On 1 November 2013, the South African government announced that a new law will come into force during 2014 which will not only replace a number of individual, 20 year old treaties but will also exclude foreign investors from any recourse to international arbitration. The controversial new Promotion and Protection of Investment Bill (PPI Bill) will, according to its myriad foreign critics, leave foreign investors and their investments inadequately protected.

Under the current regime, foreign investments in South Africa are protected and promoted by a number of Bilateral Investment Treaties (BITs) between South Africa and a number of other countries with which it conducts trade. These treaties provide foreign national investors with protection against expropriation whilst also affording those investors the opportunity to enforce these protections directly against the South African government. The BITs also offer the same protections to any South African national investing in those countries with which South Africa has concluded the BIT. Ordinarily, disputes under the BITs between nationals and the relevant trade partner can usually be settled by submitting to international arbitration at the discretion of the foreign investor. In circumstances where there is no BIT in place, an aggrieved investor has to pursue any remedies available under South African law.

Des Williams, chairman of Werksman Attorneys, suggests the major concern for foreign investors under the PPI Bill is that it marks a shift towards an expropriation regime based on ‘fair and equitable compensation’ and ‘an equitable balance between the public interest and the interest of those affected’, rather than market value. “The response of foreign investors to this shift has, understandably, been negative,” he says.

In March 2013 US District Judge Lucy Koh overturned a jury’s damage award to Apple from Samsung relating to 13 contested devices. Judge Koh decided that during the trial which led to the original award for Apple, the jury had relied on incorrect legal theories to set damages. The judge subsequently reduced the applicable damages by $400m. On 22 November it was decided that Samsung must pay a further $290m in damages. A further trial is planned for March 2014 in order to determine whether or not a number of other Samsung devices also violate Apple’s patents.

Jan-Mar 2014 issue

Richard Summerfield