Bilateral Investment Treaties and the Host State’s Right to Regulate Investments in the Public Interest: Lessons Learned and Implications for South Africa

Bilateral investment treaties (BITs) emerged in the 1950s and 1960s as an economic diplomacy and foreign policy instrument to facilitate trade and international investment. However, the uneven safeguards and asymmetric nature of treaty networks embedded in old-fashioned BITs continue to be a source of political and legal controversy hindering the independence of host countries’ domestic policy. This paper seeks to provide a three-dimensional approach to understanding the changing landscape of the BIT universe. First, it traces the history, evolution and significance of treaty practices. Second, it assesses the policy shift of BITs from North–South investment to new models of South–South investment. Third, it presents opportunities, challenges and policy implications for host countries right to regulate investment policies in the public interest. To conceptualise BITs and contextualise the policy shift from North–South to South–South investment flows, this paper uses a novel database on investment treaties called the Electronic Database of Investment Treaties and applies a multidisciplinary methodological approach and an eclectic mix of disruptive innovation and rational choice theoretical frameworks to understand treaty practices. The research design is qualitative and the case study of South Africa provides a compelling example of the host country’s right to regulate investment in the public interest. By terminating several BITs signed with various countries and promulgating the Protection of Investment Act 22 of 2015, South Africa set a bold precedent that is considered both disruptive and innovative. It symbolises the country’s commitment to challenging outdated, one-sided treaties long criticised for mirroring colonial-era institutional structures. The paper asks critical questions about BIT epistemologies and a global search for treaty practices that are designed to be more equitable, fair and transparent, and promote sustainable development policies. Thus, the ongoing calls by countries of the Global South, including South Africa, for the transformation of the international investment rule-making system present a critical opportunity for developing countries to actively shape treaty reforms and global governance, ensuring that investment practices better reflect their development priorities.