The uncertainty brought to intellectual property rights owners by the Constitution Eighteenth Amendment Bill and the Expropriation Bill 2020

Background

On the 20th February 2017 at the 54th National Conference of the African National Congress (ANC), the ANC’s commission on economic transformation came to a consensus that the ruling party must pursue an amendment of section 25 of the Constitution to permit land expropriation with nil compensation.

In the State Of the National Address a year later, President, Mr. Cyril Ramaphosa added that “The ANC will through the Parliamentary process, finalize a proposed amendment to the constitution that outlines more unambiguously the circumstances under which land expropriation may be effected without compensation.

The National Assembly advanced this process by passing a motion brought by Mr. Julius Malema to amend the property clause (S 25) of the Constitution to permit the expropriation of land with nil compensation.

Five months later, the President made an announcement that the government will pursue amending section 25 of the Constitution to provide for the expropriation of land without compensation.

The Parliamentary Committee on land expropriation published the Constitution Eighteenth Amendment Bill on 6 December 2019, in pursuance of the constitutional amendment.  The publication of the Expropriation Bill 2020 followed10 months thereafter.

What is intellectual property?

Intellectual Property (or IP) is a term used to describe intangible rights of patent, design, trademark and copyright that accrue by virtue of the patents act, designs act, trademark act, and copyright act respectively.

Put simply, intellectual property is the right that protects the creation of an author’s or inventor’s mind.

Can the passing of the Constitution Eighteenth Amendment create legal justification for the expropriation of Intellectual property without compensation?

S25 (2) of the Constitution currently provides that “Property may be expropriated only in terms of law of general application—

(a) For a public purpose or in the public interest; and

(b) subject to compensation, the amount of which and the time and manner of

Payment of which have either been agreed to by those affected or decided or

Approved by a court.

(3) The amount of the compensation and the time and manner of payment must be just

and equitable, reflecting an equitable balance between the public interest and the

Interests of those affected, having regard to all relevant circumstances, including—

(a) The current use of the property;

(b) The history of the acquisition and use of the property;

(c) The market value of the property;

(d) The extent of direct state investment and subsidy in the acquisition and

Beneficial capital improvement of the property; and

(e) The purpose of the expropriation.

(4) For the purposes of this section—

(a) The public interest includes the nation’s commitment to land reform, and to

Reforms to bring about equitable access to all South Africa’s natural resources;

and

(b) Property is not limited to land

Importantly, this sub-section spells out a mechanism by which the quantum of compensation may be assessed and includes all forms of property, including IP.

Clause 1 of the Constitution Eighteenth Amendment Bill (“the Constitutional Bill”) proposes an amendment to S25 of the Constitution to permit land expropriation with nil compensation for the purpose of land reform.

The Constitutional Bill explicitly states that its object is to amend the Constitution to “provide that where land and any improvement thereon are expropriated for the purposes of land reform, the amount of compensation payable may be nil and to provide for matters connected therewith”

The purpose of the proposed amendment is to accelerate land reform to address the historical injustice and imbalance caused by the apartheid policy.

The concern is that, the amendment, if passed, may be used to justify the expropriation of other forms of property, including IP, because the property definition is not limited to land.

However, the actual mechanism of expropriation is found in subsidiary legislation and we now turn our attention to this.

Can the passing of the Expropriation Bill create the legal justification for the expropriation of Intellectual property with nil compensation?

The Expropriation Bill is aimed at replacing the provisions of the existing Expropriation Act 63 of 1975 and, in particular:

Section 12(3)(a) of the Expropriation Bill provides that “It may be just and equitable for nil compensation to be paid where land is expropriated in the public interest, having regard to all relevant circumstances, including but not limited to—

(a) Where the land is not being used and the owner’s main purpose is not to develop the land or use it to generate income, but to benefit from appreciation of its market value;

(b) where an organ of state holds land that it is not using for its core functions and is not reasonably likely to require the land for its future activities in that regard, and the organ of state acquired the land for no consideration;

(c) Notwithstanding registration of ownership in terms of the Deeds Registries Act, 1937 (Act No. 47 of 1937), where an owner has abandoned the land by failing to exercise control over it;

(d) Where the market value of the land is equivalent to, or less than, the present value of direct state investment or subsidy in the acquisition and beneficial Capital improvement of the land; and

(e) When the nature or condition of the property poses a health, safety or physical risk to persons or other property.

(4) When a court or arbitrator determines the amount of compensation in terms of section 23 of the Land Reform (Labour Tenants) Act, 1996 (Act No. 3 of 1996), it may be just and equitable for nil compensation to be paid, having regard to all relevant circumstances”.

The Expropriation Bill explicitly states that the Bills’ objective is “to provide for the expropriation of property for a public purpose or in the public interest, to provide for certain instances where expropriation with nil compensation may be appropriate in the public interest and to provide for matters connected therewith

It is apparent from the objective and provision of the Expropriation Bill that although all forms of property may be expropriated, only a type of property, that being land, is capable of being expropriated for nil compensation and then only if the circumstances listed in section 12(3) apply.

Conclusion

The Constitutional Bill provides the legal bed rock to, in principle, provide for expropriation of property, including intellectual property, for nil compensation.

The Expropriation Bill however does not provide for the expropriation of Intellectual property because the circumstances under which property may be expropriated without compensation explicitly provides for land exclusively.

 

Written by Smangaliso Mthombothi for Taberer Attorneys – March 2021