South Africa Plans To Terminate And Renegotiate Treaties That Include Corporate Sovereignty

from the fair's-fair dept

Despite the growing evidence that corporate sovereignty clauses in international treaties pose considerable risks to nations that sign them, such “investor-state dispute settlement” (ISDS) mechanisms are present in both TPP and TAFTA/TTIP — at least as far as we know: it’s hard to be sure given the obsessive secrecy surrounding them.

South Africa has experienced first hand the reality of those bland-sounding systems and the behind-closed-doors tribunals that implement them. Here’s what happened when it set about transforming the country after apartheid, as this column on the South African Independent Online site explains:

One would assume that no nation state would have the audacity to file such a [ISDS] claim against a post-apartheid country that has been widely held up as a model for the world. That, however, didn’t stop European firms from filing claims under their bilateral investment treaties. Worse, they went right at the core of South Africa’s post-apartheid transformation plan.

The reason the country was taken to these private tribunals was an attempt to shoot down South Africa’s policy to seek greater equality in its lucrative mining sector. South Africa had required that these companies be partly owned by “historically disadvantaged persons”.

Allowing external investors to dictate its social policies was unacceptable, and South Africa decided to review its other investment agreements to see if there were dangers there too. The problem turned out to be systemic:

Bilateral investment treaties, the review found, “pose risks and limitations on the ability of the government to pursue its constitutional-based transformation agenda”.

Since this review South Africa has further concluded that “bilateral investment treaties were now outdated and posed growing risks to policymaking in the public interest”. On that basis, the government has recently moved to terminate many of its bilateral investment treaties.

The dogma is that without such bilateral treaties and their guarantees of corporate sovereignty, external investors would be reluctant to invest in a country. But that turns out not to be true:

South Africa actually receives far more capital inflows from nations with which it does not have bilateral investment treaties than from nations with which it has a treaty. Therefore, renegotiating them should not cause capital flight.

Freed from the necessity to accept whatever terms other countries might seek to impose on it, South Africa is now able to renegotiate bilateral agreements that are fair and that preserve its right to pass laws as it sees fit, unconstrained by legal threats from foreign investors. The Independent Online article points out:

South Africa’s efforts should not be seen in isolation. India is also undergoing a national review of its bilateral investment treaties. A group of 12 Latin American nations has recently convened to rethink the benefits of bilateral investment treaties, and the subject is under discussion at the [African Union].

Brazil, a country that did its homework ahead of time and does not negotiate bilateral investment treaties, is putting forth an alternative model for negotiating treaties that may serve as a template for others.

Over the next several years, we will thus see an increasing number of nation states withdrawing from their investment treaties and offering more balanced alternatives.

If that proves to be the case, it could be that those countries signing up for one-sided and inequitable ISDS clauses in TPP and TAFTA/TTIP will come to regret not choosing to preserve their sovereignty as South Africa has done.

Follow me @glynmoody on Twitter or, and +glynmoody on Google+

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Comments on “South Africa Plans To Terminate And Renegotiate Treaties That Include Corporate Sovereignty”

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Anonymous Coward says:

the USA started this, all to gain advantages when countries rejected companies products, even under safety grounds. the TPP etc are such treaties. if other countries are stupid enough to carry on negotiations under these terms, bigger bloody fools them. it’s why the USA wants the latest negotiations to be conducted in further secrecy, in the USA and signed before the years end. let’s hope this little piece of news fires up more countries to reject deals that better the USA and it’s businesses above all others!

Ninja (profile) says:

Epic win for both South Africa and Brazil (and others who are giving the middle finger to these bullshit treaties). If the “developed countries” want to build their little club they can do it among themselves. It’s not like they’ll find minerals, food and other commodities elsewhere in the quantities they need.

Kittens pretending they are lions are not threatening.

Brazilian Guy says:

Re: Brazil refusal of bilateral investment treaties

Well, at least our politicians didn’t screw us that specific way. Of course, whenever someone mentions Chile’s treaties with US and European Union, a persistent sector of our national press and industry start screaming that we are being marxists, that the government is refusing vital investment to modernize our economy, etc.

If we could streamline our tax code, there would be way more investors in Brazil.

Anonymous Coward says:

you do seem a bit confused here, you seem to think the “process” is more important than the product, or that the product will be substantively different because the process is different.

Do you honestly believe that end result will be any different because some parts of the process are slightly different ?

A treaty is a AGREEMENT between the sides involved, how you reach that agreement is probably not going to change the substance of that agreement.

But if it fill this blog up all the better I say,, more page hits, more $$$$$

That One Guy (profile) says:

Re: Re:

‘How’ is actually quite important for treaty discussions, when one side has all the cards(or at least can convince the other side of that), they can demand concessions that they wouldn’t be able to get were things on a more even footing.

In this case those countries/companies who thought that they had the upper hand are likely to find out the hard way that that is no longer true, due to the fact that other countries not bound by such restrictive treaty/agreement wording are not only equally profitable for South Africa, but actually more profitable, so like it or not the treaty/trade agreement negotiations this time around are likely to be noticeably different than they were the first time, and not in the foreign company/county’s favor.

trendless says:

Wish we did this, too

I can see folks that still want to be proud of the country the live in immigrating to a country that protects its citizens and acts in their best interests. I have never lived in Brazil or South Africa and have no genealogical links to either, but feel in many ways more kinship and more pride towards them than my home country, of which I’ve been a citizen since birth.

Anonymous Handler says:

Who's America?

“let’s hope this little piece of news fires up more countries to reject deals that better the USA and it’s businesses above all others!”

I would chance this to say “businesses that have great influence with the U.S. Executive and Congress”. The vast majority of America, meaning it’s citizens, see no gain and considerable harm from these deals. It is very much a corporate/10%er thing.

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