Good on Gillard - Aussies reject investor-state in free trade agreements.

Publication Date: 
April 20, 2011

By Janet M Eaton

The following announcement that Julia Gillard's Australian government has rejected investor-State dispute settlement in trade agreements [1] is good news for those  who care about good government, democratic legislation and process, fairness, poverty reduction, the environment, and the planet not to mention a sustainable economy. For indeed the  investor state mechanism in Free Trade Agreements [FTAs] has been widely discredited on many fronts.  [For more on Investor state, sometimes referred to as investor privileges, see here.

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There has been a very contentious debate in the US on this matter. Obama campaigned on reviewing NAFTA Ch 11 [investor state] and other harmful aspects of Free Trade Agreements in general. Since then over 100 Congress persons and many progressive NGOs are supporting the  TRADE [Trade Reform, Accountability, Development and
Employment ] Act tabled by Representative Michael Michaud  [D- Maine] and Sen. Sherrod Brown (D-Ohio) - [For more see: http://www.citizen.org/trade/tradeact/

Public Citizen, other progressive NGO's and many Democrats have been campaigning  hard to encourage the Obama administration to reject the old guard form of free trade and  investment agreement  which has
been widely denounced by all manner of  academics, think tanks and NGO's. This progressive NGO lobby has been particularly focused in recent months on the TPP - Trans Pacific Partnership [see # 2 below for more on the TPP ] trying to convince Obama to reject the NAFTA Ch 11 investor -state dispute settlement mechanism. But he apparently
has chosen to listen to his admin types like Larry Summers who favour the status quo instead of political advisors who remember his promises to voters.  

It is therefore very encouraging to see that principles put forth in the recent Australian trade policy statement will also guide the Gillard Government's trade and investment strategy in the TPP negotiations.

For  more  background on  Australia's approach to investor state,  and on this recent decision see a very good article included below: See [3]
http://donttradeourlivesaway.wordpress.com/2011/04/19/australia-
rejects-investor-state-arbitration-provision-in-trade-agreements/
"Australia rejects Investor-State arbitration provision in trade agreements." The  IA Reporter notes:
" the government appears to have taken seriously the economic findings of a public commission tasked with charting a future trade and investment policy....the Australian Productivity Commission could find no compelling economic rationale for the inclusion of investor- state arbitration mechanisms in its trade and investment agreements...The Commission concluded that there were few clear benefits, and several worrying risks, associated with such provisions."

Hopefully advocates for fairer trade in Canada and around the world will be able to point to Australia's example in their quest for rejection of the investor state clause  in future  trade and investment agreements and their demands for renegotiation and redesign of global trading arrangements.

See also:

Educational Power Point :
NAFTA: Growing Resistance & Calls for Renegotiation & Oversight
http://www.stopthehogs.com/pdf/nafta-resistance.pdf


==============================================

[1] Subject:    [Can-EU-CETA] Australian trade policy statement rejects
    investor-State dispute settlement
Date sent:    Tue, 19 Apr 2011 07:36:18 -0400


Bonjour,
Un ami d'ATTAC-Allemagne nous informe de ceci :
Below is the just released Australian trade policy statement, which
rejects investor-State dispute settlement in trade agreements (see
government link for the entire statement and the excerpt on investor-
State dispute settlement below). The principles put forth in the
statement will also guide the Gillard Government's trade and
investment strategy in the TPP negotiations.

http://www.dfat.gov.au/publications/trade/trading-our-way-to-more-
jobs-and-prosperity.html#investor-state

*"Investor-state dispute resolution
*
Some countries have sought to insert investor-state dispute
resolution clauses into trade agreements. Typically these clauses
empower businesses from one country to take international legal
action against the government of another country for alleged breaches
of the agreement, such as for policies that allegedly discriminate
against those businesses and in favour of the country's domestic
businesses.

The Gillard Government supports the principle of national treatment -
that foreign and domestic businesses are treated equally under the
law. However, the Government does not support provisions that would
confer greater legal rights on foreign businesses than those
available to domestic businesses. Nor will the Government support
provisions that would constrain the ability of Australian governments
to make laws on social, environmental and economic matters in
circumstances where those laws do not discriminate between domestic
and foreign businesses. The Government has not and will not accept
provisions that limit its capacity to put health warnings or plain
packaging requirements on tobacco products or its ability to continue
the Pharmaceutical Be......
You received this message because you are subscribed to the Google
Groups "Canada-EU CETA" group.

------------------

[2] TPP
The Trans-Pacific Partnership, also known as the Trans-Pacific
Strategic Economic Partnership Agreement or TPP agreement is a
multilateral free trade agreement that aims to integrate the
economies of the Asia-Pacific region. The original agreement between
the countries of Brunei, Chile, New Zealand and Singapore was signed
on June 3, 2005, and entered into force on May 28, 2006. Five
additional countries, including Australia, Malaysia, Peru, United
States, and Vietnam, are currently negotiating to join the group. On
the last day of the APEC summit on November 14, 2010, leaders of the
nine current negotiating countries endorsed the proposal advanced by
President Obama that set a target for settlement of negotiations by
the next APEC summit in 2011.

http://en.wikipedia.org/wiki/Trans-Pacific_Strategic_Economic_Partnership

--------------

[3] http://donttradeourlivesaway.wordpress.com/2011/04/19/australia-
rejects-investor-state-arbitration-provision-in-trade-agreements/

Australia rejects Investor-State arbitration provision in trade
agreements
Posted on April 19, 2011 by donttradeourlivesaway

Realizing the harmful impact of Investor to State dispute mechanism
in FTAs on broad spectrum of public health and environmental
protection and legislation policies, Australia had refused to accept
Investor to State dispute mechanism in FTA with US.
It has now stated in a Trade Policy Statement released on Tuesday
(April 12, 2011) that, "the Australian government notes that it had
included ISA (Investor State Arbitration) provisions in some past
agreements with developing countries at the behest of Australian
business interests, but that it will not do so in future."

The Investor-State Provision is currently being negotiated within
India-EU FTA and Trans Pacific Partnership Agreement (between
Australia, New Zealand, Singapore, Brunei, Vietnam, Malaysia, Chile,
Peru and the US).  Will India and other developing countries follow
the precedent set by Australia to protect their public health system?

In policy switch, Australia disavows need for investor-state
arbitration provisions in trade and investment agreements

Apr 14, 2011

By Luke Eric Peterson | IA Reporter

The Government of Australia has announced that it will no longer
pursue investor-state arbitration provisions in future international
economic agreements with developing countries.

The policy shift builds upon Australia´s longer-standing concerns
about including such provisions in agreements with higher-income
developed economies. (In its Free Trade Agreement with the United
States, Australia famously declined to be bound by an investor-state
arbitration (ISA) mechanism - pointing instead to the reliability of
its own legal system for resolving disputes involving U.S.
investors).

In a Trade Policy Statement released on Tuesday (April 12, 2011), the
Australian government notes that it had included ISA provisions in
some past agreements with developing countries at the behest of
Australian business interests, but that it will not do so in future.

"If Australian businesses are concerned about sovereign risk in
Australian trading partner countries, they will need to make their
own assessments about whether they want to commit to investing in
those countries," the Statement notes.
The government has signaled that it will continue to support the
principle of National Treatment, so "that foreign and domestic
businesses are treated equally under the law."

However, the government will not negotiate treaty protections "that
would confer greater legal rights on foreign businesses than those
available to domestic businesses" or that "constrain the ability of
Australian governments to make laws on social, environmental and
economic matters in circumstances where those laws do not
discriminate between domestic and foreign businesses."

The Statement is remarkable for citing concerns that foreign
investors might target particular public policies, including a
prescription drug policy that has drawn the ire of global
pharmaceutical companies and proposals for the plain packaging of
tobacco products that have drawn criticism from foreign tobacco
companies.

Indeed, calls by the Philip Morris tobacco company for an investor-
state arbitration mechanism in a pending Trans-Pacific Trade
Agreement between Australia, the U.S. and other countries, have led
to a flurry of headlines in Australia in recent months, with reports
suggesting that the company wishes to mount an international law-
based challenge to Australian plans for the plain-packaging of
tobacco products. (A similar arbitration claim launched by Philip
Morris against the Republic of Uruguay pursuant to the Switzerland-
Uruguay bilateral investment treaty has been discussed widely in
Australian media and policy circles).

While Australia´s new policy shift on investor-state arbitration
appears to have been motivated by defensive policy concerns, one
observer tells IAReporter that the government appears to have taken
seriously the economic findings of a public commission tasked with
charting a future trade and investment policy.

Jonathan Bonnitcha, a doctoral candidate in law at Oxford University,
and the co-author of one of several dozen submissions made to the
Australian Productivity Commission last year, says that it is
important to note that the Australian Productivity Commission could
find no compelling economic rationale for the inclusion of investor-
state arbitration mechanisms in its trade and investment agreements.
As reported by IAReporter last year, a draft report of that same
Commission had generated a flurry of debate as to the merits and
rationale of investor-state arbitration provisions, and lead to a
final report wherein the Commission concluded that there were few
clear benefits, and several worrying risks, associated with such
provisions.

On Bonnitcha´s view, the government´s new policy may be explained
more by the Commission´s failure to find an economic justification
for a core plank of Australia´s trade policy, as by concerns that
Australia will be sued by foreign investors. He notes, however, that
the Commission also weighed other considerations, including concerns
about the quality of rule of law in developing countries.

Bonnitcha says that the Commission held that such concerns might be
better addressed by capacity-building and financial support for
domestic legal reform than by creating a system of international
arbitration permitting foreigners to opt out of such legal systems
altogether.

Effects on investors and arbitration industry to be watched closely

While the new developments will be welcomed by critics concerned with
the over-reach of investor-state arbitration, the policy shift may be
met with greater concern from some law firms and arbitrators engaged
in investor-state arbitration work.

One Australian practitioner, Michael Polkinghorne of the law firm
White & Case, tells IAReporter that investors may have the ability to


work-around the absence of arbitration clauses in Australian
agreements by free-riding on the treaties concluded by other
countries.

"It certainly creates a concern for Australian investors seeking to
invest abroad, although frequently these concerns can be addressed by
intelligent corporate structuring. The real problems may well be for
those investors who never think about treaty rights in the first
place."

Another observer from the Asia-Pacific region, New Zealand lawyer
James Hosking, tells IAReporter that he will be watching for any
ripple effect from Australia´s new policy.

"Other free trade agreements from the region - like the China-New
Zealand FTA - have produced very nuanced investor-state dispute
mechanism provisions," he says.

Hosking, a Partner with Chaffetz Lindsey LLP in New York City, adds
that he hopes "the new Australian policy doesn´t lower the benchmark
for other treaties being considered."

Australia´s Trade Policy Statement is available here
http://www.dfat.gov.au/publications/trade/trading-our-way-to-more-
jobs-and-prosperity.html#investor-state