Why South African companies should not worry about indigenisation in Zimbabwe

The bilateral investment treaty signed between Zimbabwe and South Africa in November last year offers South Africans with investments in Zimbabwe the best protection yet, says Roger Wakefield, cross-border litigation specialist for Lex Africa, a 26-country network of African law firms.

“Although it does not assist South Africans who have already lost investments in Zimbabwe, the Bilateral Investment Promotion and Protection Agreement (BIPPA) does at least provide protection going forward,” he says.

The new treaty explicitly addresses the issues of expropriation and compensation for investors affected by expropriation after 27 November 2009, the date on which the agreement was signed.

“Firstly, the BIPPA treaty clearly states that investments may not be nationalised or expropriated except for public purposes, under due process of the law, on a non-discriminatory basis and for prompt, adequate and effective compensation,” Wakefield says. “Secondly, any investor affected by expropriation will have the right to state their case in a court of law or other independent and impartial forum.”

More than 40 South African companies have investments in Zimbabwe and literally control Zimbabwe’s economy.

The treaty also gives investors the right to settle disputes with the government of the host country by turning to the Washington-based International Centre for the Settlement of Investment Disputes.

“There is no doubt that this provision gives South African investors much more clout to protect their assets in Zimbabwe…. As a bilateral treaty legally binding on two governments, this agreement holds much more weight compared to other mechanisms, which have to date proved toothless in enforcing compensation orders,” Wakefield says.

One such mechanism is the Southern African Development Community (SADC) Tribunal. In November 2008, the Tribunal ruled that the Zimbabwean government had wrongfully removed 78 white farmers from their land. It ordered the government to compensate the farmers for their losses.

However, the Zimbabwean government refused to comply, saying the Tribunal had no authority over Zimbabwe and in September 2009 Zimbabwe formally withdrew from the Tribunal’s jurisdiction. This was despite the fact that Zimbabwe is a signatory to the SADC treaty and, as such, has undertaken to submit to the authority of SADC institutions such as the Tribunal.

“This disregard for the Tribunal’s decisions is of great concern to investors and members of the legal profession across Africa,” he says. “Indeed, the issue was discussed in detail at the recent Annual General Meeting of Lex Africa, which took place in Sudan in October 2009.”

“Lex Africa members agreed on the importance of strictly maintaining the rule of law. The Tribunal decision on Zimbabwe is a test case of the political will of SADC member states which has important implications both for the credibility of the Tribunal and the future harmonisation, free trade and future economic union between SADC states”.

However the 78 farmers still have a glimmer of hope in their quest for justice. One possible avenue is to turn to South Africa’s courts.

“On 14 January 2010 the Gauteng High Court granted the successful claimants in the SADC Tribunal’s award permission to serve summons on the Zimbabwean Justice Minister as a first step to having the award recognised in South Africa. Once a South African court has recognised the award, it will become an order of that court and can be enforced as such against commercial assets of the Zimbabwean Government in South Africa.”

Pieter Steyn , chairman of Lex Africa says that “the enforcement of the Tribunal’s award in South Africa will be enormously significant for investors and will greatly enhance the Tribunal’s reputation and standing” .

Wakefield says, “In the meantime, at least South African investors in Zimbabwe have additional rights of recourse should they be affected by expropriation in future.”

(49 VIEWS)