property 9. While the clause provides that investors have the right to property in terms of section 25 of the Constitution, section 25 however also provides for the expropriation of property, under a non- arbitrary law of general application, subject to compensation. The fact that the Bill makes provision for any number of unspecified regulatory measures in respect of investments possibly renders the provision arbitrary due to the vagueness of its nature. As such, the Bill may not meet the constitutional obligation to give adequate protection to property rights. Other Considerations 10. The Southern African Development Community Protocol on Finance and Investment of 2006 was ratified in June 2008, coming into force on April In terms of this Protocol, member states are obliged to create favourable conditions for investments through a predictable investment climate. The Protocol provides that investments may not be nationalised or expropriated except for a public purpose against full market value compensation, and further that investors must be give fair and equitable treatment. As such, the provisions of the Bill appear to repudiate South Africa s treaty obligations under the Protocol. This would appear to be in contradiction to section 231 of the Constitution which provides at 231(2) that An international agreement binds the Republic only after it has been approved by resolution in the National Assembly and the National Council of Provinces The provisions of the Protocol are nowhere reflected in the Bill. In terms of sections 39 and 233 of the Constitution, our Courts must consider and apply International Law, including international treaties binding South Africa, such as the aforementioned Protocol. A failure by the Bill to reflect South Africa s obligations in terms of this Protocol, will most likely result in applicable parts of the Bill being declared invalid by a Court.

5 11. The title of the Bill The Promotion and Protection of Investment Bill is misleading because the effect of the Bill will arguably be to result in less protection to foreign investors than they enjoyed in terms of the Bilateral Investment Treaties that the government is in the process of terminating. Due to this, the Bill will most likely not serve to promote but will rather discourage investment. In addition, although the Preamble correctly recognises the importance that investment plays in job creation, economic growth, sustainable development and the well- being of the people of South Africa its effect will not promote the State s commitment to maintaining an open and transparent environment for investments nor will it promote investment by creating an environment that facilitates processes that may affect investment. 12. Ultimately, the seeming failure of the Bill to create an environment conducive to investment lies primarily in its following provisions: The central assurance to foreign investors in clause 7(1) of the Bill that their investments must not be treated less favourably than South African investors in like circumstances is entirely contingent on the degree to which the property rights of South African investors will not be negatively affected by present or future legislation. The right of the State to regulate in terms of clause 11 is reconcilable with the ostensible purposes of the Bill to protect and promote investment only insofar as it will not result in any dilution of the property rights of investors or their ability to conduct their business without unreasonable interference. The provision for international arbitration in clause 12(5) appears to fall short of international requirements and the protection granted in most Bilateral Investment Treaties insofar as it is conditional on a decision by the Minister and would be limited to arbitration between the Republic and the home state of the applicable investor. MS PHEPHELAPHI DUBE 25 AUGUST 2015