SOUTH AFRICA Trends and Developments Contributed by: Jonathan Ripley-Evans, Fiorella Noriega Del Valle, Veronica Connolly and Kyle Melville, Herbert Smith Freehills Kramer
remains to be seen whether the other divisions of the High Court will follow suit. Investment Treaty Arbitration: a Deliberate Departure South Africa made a deliberate choice not to become a signatory to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, more commonly known as the ICSID Convention. That decision was followed in 2009 by the termination (or non-renewal) of nine of the coun - try’s bilateral investment treaties (BITs), and by a wave of further terminations in the years that followed. Although many such BITs contained lengthy sunset provisions, most of those periods have now expired or will expire in the coming years, with the result that the investor protections provided under those treaties have been, or will soon be, extinguished. This course of action left little room for ambiguity regarding the South African government’s disposition towards the traditional architecture of investor protection under international law. Taken together, these steps rep - resented an unambiguous signal that South Africa intended to chart its own path in the governance of foreign investment relationships. The Protection of Investment Act (PIA) emerged as the government’s answer to the resulting regulatory gap, and now constitutes the primary legislative instru - ment governing the legal relationship between the South African State and foreign investors. The PIA is not without precedent in the broader landscape of investment regulation: it incorporates provisions char - acteristic of more recent treaty practice, most notably the explicit reservation of the State’s right to regulate in the public interest under Section 12. Of particular significance, however, is the PIA’s approach to dis - pute resolution, which provides for three mechanisms through which investment disputes may be resolved: • mediation between the foreign investor and the government (Section 13 (1)); • traditional court litigation (Section 13 (4)); and • arbitration conducted between the Republic and the home state of the relevant investor, subject to the prior exhaustion of domestic remedies (Section 13 (5)).
In so far as arbitration is concerned, Section 13 (5) of the PIA provides as follows: “the government may consent to international arbitration in respect of invest - ments covered by this Act, subject to the exhaustion of domestic remedies.” Notwithstanding the South African government’s evi - dent reluctance to embrace arbitration as the default mechanism for the resolution of investment disputes, certain South African judges have expressed views that align with the substantive protections afforded by international investment law to foreign investors. In Trustees for the time being of the Burmilla Trust and Another v President of the RSA and Another (Case No 64/2021) [2022] ZASCA 22 (1 March 2022), the judges writing for the minority judgment engaged extensively with international investment law jurisprudence. In the context of the treaty protection known as denial of justice, the minority judgment articulated the following position (at [104]): “Therefore, absent an infringement of a fundamental obligation of international law, international tribunals are not there to scrutinise whether court proceedings of member states were free from error or defect. This is even if it were to be shown that their decisions were obviously wrong. Such incorrect application of the law does not permit interference from an international tri - bunal, except if there is illegality or denial of justice by the domestic courts. If this were not to be the standard for international intervention, one can imagine a flurry of cases, brought by unsuccessful litigants who are unhappy with how the domestic courts had applied the law, to the SADC tribunal. This could potentially undermine not only the sovereignty and independence of states, but the principle of subsidiarity as well as the doctrine of finality which, in my view, forms part of the substratum of justice and the rule of law.” Shareholder Oppression and the Limits of Arbitrability One area in which legal uncertainty persists relates to the arbitrability of shareholder oppression claims brought under Section 163 of the Companies Act. That provision confers on courts broad remedial pow - ers in cases of oppressive or unfairly prejudicial con - duct and is invoked most commonly in the context of minority shareholder protection. Whether arbitrators
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