This self-assessment report looks at South Africa's investment regime in the light of the Codes of Liberalisation and the principle of National Treatment
"National Treatment" is the commitment by a country to treat enterprises operating on its territory, but controlled by the nationals of another country, no less favourably than domestic enterprises in like situations.
The National Treatment instrument addresses the treatment of foreign-controlled enterprises after establishment and consists of two elements: a declaration of principle, which forms part of the Declaration on International Investment and Multinational Enterprises and a procedural OECD Council Decision, which obliges adhering countries to notify their exceptions to National Treatment, and establishes follow-up procedures to deal with such exceptions in the OECD.
The National Treatment instrument differs from the Code of Liberalisation of Capital Movements which seeks, amongst other things, a non-discriminatory right of establishment of foreign-controlled enterprises.
Another difference is that the Code is legally binding on adhering countries, whereas the National Treatment Instrument is not: for adhering countries, national treatment of foreign-controlled enterprises on their territories constitutes a voluntary undertaking. However, it was underpinned in 1988 by a unanimous pledge of all adhering countries to refrain from introducing new exceptions ("standstill pledge").
The National Treatment instrument's follow-up procedures, which are designed to encourage the fullest possible application of National Treatment by adhering countries, are set out in an OECD Council Decision of December 1991. The Decision comprises an Annex which lists exceptions to National Treatment as notified by each adhering country and accepted by the OECD Council.
Countries which have adhered to the Declaration on International Investment and Multinational Enterprises, as well as the related Decisions and Recommendations by the OECD Council, including the National Treatment instrument, are the 38 OECD countries and 12 non-OECD countries: Argentina, Brazil, Croatia, Egypt, Kazakhstan, Jordan, Morocco, Peru, Romania, Tunisia, Ukraine and Uruguay.
Upon accession to the Organisation, new members are required to adhere to the Declaration on International Investment and Multinational Enterprises and the attendant Decisions.
The exceptions are periodically examined by the Investment Committee. These examinations result in a decision by the OECD Council, which formulates proposals for action by the country concerned.
National Treatment has become a well-established principle among adhering countries. Exceptions are typically limited to certain sectors, notably mining, transport, fisheries, broadcasting and telecommunications. Even there, many exceptions are of a limited nature and exceptions are reduced in scope or deleted as a result of unilateral measures by the countries themselves, or as a result of the examinations.