SACU-US FTA:Investment Issues Riekie Wandrag October 2006

Background  Failed SACU-US FTA Negotiations  Why?  Comprehensive nature of US FTA’s  Including: Foreign Investment Regulation Foreign Investment Regulation Investor-State Dispute Resolution Investor-State Dispute Resolution Government Procurement Regulation Government Procurement Regulation

Is there hope for future agreement?

Recent US FTA’s  Chile (2004)  Australia (2005)  Morocco (2006)  CAFTA-DR (being ratified)  “ Template Agreements”

Foreign Investment  Foreign Investment : Direct and Equity Investment Direct and Equity Investment Regulation: National Treatment National Treatment Most-Favoured Nation Treatment Most-Favoured Nation Treatment Minimum standard of treatment Minimum standard of treatment Safety and Security Safety and Security Expropriation & compensation Expropriation & compensation Performance Requirements Performance Requirements Non-Conforming Measures Non-Conforming Measures

Dispute Resolution  Investor – State dispute Resolution  ICSID  ICSID Additional Facility  Ad Hoc: UNCITRAL Arbitration Rules  Enforcement: ICSID / NY Convention  Appellate Body?  Australia: State-state dispute settlement & national arbitration

Procurement  National Treatment  Transparancy  But:  Only applicable to listed entities  Exceptions eg “measures protecting public morals, order, safety”  Exclusions: Eg small & minority businessess (US), “social assistance”(AUS)

Compliance with International Law?  Foreign Investment: No real International Law  Dispute Settlement: ICSID & UNCITRAL Arbitration  Procurement: WTO Government Procurement Agreement Plurilateral AgreementPlurilateral Agreement Policy Space?Policy Space?

Compliance with SA Law?  Investment: No Specific Investment Law  National Treatment: Generally applied  Minimum Restrictions –  “Like Circumstances”?  Non-Conforming Measures?  Expropriation /Nationalisation S 25 Bill of Rights S 25 Bill of Rights Non-discriminatory Non-discriminatory

 Dispute Settlement:  Investor –State Dispute Settlement?  ICSID? (SA not member)  Recent BIT’s: Additional Facility  Favouring Foreign Investor? “Non-Conforming Measures”  National Dispute Resolution?  Problems with SA Arbitration Law

 Government Procurement:  National Policy Space?  BEE?  National Treatment?  Exclusions in US FTA’s  “Public Morals” GATT XX

SACU’s Capacity in these areas?  New SACU Agreement:  No Harmonised Policies on Investment or Procurement  No foreseeable harmonisation  Dispute Settlement: WTO state-state dispute settlement WTO state-state dispute settlement Excluding Investment & ProcurementExcluding Investment & Procurement

The Way Forward?  SACU lacks capacity to Negotiate comprehensive FTA  South Africa?  SA Law not incompatible with comprehensive US FTA  Drafting options = retention of policy space  SA Investment Climate Positive

CONCLUSION  “piece-meal” / limited SACU –US FTA  OR  Comprehensive US FTA with “staged” implementation for SACU member states in re Investment & procurement