Trade and investment are the two fundamental pillars of international economic relations. Almost all international trade flows are governed either by bilateral or regional trade agreements or by the multilateral trade rules established under the various World Trade Organization (WTO) agreements. Efforts to establish a multilateral governance framework for cross-border investment, however, have thus far failed to bear fruit. In the absence of multilateral rules on foreign investment, states have resorted to using bilateral investment agreements to establish legally binding rules on the treatment of foreign investment. While some of these agreements take the form of dedicated investment chapters in comprehensive trade agreements, the vast majority are in the form of bilateral investment treaties (BITs).

BITs are binding international agreements between two states that establish the terms and conditions for private investment by nationals and firms of either state in the territory of the other. In particular, BITs grant investments made by an investor of one contracting state party (contracting party) in the territory of the other, a number of guarantees which typically include fair and equitable treatment, full protection and security, protection from discriminatory treatment, protection from expropriation and free transfer of funds. Notably, BITs also provide for international investor-state dispute settlement.

Southern African countries are no strangers to the use of BITs. According to the United Nations Conference on Trade and Development (UNCTAD), every one of the 15 member states of the Southern African Development Community (SADC) is party to at least one BIT, and together they have signed over 250 BITs to date, of which over 100 are currently in force. The BITs concluded by SADC member states largely follow the form, structure and content of traditional BITs.

The publication in 2012 of the SADC Model Bilateral Investment Treaty Template (Model BIT) provides a clear example of a shifting approach to investment governance in southern Africa. This Trade Brief shows how the Model BIT encapsulates new thinking about investment governance by recommending an approach to investment governance that deviates quite sharply from the status quo provided by the BITs currently in force in southern Africa. In particular, the brief examines the specific suggestions and recommendations the Model BIT makes with regard to individual BIT provisions and demonstrates how these differ from the typical form such provisions take in the BITs previously concluded by SADC member states.

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