The European Union (EU) on Monday warned against South Africa's intention to terminate the Bilateral Investment Treaties (BIT).

The EU would reduce its foreign direct investment (FDI) if South Africa doesn't rethink its proposed dumping of BIT, EU Trade Commissioner Karel De Gucht said in remarks broadcast by the South African Broadcasting Corporation (SABC).

The EU, which has described SA's move as a unilateral one, is considering its options in Brussels, said the report. EU accounts for 88 percent of FDI into South Africa, based on 2010 figures.

A BIT historically provides certain legal investor protections, which include compensation on a fair-market value basis, as well as to have a case heard at international arbitration, if necessary.

"When you make an investment, it's very important that your investment is protected. Investors and that's not only the company, but the Board of Directors is wary of making investments that are not properly protected, and I believe if what is presently on the table becomes the regime, I would not understand that it would not have an impact on investments," the report cited De Gucht as saying.

According to the report, the South African government plans to do away with all BIT and replace them with one law. Last week, it tabled the Promotion and Protection of Investment Bill for public comment.

While existing investors will be protected according to the BIT up to a further 20 years, new investors will only be afforded the protections in the new legislation, which De Gucht said are inferior to the protections offered by the BIT.

The EU has complained that South Africa failed to consult with the EU before making the decision. Last week, South Africa and the EU held the South Africa-EU Business Forum in Pretoria to seek a solution.

Tensions between South Africa and the EU have escalated recently, especially with South Africa having joined the BRICS bloc of emerging economies, raising fears that this may be at the expense of its long-standing ties to Europe's developed economies.

South African Minister of Trade and Industry insisted that studies over many years indicate there is no clear relationship between BITs and FDI flows. The relationship is, at best, ambiguous and it is clear that BITs are neither necessary nor sufficient to attract FDI, he said.