The Republic of South Africa is coming to an international law crossroads again. Some 20 years ago, when the Apartheid system was being dismantled, South Africa signed a series of international investment treaties with European countries. These were designed to reassure wary foreign investors that their assets would be protected by international law in the event that South Africa were to embark upon a radical redistribution of wealth.

However, with the passage of time, these treaties have come to be seen not merely as a bulwark against confiscation of foreign-owned assets, but as a possible weapon to be used by foreign companies against unwanted regulation and legislation.

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When a group of Italian investors opted to sue South Africa over a series of Black Economic Empowerment policies imposed upon the mining sector, their instrument of choice was the international treaties signed many years earlier by South Africa.

Slowly, South Africa’s political class came to grasp that these investment treaties impose wide-ranging limits on the government’s future policy options – and outsource the settlement of foreign investment disputes to international arbitration tribunals, rather than South Africa’s courts.

After a 2010 review of the country’s foreign investment laws, South Africa settled on a new course: it will phase out the international treaties that accord too many special protections to foreigners. It will also retreat from the policy of letting international arbitral tribunals have the final word on the legality of South African policies.

This new path has many international law firms worried. While lawyers profess to speak on behalf of the investment community, the reality is that many of them are worried about their own bottom line. Arbitration of crossborder disputes has become big business over the past decade, and moving disputes back into South African courts will sideline many international law firms based in London, Paris and Washington, DC.

Although law firms have their own vested interests at stake, their commentary should not be dismissed as pure self-interest. Certainly, multinational investors should pay close attention to these changes in South Africa’s FDI protection landscape.

Down the road, South Africa has promised to negotiate a new generation of international treaties that provide some legal safeguards for foreigners, while not going so far as to let individual investors sue the state in international arbitration.

In the meantime, however, the government has unveiled domestic legislation intended to provide some assurances to foreign investors that their investments will be protected. Of course, should the political winds shift in South Africa, such legislation could be repealed – or applied begrudgingly by the local courts.

Investors looking for greater legal comfort in this time of policy upheaval can always call up their insurance broker and look into political risk policies that insure against major perils.

Luke Peterson is the editor of Investment Arbitration Reporter (http://www.iareporter.com), an online news and analysis service tracking FDI legal disputes.