Laurence Boulle and Nokuhle Madolo:Cross-border disputes

05 March 2010, Business Day
URL: http://www.businessday.co.za/articles/Content.aspx?id=95294

Johannesburg:  In the Where’s Wally? books, children scrutinise assemblies of people to find a familiar but concealed character of that name. The question always is: “Where will Wally crop up next?”

A similar question arises in the disputes relating to South African farming investors’ rights under Zimbabwean land policies. Recently the Gauteng High Court ordered the South African government to pay damages to a South African whose Zimbabwean farm was expropriated. Other cases have cropped up in South African and Zimbabwean trial courts, in the Southern African Development Community (Sadc) Tribunal, in SA’s Constitutional Court and prospectively in the Supreme Court of Appeal. There is no guessing where they could crop up again.

The disputes raise issues of property rights, constitutional propriety, sovereign immunity, diplomatic protection and treaty interpretation. The court events, in summary, are as follows:

*  In July 2008, Crawford von Abo complained to the Gauteng court that SA’s government had failed to afford him protection he was entitled to as a South African citizen over property expropriated in Zimbabwe. The court ordered the government “to take all necessary steps” to remedy the violation of his rights by Zimbabwe — in practical terms, to afford him diplomatic protection.

*  In June last year, the Constitutional Court was asked to confirm the order in relation to the president to reinforce Von Abo’s right to protection. The court held that confirmation was not technically necessary and, as neither party had appealed against the high court judgment, it remained of full force.

*  In February 2007, Mike Campbell, having failed to obtain compensation or return of his farms through Zimbabwean courts, pursued rights as a citizen of Sadc before the Sadc Tribunal in Windhoek. The tribunal ruled for Campbell, finding the expropriation policies to be racially discriminatory, entitling him to compensation. The Zimbabwean government dismissed the tribunal’s decision, holding it lacked legal jurisdiction.

*  In June last year, the Sadc Tribunal ruled that the Zimbabwean government was in breach of its earlier ruling and referred the defiance to the Sadc summit for consideration of consequential measures. Here a court with no enforcement powers invoked a political process to achieve resolution.

*  In September last year, the Zimbabwe Commercial Farmers Union applied in the Gauteng High Court to have the Sadc Tribunal’s ruling recognised in domestic law so it would bind the South African government. A decision has yet to be made in this case.

*  In January this year, AfriForum served papers on the Zimbabwe government over its land programme. This followed a Pretoria High Court granting three farmers leave to join Zimbabwe to the application to register the Sadc ruling domestically. Court sanction is required because of the diplomatic sensitivities over suing a sovereign state.

*  In the same month, the Commercial Farmers Union applied to the Zimbabwe High Court to enforce the Sadc ruling in Zimbabwean law. The court held the state was under no obligation to recognise the ruling as it contravened the Zimbabwean constitution and was contrary to a land programme designed “for the greater good”.

* On February 25, the North Gauteng High Court ruled the Sadc judgment enforceable in SA against Zimbabwe and its local assets, with AfriForum portraying the ruling as a moral victory for the farmers. But it presents difficulties for South African policy towards Zimbabwe and the Zimbabwean government has yet to announce its response. The outcome could be challenged in Bloemfontein.

Numerous sources of law have been invoked in the different forums: domestic South African and Zimbabwean law, bilateral treaty law, South African constitutional law, Sadc regional law and public international law. The legal events were supplemented by quiet diplomacy and noisy publicity involving different individuals, nongovernmental organisations and government agencies.

This presents a complex system of multi- party conflict played out in a plurality of forums. The investors’ first resort was to Zimbabwean courts, then to a regional tribunal. But enforcement of cross-border decisions is not easy, even under treaty arrangements, due to state sovereignty. This entailed the need to apply to South African and Zimbabwean courts to enforce the Sadc ruling.

Even clear rulings by South African courts have limited effect, though. Domestic judgments are not enforceable across boundaries, accounting for the application to join Zimbabwe in the local proceedings. This entails that an adverse judgment against Zimbabwe could result in enforcement against its assets in SA, a protracted way of achieving a consolation award for restoration of the property rights sought in the first place.

In a globalised age, it is not unusual for parties to face many avenues for enforcing rights. Domestic law, bilateral treaties, regional conventions and multilateral institutions introduce arbitrage advantages for complainants and applicants, without necessarily leading to enforceability and finality.

Could there be better co-ordinated resolution systems for investment disputes? What kinds of institutions could be introduced for the vindication of investors’ rights and the enforcement of remedies without the frustration of inconsistent rulings?

These issues are being considered at the policy level by the Department of Trade and Industry. A policy framework would provide a reference point for legislation governing inward and outward foreign investment, including reciprocal rights of host countries and investors and co-ordinated dispute resolution systems for enforcing them. However, domestic legislation ensuing from new policy frameworks could provide only partial clarity on conflicts straddling national boundaries.

Bilateral investment treaties are another response. Late last year, SA and Zimbabwe signed an Agreement for the Promotion and Reciprocal Protection of Investments, which regulates future rights of investors from both countries but does not apply to previous land dispossessions. This explicit restriction led to yet another court application, settled between AfriForum and the government.

An advantage of investment treaties is that they clarify the operative dispute resolution systems for investors. Last year’s treaty provides for arbitration by the International Centre for Settlement of Investment Disputes or arbitration under the United Nations Commission on International Trade Law. The Sadc Tribunal is not included as a dispute resolution option. Domestic courts are not excluded but investors tend to avoid them as they do not expect favourable outcomes.

At the multilateral level, the International Convention on the Settlement of Investment Disputes has been signed by most states (including Zimbabwe), but not by SA. The World Trade Organisation has little involvement in investment disputes and its dispute system is largely irrelevant in this area.

The question remains: what can be done locally to deal with transnational disputes that raise complicated trade-offs among economic imperatives, constitutional rights and domestic sovereignty? The first requirement is a clear South African policy on outward and inward foreign investment, including clear, coherent dispute resolution arrangements.

The Where’s Wally syndrome has no simple solution but progress in the review of SA’s policy framework on investment would seem a good priority.

*  Laurence Boulle is director and Nokuhle Madolo senior researcher at the Mandela Institute for Global Economic Law at Wits University.