The threat of expropriation in commercial contracts entered into with states : lessons from the case of Lap Green Networks of Libya and the Zambian government
Master Thesis
2014
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University of Cape Town
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Foreign direct investment (FDI) continues to be made into Africa, as an important means of strengthening the national economies of the various countries in which it is undertaken. However, while FDI inflows continue into these economies, there has been a relative decline in FDI attractiveness into Africa as shown by Africa’s share of global FDI inflows which stood at only 4.4 per cent in 2010. One of the factors that deter FDI is political instability caused by government actions. It is noted that in some instances following a regime change, there is a repudiation of former contracts with foreign firms, increasing the risk of expropriation and thereby reducing the volume of FDI. An example of a regime change that resulted in the cancellation of contracts with foreign firms and the expropriation of property rights that had been acquired as a result of those contracts, is that which occurred in Zambia in 2012 with the [repossession] by the government of Zamtel Limited, a telecommunications company, and the termination of a concession agreement entered into by the government with Zambia Railways Limited. While the right to expropriate property of citizens is the sovereign preserve of every state (provided that such expropriation is in the public interest and is accompanied by adequate compensation for the person from whom the property is expropriated) there remain instances where states abuse this sovereign right and carry out unlawful expropriations. Although most states have legislation which regulates expropriations, there remain some gaps in domestic legislation that do not adequately safeguard the rights of persons whose property is expropriated. Unlawful and arbitrary expropriations carried out by states without impunity, are a major deterrent to FDI. It is therefore necessary to consider whether the current international law framework relating to expropriations, provides an effective means for safeguarding the interests of property owners whose property is expropriated, where domestic legislation falls short of the required standard. These considerations will in this paper be examined in the context of international commercial contracts entered into by foreign entities with governments. These considerations are further necessary in order to offer solutions to foreign investors who may find their property unlawfully expropriated as a result of political action, and who may be unable to seek proper or meaningful redress under the domestic laws of the expropriating states. Establishing the extent of the remedies that are provided by international law may seek to encourage FDI inflows into developing economies, even in the face of the real risk of political instability resulting in arbitrary or unlawful expropriations.
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Includes bibliographical references.
Reference:
Matambo, N. 2014. The threat of expropriation in commercial contracts entered into with states : lessons from the case of Lap Green Networks of Libya and the Zambian government. University of Cape Town.