tag:theconversation.com,2011:/au/topics/isds-16000/articlesISDS – The Conversation2023-05-22T11:34:42Ztag:theconversation.com,2011:article/2037372023-05-22T11:34:42Z2023-05-22T11:34:42ZCatch-22: Canada’s attempts to phase out fossil fuel might result in it paying the polluters<p><a href="https://www.cbc.ca/news/canada/montreal/gnl-quebec-arbitration-1.6786674">US$20 billion</a>: That’s how much American investors think Canadian taxpayers should fork over to compensate them for their failed bid to develop a liquefied natural gas (LNG) facility in Québec.</p>
<p>That’s almost <a href="https://montreal.ctvnews.ca/quebec-budget-2023-2024-here-are-the-highlights-1.6322761">a fifth of the province’s total budget</a> for this year.</p>
<p>Ruby River Capital LLC, the U.S.-based owner of GNL Québec Inc., filed a <a href="http://icsidfiles.worldbank.org/icsid/ICSIDBLOBS/OnlineAwards/C11097/DS18460_En.pdf">claim</a> against Canada under the <a href="https://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/nafta-alena/fta-ale/index.aspx?lang=eng">North American Free Trade Agreement (NAFTA)</a> after its <a href="https://iaac-aeic.gc.ca/050/evaluations/proj/80115">Énergie Saguenay</a> project failed to pass a federal environmental impact assessment. </p>
<p>The proposed LNG terminal had already been <a href="https://www.cbc.ca/news/canada/montreal/lng-quebec-saguenay-1.6111248">rejected by the Québec government</a> over concerns that it would increase greenhouse gas emissions and negatively impact First Nations and marine mammals. </p>
<p>Canada faces a no-win situation — a catch-22. If the government does not rapidly phase out fossil fuels, it will fail to meet its commitments under the <a href="https://unfccc.int/process-and-meetings/the-paris-agreement">Paris Agreement</a> to address the climate crisis. But when it takes steps to do so, foreign investors invoke <a href="https://investmentpolicy.unctad.org/international-investment-agreements">international trade and investment agreements</a> like NAFTA and threaten to drain public coffers.</p>
<h2>Paying the polluters</h2>
<p>Unlike environmental treaties, trade and investment agreements have teeth. They are enforceable through a system known as <a href="https://ccsi.columbia.edu/content/primer-international-investment-treaties-and-investor-state-dispute-settlement">Investor-State Dispute Settlement</a> (ISDS) that allows foreign investors to bypass local courts and bring claims for monetary compensation to a panel of three arbitrators. More than <a href="https://investmentpolicy.unctad.org/investment-dispute-settlement">1,200 ISDS</a> cases have been launched against governments around the world in the last 25 years.</p>
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<a href="https://theconversation.com/world-bank-ruling-against-pakistan-shows-global-economic-governance-is-broken-120414">World Bank ruling against Pakistan shows global economic governance is broken</a>
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<p>Between 1996 and 2018, <a href="https://policyalternatives.ca/sites/default/files/uploads/publications/National%20Office/2021/04/The_Rise_and_Demise_of_NAFTA_Chapter_11.pdf">Canada was sued more than 40 times</a> by American investors through the investment chapter in NAFTA. To date, Canada has lost or settled (with compensation) 10 claims. Canadian governments have paid out more than $263 million in damages and settlements. </p>
<p>When NAFTA was replaced in 2018 with the <a href="https://can-mex-usa-sec.org/secretariat/agreement-accord-acuerdo/index.aspx?lang=eng">U.S.-Mexico-Canada Agreement (USMCA)</a>, it did not include an ISDS mechanism between Canada and the U.S. Chrystia Freeland, the then-deputy prime minister of Canada, noted at the time that the removal of ISDS <a href="https://pm.gc.ca/en/news/speeches/2018/10/01/prime-minister-trudeau-and-minister-freeland-speaking-notes-united-states">“strengthened our government’s right to regulate in the public interest, to protect public health and the environment.”</a></p>
<p>Ruby River was only able to launch its case because USMCA allowed firms that had made investments before NAFTA’s termination — on July 1, 2020, — to continue to bring ISDS claims for three years — until June 30, 2023. </p>
<p>Importantly, Ruby River <a href="https://www.cbc.ca/news/canada/montreal/gnl-quebec-arbitration-1.6786674">spent only about CDN$165 million</a> on the Énergie Saguenay project proposal. However, the firm is permitted within the ISDS system to seek “lost future profits” based on speculation about the performance of notoriously volatile oil and gas markets.</p>
<h2>Risks to climate policy</h2>
<p>Québec is a member of the global <a href="https://beyondoilandgasalliance.org/">Beyond Oil and Gas Alliance</a> and is the <a href="https://www.theenergymix.com/2022/04/13/quebec-becomes-worlds-first-jurisdiction-to-ban-oil-and-gas-exploration/">first jurisdiction in the world</a> to ban all oil and gas production. The province is being <a href="https://financialpost.com/commodities/energy/oil-gas/utica-resources-files-lawsuit-seeking-billions-of-dollars-if-quebec-implements-bill-21">sued</a> over this ban by several fossil fuel firms — seeking more compensation than was <a href="https://montrealgazette.com/news/local-news/quebec-votes-100-million-in-compensation-to-oil-and-gas-companies">offered</a> — in Québec’s Superior Court. </p>
<p>Had these companies been foreign, and thereby qualified for the protection of an investment treaty, they likely would have chosen ISDS instead. This is because ISDS generally provides <a href="https://www.cigionline.org/articles/it-time-redesign-or-terminate-investor-state-arbitration/">broader scope for claims — and larger awards — than domestic courts</a>.</p>
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<figcaption><span class="caption">Companies are suing governments for shifting away from fossil fuels. Allowing these companies to demand billions in compensation could dampen necessary policy action.</span></figcaption>
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<p>Other jurisdictions need to follow Québec’s lead. The global carbon budget has no room for new coal, oil or gas developments. Construction of new fossil fuel infrastructure also needs to be limited, as it would lock in continued extraction long into the future.</p>
<p>Despite clear messages to this effect from the <a href="https://www.theguardian.com/environment/2022/apr/04/its-over-for-fossil-fuels-ipcc-spells-out-whats-needed-to-avert-climate-disaster">Intergovernmental Panel on Climate Change</a> and the <a href="https://www.iea.org/reports/net-zero-by-2050">International Energy Agency</a>, investors continue to propose new fossil fuel projects. They do so in full knowledge that governments need to act to curb emissions in line with their international commitments and that future climate policies may negatively impact their investments. </p>
<p>Allowing these companies to demand billions in compensation creates <a href="https://www.iisd.org/itn/en/2011/04/07/the-problem-of-moral-hazard/">moral hazard</a> and could dampen necessary policy action.</p>
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Read more:
<a href="https://theconversation.com/a-secretive-legal-system-lets-fossil-fuel-investors-sue-countries-over-policies-to-keep-oil-and-gas-in-the-ground-podcast-191804">A secretive legal system lets fossil fuel investors sue countries over policies to keep oil and gas in the ground – podcast</a>
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<p>Governments are increasingly aware of this risk and many are taking action. The European Union is seeking to withdraw from the <a href="https://www.reuters.com/world/europe/brussels-says-eu-exit-energy-charter-treaty-unavoidable-2023-02-07/">Energy Charter Treaty</a>, the largest investment treaty in the world, because it “<a href="https://www.europarl.europa.eu/doceo/document/TA-9-2022-0421_EN.html">is not aligned with the Paris Agreement, the EU Climate Law or the objectives of the European Green Deal</a>.” </p>
<p>The Biden administration is committed to not signing up to new agreements with ISDS and a <a href="https://www.reuters.com/business/33-democrats-urge-ban-investor-state-dispute-provisions-all-us-trade-deals-2023-05-03/">number of Democrats</a> are calling for the removal of the mechanism from existing deals. Other countries such as <a href="https://www.afr.com/politics/federal/aussie-companies-to-lose-right-to-sue-under-free-trade-pacts-20221113-p5bxs1">Australia</a> and <a href="https://www.beehive.govt.nz/release/new-zealand-signs-side-letters-curbing-investor-state-dispute-settlement">New Zealand</a> have worked to exclude ISDS from some of their trade agreements.</p>
<h2>Future threats</h2>
<p>Canada will soon escape from the legacy of NAFTA. However, the government remains exposed to the threat of ISDS through other trade agreements such as the <a href="https://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/cptpp-ptpgp/index.aspx?lang=eng">Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)</a>, as well as dozens of bilateral investment treaties. </p>
<p>When the <a href="https://monitormag.ca/articles/u-k-membership-in-pacific-trade-deal-threatens-canadian-climate-action/">U.K. officially joins the CPTPP</a>, the risk of ISDS claims from fossil fuel firms will <a href="https://theecologist.org/2023/apr/12/rough-trade">increase dramatically</a>.</p>
<p>The idea that public finance, desperately needed for the energy transition and climate adaptation, will be redirected to compensate fossil fuel firms currently making <a href="https://blog.ucsusa.org/shaina-sadai/fossil-fuel-companies-make-billions-in-profit-as-we-suffer-billions-in-losses/">record profits</a> is offensive. </p>
<p>In light of the increasing <a href="https://theconversation.com/what-big-oil-knew-about-climate-change-in-its-own-words-170642">body of evidence</a> that documents how the industry has <a href="https://theconversation.com/big-oils-trade-group-allies-outspent-clean-energy-groups-by-a-whopping-27x-with-billions-in-ads-and-lobbying-to-keep-fossil-fuels-flowing-198286">actively obstructed climate action</a> and helped to spread disinformation about climate science, it is <a href="https://theconversation.com/directors-are-in-the-crosshairs-of-corporate-climate-litigation-117737">communities impacted by climate change</a> that should be compensated by fossil fuel firms, not the other way around. </p>
<p>The Canadian government should adopt a consistent approach to ISDS. The exclusion of ISDS from USMCA should be emulated in any future agreements, and Canada should work with treaty partners to remove access to the system in all current ones.</p><img src="https://counter.theconversation.com/content/203737/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kyla Tienhaara receives funding from the Canada Research Chairs Program and SSHRC (Government of Canada). She collaborates with and provides pro bono advice for a number of non-profit organizations working on climate and investment issues.</span></em></p>To address the climate crisis, governments need to limit new fossil fuel developments. But foreign investors are often protected under trade and investment agreements.Kyla Tienhaara, Canada Research Chair in Economy and Environment, Queen's University, OntarioLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2031112023-04-03T20:10:12Z2023-04-03T20:10:12ZHow Clive Palmer is suing Australia for $300 billion with the help of an obscure legal clause (and Christian Porter)<p>Australian business figure Clive Palmer is suing the Australian government for almost <a href="https://www.abc.net.au/news/2023-03-30/clive-palmer-to-sue-australia-for-300b-over-iron-ore-project/102166246">A$300 billion</a> in an international tribunal, having lost a case against the Western Australian government he took <a href="https://theconversation.com/explainer-why-did-the-high-court-rule-against-clive-palmer-and-what-does-the-judgment-mean-169633">all the way to the High Court</a>.</p>
<p>The High Court is meant to be the ultimate arbiter of Australian legal disputes. But in 2019 while in conflict with the WA government Palmer moved ownership of his two main Australian firms <a href="https://www.donnarossdisputeresolution.com/wp-content/uploads/2021/07/Up-in-smoke-will-Clive-Palmers-S-ingapore-company-be-denied-standin-g-in-its-ISDS-arbitration-against-Australia-2021-64-ADR-54.pdf">offshore</a>, ultimately to a company he set up in Singapore, <a href="https://opencorporates.com/companies/au/632245599">Zeph Investments Pte Ltd</a>.</p>
<p>As a Singapore-based company, Zeph believes it is able to take action against the Australian government that Australian-based companies cannot, using an obscure provision of the <a href="https://aanzfta.asean.org/index.php?page=chapter-11-investment/">ASEAN-Australia New Zealand Free Trade Agreement</a>.</p>
<p>What makes him think it would work?</p>
<h2>Palmer lost in the High Court</h2>
<p>First, a quick look at what’s at stake. </p>
<p>In 2002, Palmer’s two companies entered into an agreement with the WA government to explore, mine and process iron ore in the Pilbara region, known as the <a href="https://mineralogy.com.au/projects/balmoral-south/">Balmoral South Iron Ore Project</a>.</p>
<p>The two sides fell out, and in 2020 Palmer sued the state for <a href="https://www.smh.com.au/national/what-are-the-disputes-involving-clive-palmer-and-the-wa-government-about-20200819-p55ndk.html">$27.8 billion</a>. In 2022 the WA government hurriedly passed <a href="https://www.legislation.wa.gov.au/legislation/prod/filestore.nsf/FileURL/mrdoc_43095.pdf/$FILE/Iron%20Ore%20Processing%20(Mineralogy%20Pty%20Ltd)%20Agreement%20Amendment%20Act%202020%20-%20%5B00-00-00%5D.pdf?OpenElement">legislation</a> that indemnified the state against any money it might be found to owe Palmer, meaning he would get nothing.</p>
<p>Palmer appealed to the High Court, and <a href="https://eresources.hcourt.gov.au/downloadPdf/2021/HCA/31">lost</a> in a unanimous judgement.</p>
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<a href="https://theconversation.com/clive-palmer-versus-western-australia-he-could-survive-a-high-court-loss-if-his-company-is-found-to-be-foreign-145334">Clive Palmer versus (Western) Australia. He could survive a High Court loss if his company is found to be “foreign”</a>
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<p>In his new guise as director of a Singapore-based company, Palmer has upped the ante to <a href="https://globalarbitrationreview.com/article/mining-magnate-launches-us200-billion-treaty-claim-against-australia">US$200 billion</a> (about A$300 billion) – an amount WA Premier Mark McGowan says is “A$11,500 for every person in Australia”. The demand includes US$10 billion for “moral damages”.</p>
<p>By way of comparison, A$300 billion is in the ballpark of the A$268 billion to $368 billion Australia is set to pay for nuclear submarines over three decades. </p>
<p>Palmer has hired former Australian Attorney-General <a href="https://www.theguardian.com/australia-news/2023/mar/30/clive-palmer-christian-porter-300bn-lawsuit-against-australian-government">Christian Porter</a> as part of his legal team. The clause Porter and the rest of the team will attempt to use is known as the Investor-State Dispute Settlement (<a href="https://www.dfat.gov.au/trade/investment/investor-state-dispute-settlement">ISDS</a>) clause. </p>
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<img alt="" src="https://images.theconversation.com/files/518950/original/file-20230403-24-jik04h.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/518950/original/file-20230403-24-jik04h.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/518950/original/file-20230403-24-jik04h.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/518950/original/file-20230403-24-jik04h.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/518950/original/file-20230403-24-jik04h.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/518950/original/file-20230403-24-jik04h.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/518950/original/file-20230403-24-jik04h.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Christian Porter, part of Clive Palmer’s legal team.</span>
<span class="attribution"><span class="source">Lukas Coch/AAP</span></span>
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<p>Investor-State Dispute Settlement clauses allow foreign (but not local) investors to claim damages from governments if they can argue that a change in law or a government decision has reduced their future profits.</p>
<h2>Trying again, as a Singaporean</h2>
<p>ISDS clauses were originally designed in the <a href="https://www.cato.org/commentary/isds-controversy-how-we-got-here-where-next">postcolonial period</a> to compensate foreign investors from countries which claimed to have the rule of law against having their assets appropriated by developing countries countries which were viewed as having less developed legal systems.</p>
<p>But its use has expanded to include concepts such as “indirect expropriation,” “minimum standard of treatment” and “<a href="https://www.iisd.org/toolkits/sustainability-toolkit-for-trade-negotiators/5-investment-provisions/5-4-safeguarding-policy-space/5-4-5-fair-and-equitable-treatment-fet-or-minimum-standard-of-treatment-mst/">legitimate expectations</a>” which enable foreign investors to sue on the grounds that government action reduced the value of their investments or did not meet their expectations at the time they invested.</p>
<p>US tobacco company <a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279">Philip Morris</a> tried a similar ploy when it sued the Australian government over Australia’s plain packaging law. </p>
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Read more:
<a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279">When even winning is losing. The surprising cost of defeating Philip Morris over plain packaging</a>
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<p>Although Philip Morris couldn’t sue using the Australia-US Free Trade Agreement (which lacks an ISDS provision), it moved ownership of its Australian arm to Hong Kong and sued using a Hong Kong treaty, ultimately <a href="https://nortonrosefulbright.com/en/knowledge/publications/ded9c356/philip-morris-asia-v-australia">failing</a>. However, Australia was left with a <a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279">A$24 million</a> legal bill, only half of which it recovered.</p>
<h2>The tool used by big tobacco</h2>
<p>Overseas, ISDS clauses have been used to enable corporations to take action against measures to reduce carbon emissions, as well as against public health measures. Denmark and New Zealand appear to have designed their fossil fuel phaseout plans specifically to <a href="https://theconversation.com/how-treaties-protecting-fossil-fuel-investors-could-jeopardize-global-efforts-to-save-the-climate-and-cost-countries-billions-182135">minimise their exposure to ISDS clauses</a>. </p>
<p>Unlike normal legal proceedings, ISDS adjudications lack safeguards including an independent judiciary (ISDS arbitrators can continue to act for clients in other ISDS cases) or the need to <a href="https://www.abc.net.au/radionational/programs/backgroundbriefing/isds-the-devil-in-the-trade-deal/6634538">consider precedents or allow appeals</a>. This means decisions lack consistency and the outcome of Palmer’s case is unpredictable.</p>
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<a href="https://theconversation.com/corporations-prepare-to-sue-as-pandemic-reveals-trade-flaws-136604">Corporations prepare to sue as pandemic reveals trade flaws</a>
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<p>Mounting criticism of the clauses led to their exclusion from recent Australian trade agreements, including those with the <a href="https://www.dfat.gov.au/trade/agreements/not-yet-in-force/aukfta/official-text">United Kingdom</a>, the <a href="https://www.dfat.gov.au/trade/agreements/negotiations/aeufta/australia-european-union-fta-fact-sheet">European Union</a> and <a href="https://theconversation.com/suddenly-the-worlds-biggest-trade-agreement-wont-allow-corporations-to-sue-governments-123582">nations bordering the Pacific</a>.</p>
<p>Labor recently reaffirmed its<a href="https://www.trademinister.gov.au/minister/don-farrell/speech/trading-our-way-greater-prosperity-and-security"> policy</a> to exclude ISDS clauses from all new trade agreements and to review their inclusion in existing agreements. </p>
<p>Palmer’s case, and the millions of dollars and years of effort it could cost Australia even if he ultimately fails, makes removing these clauses more urgent.</p><img src="https://counter.theconversation.com/content/203111/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dr Patricia Ranald is an honorary research associate at the University of Sydney and the honorary convener of the Australian Fair Trade and Investment Network, a network of community organisations which advocates for fair trade based on human rights, labour rights and environmental sustainability.</span></em></p>Palmer sued Western Australia’s government in the High Court and lost. But an obscure clause in a little-known trade agreement is giving him a second chancePatricia Ranald, Honorary research associate, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1928712022-11-14T15:03:41Z2022-11-14T15:03:41ZSecretive lawsuits by fossil fuel companies could hold back climate action – The Conversation Weekly podcast transcript<figure><img src="https://images.theconversation.com/files/495089/original/file-20221114-11-73bufu.jpg?ixlib=rb-1.1.0&rect=0%2C120%2C4144%2C2500&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Fossil fuel investors can use an obscure legal mechanism found in many international trade agreements to sue countries if their projects are blocked.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/offshore-gas-extraction-platform-cromarty-firth-393548437">Bernabe Blanco via Shutterstock</a></span></figcaption></figure><p><em>This is a transcript of The Conversation Weekly podcast episode: <a href="https://theconversation.com/a-secretive-legal-system-lets-fossil-fuel-investors-sue-countries-over-policies-to-keep-oil-and-gas-in-the-ground-podcast-191804">Secretive lawsuits by fossil fuel companies could hold back climate action</a>, published on October 6, 2022.</em></p>
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<p><em>NOTE: Transcripts may contain errors. Please check the corresponding audio before quoting in print.</em></p>
<p>Gemma: Hello, I’m Gemma Ware in London.</p>
<p>Dan: And I’m Dan Merino in San Francisco. Welcome to The Conversation Weekly.</p>
<p>Gemma: Dan, this week we’re gonna hear a story about a secretive international legal system that protects fossil fuel companies and could jeopardise global efforts to save the climate.</p>
<p>Dan: Well, I hate the sound of this. Where are we starting this story, Gemma?</p>
<p>Gemma: Well, we’re gonna start in a very idyllic part of the world on the East coast of Italy in a region called Abruzzo.</p>
<p>Maria D'Orsogna: It’s very, you know, beautiful. It’s unspoiled in many ways. It’s very raw.</p>
<p>Gemma: This is Maria D’Orsogna. A physicist by training, today Maria is a professor of mathematics at California State University at Northridge in the US, but her heart lies thousands of miles away, in Abruzzo.</p>
<p>Maria: My parents were from there. They immigrated to New York where I was born and raised, but then they went back to live there. So I lived there with them when I was a teenager and a young adult for a good ten years of my young life.</p>
<p>Gemma: Maria moved to the US for college and then graduated school, but she kept travelling back and forth to Italy to see her family in France.</p>
<p>Maria: I have a lot of memories. I love that place. So, it’s very near and dear to my heart.</p>
<p>Gemma: What do you love about it? Tell me what it’s like.</p>
<p>Maria: The lifestyle, the rituals, everything. You know, it’s almost like life is the way it used to be, like you know, 50 years ago in many ways. There’s a lot of rituals connected to agriculture. This time of the year we’re supposed to do stuff in the fields. We’re supposed to take care of the harvesting, make olive oil. So I have relatives that make wine, that make olive oil. So I’m part of all these things when I go back and it’s very different from my life in the US.</p>
<p>Gemma: There’s a national park on the Abruzzo coast, and Maria says it has beautiful views out over the Adriatic sea.</p>
<p>Maria: A long time ago, there used to be a railroad that was taken out, and that railroad has now been turned into a bicycle path. So you can actually bike all along the coast of Abruzzo for about 100km. You have all these beautiful sites of the sea that are unobstructed in many ways because the railroad, a long time ago protected it from overdeveloping.</p>
<p>Gemma: One day in 2007, Maria received a phone call from a friend in Abruzzo that would change the course of her life.</p>
<p>Maria: He just said there were these rumours, they wanna drill over here, but it’s not clear. You know, nobody knows much about it.</p>
<p>Gemma: Drill, for oil.</p>
<p>Maria: And he told me “Maria, just don’t worry about this. Don’t you know, don’t overthink it because you live so far away. There’s nothing you can do about it, even if they decided to go ahead with this.” But I couldn’t sleep that night. And I just kept wanting to learn more. So I spent several hours the next day just looking over the internet, whatever I could find. And it was clear that some drilling was going to happen.</p>
<p>Gemma: Maria swung into action. She poured over the documents that the oil companies were sending out to their investors, and she began contacting others in Abruzzo who were concerned about the prospect of oil drilling.</p>
<p>Maria: We started doing these town hall meetings. I would go to Italy often just to talk to people. While I was at home, I would start running a blog and I wrote it every day, it became very popular. I would do these debates with oil people, sometimes. I got the Catholic Church involved. Remember, I had a job. I was doing research, I was giving talks. And for a long time, I essentially led two parallel lives.</p>
<p>Gemma: Initially, Maria was fighting against two onshore projects. One to drill in and the other to refine oil. But pretty soon she also became aware of an offshore project called Ombrina Mare. In 2005, Italy had granted a British-registered company called Mediterranean Oil & Gas, <a href="http://otp.investis.com/generic/regulatory-story.aspx?newsid=352036&cid=510">an oil exploration permit</a> for this offshore field. The plan was to erect a drilling platform a few kilometres offshore, <a href="https://ejatlas.org/conflict/estrazione-di-idrocarburi-ombrina-mare">accompanied by a large ship</a> that would help to refine the oil.</p>
<p>Maria: They actually did also conduct some tests for the oil back in 2008. They actually did drill, they didn’t have the final permit, but they had permits to drill temporarily. So actually they did erect an oil rig, and this lasted for three or four months while they were doing all this testing.</p>
<p>Gemma: Maria told me that local residents found tar-like deposits on stones to nearby beach during the period the oil right was up. When a regional environmental agency inspected the deposits, <a href="http://icolibri.blogspot.com/2008/05/le-analisi-dellarta-confermano-che-per.html">it confirmed the substance was a form of heavy hydrocarbon</a>. Where it came from, was never confirmed. </p>
<p>Plans for the onshore project and refinery were eventually abandoned, but Maria and her fellow campaigners <a href="http://cosmos.sns.it/wp-content/uploads/2018/01/Cernison_No_Oil_Abruzzo.pdf">continued to protest</a> against the offshore Ombrina Mare project. Then in 2010, the Italian government decided to suspend exploration licenses for all offshore drilling within 12 nautical miles off its coast.</p>
<p>Maria: At the time we had the Louisiana oil spill. Remember that? The Gulf of Mexico, Deep Water Horizon. So that was one thing that kind of made the Italian politicians think.</p>
<p>Gemma: At Ombrina Mare, the oil company didn’t give up. And it set about challenging the government’s ban. Then in 2014, Mediterranean Oil & Gas was <a href="https://www.thetimes.co.uk/article/rockhopper-exploration-widens-reach-by-buying-mediterranean-oil-and-gas-q28mnvrkjm8">bought out by another British company</a> called Rockhopper Exploration. It took on the permit to explore Ombrina Mare.</p>
<p>Maria: And again, they continued this attempt to have the judgements overturned. And actually they were able to have some changes in the law. Let me just say that there was a series of “Yes, you can drill. No, you cannot drill. Maybe you can drill. At some point you’ll be able to drill, but no, you can’t.” It ended in 2016.</p>
<p>Gemma: Pressure had mounted from the anti-oil activists and a couple of large protest rallies had drawn in tens of thousands of people. And so the Italian parliament decided to reintroduce its ban on offshore oil <a href="http://otp.investis.com/clients/uk/rockhopperexploration/rns/regulatory-story.aspx?cid=441&newsid=641609">drilling 12 nautical miles off the coast</a>. This meant Ombrina Mare could not go ahead. </p>
<p>Tell me what you felt when you heard the law was gonna be passed back in 2016?</p>
<p>Maria: At that time, I was, quite frankly, I was exhausted because again, not only was I doing all this activism, travelling to Italy a lot, I was under the attack of a lot of people, also, some normal people that were actually really convinced that this was gonna save all of Italy’s need for energy.</p>
<p>Gemma: Once she got over the exhaustion, over time, Maria was able to look back at what she and her fellow activists had achieved.</p>
<p>Maria: As the emotions cooled off. It turned also into pride for all that we have done and all that we had endured that we didn’t give up, that we resisted for so long. I didn’t know I had this in me.</p>
<p>Dan: Hooray, I say questioningly because I imagine Gemma, that though this sounds like a victory for Abruzzo and anyone on the Italian coastline, you’re gonna tell me I’m wrong, right?</p>
<p>Gemma: Yeah, unfortunately, this was a really great victory from Maria and all her colleagues, but it really is only the beginning of this story. I’ve been finding out all about what happened next for this episode because remember that oil company, Rockhopper, the one that bought the exploration rights for the Ombrina Mare field? Well, in 2017, it decided to take legal action against the Italian government, arguing that it had lost millions of Euros in potential earnings from that offshore drilling.</p>
<p>Dan: They wanted compensation …</p>
<p>Gemma: They did, they wanted money. They didn’t start doing this in an Italian court. They went through arbitration. So essentially a private form of litigation. But Rockhopper used a pretty obscure mechanism to do this, called investor state dispute settlement, or ISDS.</p>
<p>Dan: Sounds like some legal jargon agreementy thing. What’s ISDS?</p>
<p>Gemma: So these kind of arbitrations allow a company to sue a country if that country is signed up to an international investment treaty. Some of these treaties are huge, international, multinational ones … think about what used to be called Nafta. But others are just bilateral treaties between two countries.</p>
<p>Dan: So Gemma, this to me sounds like there’s some baked-in legalese, loophole type thing and these trade agree that is complicated, probably purposefully, to allow companies to sue nations for a tonne of money. Is that basically what’s happening here? And I’m already mad. </p>
<p>Gemma: Yeah, it is, and it is a huge deal and as I’ve been talking to a couple of academics over the past few weeks for this episode, I’ve been finding out just how worried and frankly irate they are about the whole ISDS arbitration system. Apart from lots of concerns about how secretive this whole system is just in the first place, they’re really worried about how it could be used by companies to sue governments who are taking climate actions that harm the bottom lines of fossil fuel investors. And you know the scary thing about this, Dan, is that it’s actually already happening, and somebody who knows a lot about it is Kyla Tienhaara. She’s an assistant professor at Queen’s University in Kingston, Canada.</p>
<p>Kyla: A lot of my research happens to be on investor state dispute settlement or ISDS. And how it in particular, impacts environmental policy and climate policy decisions.</p>
<p>Gemma: So how did you get interested in researching these opaque international treaties and this quite complex and very secretive bit of international law?</p>
<p>Kyla: First of all, I’m not a lawyer. So, it always is a bit funny how I managed to stumble into this. It was quite a long time ago, it was around 2005. I was working on my PhD and I was supposed to be working on forest governance and looking at sort of international cooperation on forests. I was looking at a case study, doing a case study in Indonesia. And came across this news article that was about all these mining companies that were threatening the government with hundreds of millions of dollars in legal claims, if they didn’t backtrack on a new policy that banned open pit mining in certain types of forest that were protected, basically to protect groundwater resources. </p>
<p>I understood nothing about what these legal claims were. I was like, it’s not in the Indonesian courts, so what is this system where this is happening? And I just kind of got hooked and started digging into it and completely abandoned my PhD on forest governance and took up something entirely new and spent some time in Indonesia actually digging into that case a bit more. The sad part is that the government did backtrack and allow the mining companies to proceed. </p>
<p>But then in the course of all that too, I realised that it wasn’t just Indonesia facing these cases. My own country, Canada, had been facing these cases for a couple years over environmental policy and I was really shocked that I had never heard of it. I think that’s the usual reaction whenever people find out about this system is: how have I never heard of this before?</p>
<p>Gemma: Yeah. I felt like that for sure. So tell us a bit about the history of these clauses and these treaties. When do they start getting used and why?</p>
<p>Kyla: So the treaties that allow for ISDS go back to the sort of immediate post-colonial period, and it’s really important that people understand the system really is an extension of colonialism. Although, countries like Italy and Canada are impacted by the system now, it was really intended in the first instance to protect the interests of multinational companies from the global north when then were operating in these newly de-colonised parts of the world. And so, that asymmetry still exists. The vast majority of these treaties are between a developed and a developing country. The investment only flows in one direction, usually. So that means that the risk is all on the developing country side and developed countries are mainly immune unless they get into these bigger regional or multilateral agreements.</p>
<p>Gemma: Between 1959 and 2009, 3,300 international investment agreements were signed, <a href="https://unctad.org/system/files/official-document/diaepcbinf2022d6_en.pdf">around two-thirds of which</a> are still in place today. In the first few decades these treaties existed, companies didn’t use the ISDS clauses in them to sue countries they were investing in.</p>
<p>Kyla: Then we get into the late 90s and we have the North American Free Trade Agreement, Nafta, which had Canada, the US and Mexico. And we have some creative lawyers who started to realise that these vaguely worded causes in the investment chapter of Nafta could be used to challenge forms of regulation that honestly the government’s never anticipated these types of cases. Canada and the US were very clear that they expected this chapter of the free trade agreement to be used against Mexico. The concern really is what happens if a government completely takes over, nationalises or expropriates an investor’s property, </p>
<p>Gemma: That’s the argument for them, isn’t it? If you’re a company investing in a country that doesn’t have the kind of legal system that you think is gonna protect you, then these clauses are meant to protect you. </p>
<p>Kyla: Exactly, because in the early post-colonial period there was nationalisations occurring and we can all debate whether or not we agree with those and who should have sovereignty over natural resources and so forth, but that was the original argument in that these countries didn’t have well-developed court systems where investors would be able to make claims. But it has just morphed beyond, all recognition really of what the original intention of the treaties was. And that’s due to a lot of creative lawyering and the fact that the system is really stacked against states.</p>
<p>Dan: All right, Gemma, so Nafta, the TPP, all these international trade agreements and treaties, to be honest, I know that they’re a big deal and there’s been a lot of controversy, especially in the States in the last couple elections about whether they’re good, whether they’re bad, and globalisation and American jobs and it’s kind of all a big swirly mess that I will admit I’m not the most informed about. But one thing I didn’t hear anyone talking about ever were these ISDS clauses. Was this part of the reason people have been mad about these treaties in the past?</p>
<p>Gemma: No, it hasn’t really been a major part of the opposition to these treaties, which has been out there for a long time, but there are some ISDS cases that have got a bit more public attention.</p>
<p>Dan: I haven’t heard of any of these. Can you give me an example, Gemma?</p>
<p>Gemma: Yeah. So a pretty notorious case was one that started in 2011 in Australia. So the Australian government decided to <a href="https://www.fda.gov/international-programs/international-programs-news-speeches-and-publications/wtos-decision-australias-plain-packaging-tobacco-measures-explained">introduce new rules about plain packaging</a> for cigarette packets. This meant that companies could no longer have their logos or even any real design at all on the front of a cigarette packet. Now, Australia decided it wanted to do this to make smoking less appealing, but Philip Morris, the cigarette manufacturer, said, hang on a minute, this is gonna impact our sales. </p>
<p>So they used ISDS to sue the Australian government. Now Australia eventually <a href="https://www.iareporter.com/articles/breaking-australia-prevails-in-arbitration-with-philip-morris-over-tobacco-plain-packaging-dispute/">won on a technicality</a> based on the way that Philip Morris actually brought the case. But the whole thing led to a lot of opposition to ISDS clauses in Australia, and actually the newly elected Labor government in Australia has <a href="https://alp.org.au/media/2594/2021-alp-national-platform-final-endorsed-platform.pdf">said it won’t agree to future ISDS clauses</a> and actually wants to renegotiate any deals that have got them in there.</p>
<p>Dan: OK, so it sounds like there is a little bit of opposition, and it might be growing to these ISDS clauses and these treaties, but cigarettes and climate change are pretty different topics. What’s the connection here? How do both of these things fall under ISDS?</p>
<p>Gemma: Yeah, it’s a good question. And I guess climate change is kind of the future worry here for people like Kyla. And she told me there’s a particularly concerning clause that often appears in these international investment treaties that’s very concerning when it comes to climate change.</p>
<p>Kyla: The really problematic clause is this one called fair and equitable treatment. I mean it sounds fine, right? Like everybody believes people should be treated fairly, treated equitably. But it’s basically morphed into this idea that investors have legitimate expectations about what they’re going to be able to do when they invest in a country, and changing policy, changing science be damned. They should be able to have things go as they planned. And so that’s being used in cases now around climate where the investors were saying we had a legitimate expectation that our coal plant or our pipeline was gonna be able to have a 30-year life and now you’re saying that it can’t, so you’ve breached our legitimate expectations.</p>
<p>Dan: Gemma, if I can jump in here with a question. Kyla mentioned 30-year expectations. This all sounds like a loss of future earnings, which I’ve always found that to be a weird term. Is that what’s really going on here?</p>
<p>Gemma: Yeah, and this is really crucial because it’s not always just about what a company’s already invested, say in an oil well, it’s about their future earnings, what profits they might make from the oil in the future.</p>
<p>Dan: And that could be way more than the millions they spent building the well. Right?</p>
<p>Gemma: Exactly. And take the case of oil, like the oil price fluctuates massively depending on the global economy. So how much compensation a company gets really depends on the negotiations that happen in that room, in the arbitration panel.</p>
<p>Dan: So it sounds like a lot of squishy back and forth arguing in these back courts. Gemma, I would love to know what that’s like. Are people allowed into these negotiation rooms and these hearings, or is this as shady and dark as I’m imagining it to be?</p>
<p>Gemma: Well, obviously some people are allowed in, but I really wanted to know this too, Dan. I really wanted to know what it’s like, what it feels like inside one of them. So I called up someone who’s been on the inside of a lot of them.</p>
<p>Emilia Onyema: You don’t actually feel like you’re in a courtroom. You feel as though you are in a conference room or a boardroom. And it happens a lot in hotel rooms.</p>
<p>Gemma: This is Emilia Onyema. She’s a professor of international commercial law at SOAS University of London in the UK. She researches international arbitration. She’s also sat on many arbitration panels herself.</p>
<p>Emilia: Just imagine a boardroom with the wide table, and so you have the arbitrator sitting at one end, and usually the claimants will sit on the right, the respondent will sit on the left.</p>
<p>Gemma: The way arbitrations work depend on where they’re happening and who is suing who. For example, it could be a commercial case where a company sues another company, or as we’ve been hearing, it could be a company suing a country.</p>
<p>Emilia: Arbitration is like private litigation, which means, when we come to what the arbitrator does, the arbitrator is like a private judge.</p>
<p>Gemma: Sometimes a case just has one arbitrator acting as a judge, but often there’s a panel made up of three of them. Each side in the dispute gets to choose one, and then they both agree who will be the third, presiding arbitrator. At the end of the hearings, it’s these three people who will rule on the outcome of the case. Often the full details of their decisions are kept secret. </p>
<p>Emilia: It’s a private process and private in the sense that the parties determine who the arbitrator is, they appoint their arbitrator. They pay the arbitrator, so they have more powers over the process than what they’ll have in litigation.</p>
<p>Gemma: Sometimes there will be witnesses too. These could be technical experts on the case, or there could be specialists brought in by both sides to assess the size of any potential damages.</p>
<p>Emilia: The witnesses, if they’re appearing virtually, there’ll be a huge screen through which they would appear. If they’re appearing physically, they will be physically in the room. OK, so just go back to your image of the court and then the witness is sitting there in the middle between the claimant and the respondent, facing the tribunal.</p>
<p>Gemma: And I guess in a courtroom what you’d see is family members or the public might come in or the media, but I’m presuming that’s not the case.</p>
<p>Emilia: That’s not possible in arbitration, because remember we said it’s a private process. So for any third party, third party being anybody that is not the parties in dispute, for anybody else to be in the room, they need the consent of the parties and the tribunal.</p>
<p>Gemma: And do they have to agree not to talk about what they’ve heard?</p>
<p>Emilia: Yes. They have to agree.</p>
<p>Gemma: When I asked Emilia what she thought about this secrecy, she said it depends on the type of arbitration. If it’s a commercial one between two companies, she thinks it’s usually none of the public’s business.</p>
<p>Emilia: The one that the public should be concerned about is really investor state arbitrations, simply because the state is involved and it’s usually the state exercising its powers and an investor being uhappy with that, and it would impact on the public. It’s either issues around public goods or the exercise of sovereign authority by the state and its citizens – it’s their tax money ultimately that would be used to resolve those disputes.</p>
<p>Gemma: So when it comes to a state, you think there should be more transparency then?</p>
<p>Emilia: I think there should be more transparency. Definitely. Again because of the nature of those disputes.</p>
<p>Dan: So Gemma, that sounds exactly like I picture shady backroom dealings going on with the powerful people of the world. It sounds like Emilia’s worked on a lot of these cases. She’s an arbitrator. Has she worked on any climate-related or fossil-fuel-related cases?</p>
<p>Gemma: She actually hasn’t. No. But she did tell me that arbitrators like her are seeing and hearing more about these cases coming up on their radar and the world of arbitration is expecting more of them to come down the line as well too.</p>
<p>Dan: If this is somewhat of a new kind of case, do we have any idea how much money we’re talking here?</p>
<p>Gemma: So it’s still early days, but lots of researchers are thinking about this. And actually, Kyla Tienhaara and a couple of her colleagues actually recently figured out just how much money countries might get sued for if they want to try and keep warming to below 1.5 degrees celsius.</p>
<p>Kyla: In 2021, the International Energy Agency (IEA) came out with this big report on <a href="https://www.iea.org/reports/net-zero-by-2050">Net Zero Emissions by 2050</a>. It basically modelled a scenario for what needed to happen in order to keep below 1.5 and said: no new oil, gas or coal. It’s important to recognise the IEA is not some left-wing environmental group. It’s a very conservative organisation. So for it to say fossil fuels have to stay in the ground now, was pretty significant.</p>
<p>Gemma: Kyla and her colleagues at Boston University used the IEA statement as a <a href="https://theconversation.com/how-treaties-protecting-fossil-fuel-investors-could-jeopardize-global-efforts-to-save-the-climate-and-cost-countries-billions-182135">cutoff point in their study</a>. They assumed that all existing oil and gas projects would need to be cancelled if governments wanted to stay within 1.5 degrees of warming. They used a global database of existing oil and gas concessions and looked at which ones were subject to some kind of investor state arbitration clause. They found that if countries decided to cancel just the oil and gas concessions alone, <a href="https://www.science.org/doi/10.1126/science.abo4637">they could face up to US$340 billion</a> in legal and financial risks from ISDS cases. And Kyla admits even this figure is probably an underestimate.</p>
<p>Kyla: But for me, the most important part about that study was not the big headline of $340 billion, but the distribution of the risks amongst different countries.</p>
<p>Gemma: Which countries are more at risk?</p>
<p>Kyla: So, what really stood out for me is that there are some countries like Mozambique that are highly vulnerable to climate change. They’re also not overflowing with resources to defend themselves in arbitration. But my main concern about these types of disputes is that countries like Mozambique are gonna look at a threat and just be like: “No way, we cannot afford to lose that much in an arbitration.”</p>
<p>Gemma: I wanna zoom in here on Mozambique for a moment. I spoke to another researcher called Lea Di Salvatore, who’s a PhD candidate at the University of Nottingham in the UK. Lea’s done a lot of work <a href="https://www.iisd.org/system/files/2022-01/investor%E2%80%93state-disputes-fossil-fuel-industry.pdf">trying to track what we know about ISDS cases</a> linked to environmental issues and to climate change. The main focus of her research is on Mozambique, which has huge reserves of natural gas and coal. She wanted to know how many of the contracts surrounding these mega fossil fuel projects could potentially be taken to arbitration.</p>
<p>Lea Di Salvatore: <a href="https://link.springer.com/referenceworkentry/10.1007/978-3-030-74380-2_26-1">I looked at the contracts</a> and the international investment agreements that cover these projects. And I can tell you that almost all of them are covered and have direct access with consent to ISDS. What that means is that the company can directly go and initiate an arbitration against Mozambique.</p>
<p>Gemma: Lea looked at contracts for 29 fossil fuel mega projects covering gas, coal and hydrocarbon exploration. All of these contracts have a duration of between 25 and 30 years. She found that 26 of these 29 contracts included clauses related to ISDS, either through international investment treaties or because of Mozambique’s own national investment laws. Now, Lea stressed that Mozambique is unlikely to cancel any of these contracts right now due to climate change, particularly when the country, like most of the global south, contributes so little to overall global emissions from fossil fuels.</p>
<p>Lea: It is definitely not its responsibility to go against these companies while it’s sitting on a huge pile of gas, when it contributed zero to the global emissions.</p>
<p>Gemma: But Leah warns that Mozambique is in danger of what’s called carbon lock-in. Other countries in the west are slowly moving away from fossil fuels and towards renewables. As this happens, Mozambique may find that the investments made in gas and coal infrastructure in the country start to lose their value over the duration of these 30-year contracts.</p>
<p>Lea: If the country decides to take some action that are not gonna be necessarily linked to the energy transition, but to protect itself from these risks, it might still be sued. </p>
<p>Gemma: She gave me a specific example. Say Mozambique decides it wants to raise the percentage, it taxes natural gas companies. </p>
<p>Lea: But in their contract they have what is called the stabilisation clause, a fiscal stabilisation clause. That means that the country, the moment they signed this contract, they have to maintain the same legal environment for taxation, for the duration of the contract. And if they change the legislation, the legislation does not apply to that specific.</p>
<p>Gemma: That’s crazy.</p>
<p>Kyla: Yes, it’s absurd.</p>
<p>Gemma: Just think about that for a moment. If Mozambique decides to change its own tax code – the way it taxes companies – it could potentially be on the hook for a lot of money if one of these investors decides to sue. For now, that’s not happening, but there are already disputes going on that are directly linked to a country’s policies on climate change. Kyla Tienhaara told me about two big ones. The first involves coal in the Netherlands.</p>
<p>Kyla: The Netherlands decided to phase out coal power and it offered compensation to companies that had coal power plants to help them convert to other forms of energy production. And two companies, Uniper and RWE said, the compensation you are offering us is insufficient, we are going to take claims to arbitration instead. </p>
<p>One of those companies: Uniper, has recently been forced by the German government to drop its case. Basically, Uniper needed a bailout. The German government said, we’ll bail you out, but <a href="https://www.ft.com/content/0a1406f7-4338-478c-ab11-b0c2c12faac8">one of the conditions</a> is that you need to drop this case. So, great on Germany. </p>
<p>Interestingly, Germany has also had a lot of work around coal phase out and they negotiated compensation with several companies. And in those negotiation agreements, explicitly says that the companies cannot challenge the phase out under arbitration. So Germany’s clearly very aware of these issues.</p>
<p>Gemma: The second of these big cases is closer to home for Kyla. It involves Canada in the United States and the Keystone XL oil pipeline.</p>
<p>Kyla: This case originally started back in 2015 when the Obama administration, in the lead up to the Paris Agreement said, we are not going to provide the permit for this big pipeline that’s gonna carry the most awful type of oil from a climate perspective, tar sands oil, from Alberta and Canada through the US. And the company launched a US$15 billion case under what was then the North American Free Trade Agreement or Nafta. Then, Trump came to power and said, “We’ll provide the permit.” And so the company dropped that dispute. Fast forward a couple years and we have the Biden administration, and he immediately, on coming into office, revoked the permit. So the company again launched a $15 billion dispute.</p>
<p>Gemma: Nafta was replaced in July 2020 by a new US, Mexico Canada Agreement, which contains some limited ISDS provisions. But companies are still allowed to sue under the old Nafta agreement for three more years, up to July 2023. This is because of what’s called a sunset clause that’s common in these types of international treaties.</p>
<p>Kyla: In addition to TC Energy, which is the company that has launched that dispute over Keystone XL, the Alberta government, which had very foolishly invested very late in the day when many people were very aware that Biden was likely to cancel the project and seemingly betting on the fact that they hoped that Trump would be reelected. So Alberta invested a whole bunch of money into the project, and now they are also <a href="https://globalnews.ca/news/8606716/alberta-government-compensation-cancelled-keystone-xl-pipeline/">taking a claim</a> against the US government, which is quite bizarre. </p>
<p>Gemma: You’ve talked about what you call the regulatory chill that these kind of cases can have on countries. So what does that chill look like in practice? And why are you so concerned about that part of this?</p>
<p>Kyla: The chill part has been what is most interesting to me from the beginning. People in the legal discipline tend to focus on the cases that actually happen and sort of going through and understanding how the arbitrators came to the decision and so forth. But for me it’s always been what are the cases that didn’t actually get to arbitration? When did an investor just threaten a dispute? And, you know the government wanted to make it go away, and so either rolled back the policy or delayed action or something like that. There is some preliminary evidence, at least that this is happening in the climate policy sphere. So, we have one case, a company called Vermillion threatened France when they came out <a href="https://www.bilaterals.org/?how-the-lobbies-used-the-threat-of&lang=en">with an oil and gas phase-out plan</a>, and subsequently the government <a href="https://www.sciencedirect.com/science/article/pii/S2589811621000227?via%3Dihub">did change the oil and gas phase out</a> so that those with sort of existing concessions would have more time to be phased out. </p>
<p>And then most recently, a journalist was able to get the New Zealand climate minister to actually say <a href="https://capitalmonitor.ai/institution/government/cop26-ambitions-at-risk-from-energy-charter-treaty-lawsuits/">our phase-out plan wasn’t as ambitious as it could have been</a> because we didn’t want to have to deal with investor state disputes. So this is really concerning. Again, it’s a critical decade for climate action we don’t have time for delay. </p>
<p>Dan: Gemma, the idea that the threat of being sued by a profit-driven corporation can prevent an entire country and many countries from trying to pursue their very necessary climate goals is just dark, honestly.</p>
<p>Gemma: Yeah. It’s sinister, isn’t it? I feel the same.</p>
<p>Dan: Bring me back to Italy though, Gemma, because we started in. Whatever ended up happening with that arbitration case?</p>
<p>Gemma: Right. So remember we had this on Ombrina Mare field off the coast of Italy that was blocked by the efforts of Maria D'Orsogan, and her activist colleagues and Rockhopper the oil company involved then launched an arbitration case back in 2017. And they did this based on something called the Energy Charter Treaty.</p>
<p>Dan: I’ve never heard of this one, but I assume it’s just one of these big international trade agreements, right?</p>
<p>Gemma: Yeah, it’s one that covers the energy industry and it’s got more than 50 signatories, including most EU states, the UK, Turkey and Japan. So Rockhopper launched this arbitration, and it’s actually been rumbling on for about five years until late August 2022, just a couple of weeks ago when a ruling was announced. </p>
<p>Dan: Who won?</p>
<p>Gemma: Rockhopper. <a href="https://www.theguardian.com/business/2022/aug/24/oil-firm-rockhopper-wins-210m-payout-after-being-banned-from-drilling">Rockhopper won. </a>The tribunal ordered the Italian government to pay 190 million Euros to Rockhopper, plus interest at 4%.</p>
<p>Dan: That’s obviously a lot of money, but honestly I was expecting it to be a bit higher … though I imagine Rockhopper was pretty stoked about the result, yeah?</p>
<p>Gemma: They were. Their chief executive, Samuel Moody said in a statement that he was “<a href="https://otp.tools.investis.com/clients/uk/rockhopperexploration2/rns/regulatory-story.aspx?cid=441&newsid=1618241">delighted” to have won the case</a>, which had been obviously going on for a long time.</p>
<p>Italy has until late December to appeal the decision. But Rockhopper’s share price has <a href="https://www.marketwatch.com/story/rockhopper-shares-jump-on-eur190-mln-italian-compensation-271661341603">already more than doubled</a> on the news, so it’s been good for them.</p>
<p>Dan: OK. So yeah, 190 million, that’s great, but a doubling of the share price, this all makes a lot of sense now. There’s a huge potential upside for a company to try and do this very little risk downside. Yeah, maybe legal fees, but the real issue is, There’s so much at stake in terms of climate efforts.</p>
<p>Gemma: Yeah, and this is something that Kyla Tienhaara said to me when I got her take on the ruling too.</p>
<p>Kyla: Unfortunately, I wasn’t particularly surprised, but it is still really disappointing. I’m really concerned that this is gonna have a chilling effect on other countries that are considering similar actions in terms of banning oil and gas drilling.</p>
<p>So what Italy did is very consistent with the climate science, even though it really came out of concerns about the local environment and so forth. And now we have this arbitration tribunal saying if other countries do that sort of thing, they should expect to have to pay hundreds of millions or even billions of dollars to oil companies to compensate them for this. It’s just crazy.</p>
<p>Gemma: The decision in Rockhopper’s favour came even though Italy actually withdrew from the Energy Charter Treaty in 2016. But because it withdrew on its own without the agreement of the other members, Italy is subject to a sunset clause. This means it can still be taken to arbitration under the treaty for 20 more years after its official exit, so until 2036.</p>
<p>Kyla: And that means that any investments that existed prior to the termination of that treaty still get protected. And in the context of climate change, this is really problematic, right? Because this is a critical decade for action on climate. And we have all these treaties that really we should terminate. But if we don’t get agreement from everyone on doing that, then the sunset clauses are gonna protect these fossil fuel investors.</p>
<p>Gemma: Opposition has been mounting to the Energy Charter Treaty, and it’s recently gone through a reform process. In late June, the members reached an <a href="https://www.euractiv.com/section/energy/news/eu-uk-win-fossil-fuel-carve-out-in-energy-charter-treaty-deal/">agreement in principle to modernise the text</a>. The EU and the UK secured a carve-out which will exclude any new fossil fuel investments made after mid August 2023 from the treaty. That means that any coal, or gas or oil project that starts after that date in the UK or EU, won’t be subject to arbitration under the treaty. But when it comes to existing fossil fuel investments, there’s still going to be a ten-year sunset clause. That means companies will have until 2033 to launch an arbitration. Another key reform is that companies based in the EU will no longer be able to bring disputes under the treaty against other EU states. Some European environmental groups were dismayed at the reforms, saying they didn’t go far enough. The next step now is in November when the sides of the treaty will come together to formally agree on whether to press ahead with the reforms.</p>
<p>Kyla: There still is potential for a different path and the different path would be for European countries to leave, collectively, and hopefully bring the UK with them as well. And in doing so, they could cancel the sunset clause between them.</p>
<p>Dan: I’m happy to hear some good news at the end here, Gemma. Maybe a light at the end of the tunnel. Treaties are just pieces of paper if we all decide to rip them up. Makes sense. But I imagine it’d be really hard, it’s hard enough to get a number of countries to agree to anything these days. Are there other ways countries are trying to avoid getting sued under this ISDS system?</p>
<p>Gemma: Yeah, you know Kyla told me that countries are really starting to realise what’s at stake with these treaties and with ISDS more generally. So there are a <a href="https://unctad.org/system/files/official-document/diaepcbinf2022d6_en.pdf">couple of ways they’re trying to do this.</a> Some countries are actually cancelling bilateral treaties that have ISDS clauses in them. Some are trying to renegotiate them. Other countries, like South Africa, are refusing to put these kind of clauses in any new international trade deals. And more recently, some countries have specifically fought to put clauses into these agreements that prevent companies from suing them over climate action.</p>
<p>Dan: That sounds good in that governments are finally getting wise to the risk of this.</p>
<p>Gemma: They are, and actually Emilia Onyema, the arbitration expert we heard from earlier, told me something that made a lot of sense to me. So as richer countries in Europe and North America face the threat of these arbitrations over their own policies to reduce fossil fuel emissions, it might actually give them pause for thought about demanding these clauses from other countries.</p>
<p>Emilia: So as we now have states from different hemispheres being sued, maybe states can see that they have common interests. It’s no longer a north-south sort of relationship where it’s only our own investors that can sue states in the global south. So, maybe states can understand that, well, we can also be sued and so we do have a common interest.</p>
<p>Gemma: Emilia said the next question is for states to ask themselves, why are we being sued?</p>
<p>Emilia: Because you’ve made promises that you can’t keep. These are contractual and legally binding promises. And I think it will be wrong for us to say that a state can wake up today, say something, and then it’s OK if the state does not comply with it. I think that’s wrong, because businesses rely on those promises made by states and they make investments. So it’s for states to step back and ask themselves what sort of commitments are we making? Can we realistically, can we actually perform? Can we comply?</p>
<p>Gemma: Emilia also said that if governments do decide to shut down oil exploration or coal power plants, they should be ready to pay out compensation, because if they don’t, they may well find themselves in one of these private litigations. There’s a bigger point here that there’s gonna be some kind of cost to phasing out fossil fuels whatever happens. Either you do it around a negotiating table or you leave it up to a secretive panel of three arbitrators in a hotel room somewhere. </p>
<p>I wanna give the final word in this episode to Maria D’Orsogna. I asked her how did she feel about the arbitration decision in Rockhopper’s favour?</p>
<p>Maria: It’s very discouraging for future battles, right? Even the politicians that wanted to change their minds in the future, they will be, they’ll have this thing in their heads: “Oh, you know, now we’re gonna be slapped with millions of dollars of fines.” So again, I was angry, I was discouraged. But again, in the end, I think that what we saved is worth much more than all the money they’re able to recuperate.</p>
<p>Gemma: OK, that’s it for this episode. We’ve got a few people to thank. First to Stacy Morford in the US who worked on a story earlier this summer with Kyla Tienhaara and some of her colleagues at Boston University. To our global executive editor Stephen Khan, to Alice Mason for our social media and to Soraya Nandy for help with our transcripts. Finally, thanks to Graham Griffith for all his help over the past few months.</p>
<p>Dan: You can find us Twitter <a href="https://twitter.com/TC_Audio">@TC_audio</a>; on <a href="https://www.instagram.com/theconversationdotcom">Instagram</a>; or <a href="mailto:podcast@theconversation.com">email</a> us. You can also sign up for our <a href="https://theconversation.com/newsletter">free newsletter</a> And if you like what we do, please support the podcast and the conversation more broadly, go to <a href="http://donate.theconversation.com/">donate.theconversation.com</a>.</p>
<p>Gemma: This episode of The Conversation Weekly was produced by Mend Mariwany and me, Gemma Ware. I’m also the show’s executive producer. Sound Design was by Eloise Stevens and our theme music is by Neeta Sarl.</p>
<p>Dan: I’m Dan Merino. Been a pleasure having you.</p><img src="https://counter.theconversation.com/content/192871/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Maria R. D'Orsogna was leader of the Italian "No Oil" Movement. Emilia Onyema often sits as an arbitrator on tribunals in both commercial and state disputes. To date, she has not been involved in any cases related to climate change or fossil fuel extraction. </span></em></p><p class="fine-print"><em><span>Kyla Tienhaara receives funding from the government of Canada through the Canada Research Chairs program. She does pro bono and occasionally paid work for a number of non-profit organizations including IISD, IIED and ClientEarth. Lea Di Salvatore is visiting scholar at the Business, Human Rights and the Environment research centre at the Nova Law School in Lisbon. She is also part of the Rising from the Depths Network. </span></em></p>A transcript of an episode of The Conversation Weekly published on October 6, 2022.Gemma Ware, Editor and Co-Host, The Conversation Weekly Podcast, The ConversationDaniel Merino, Assistant Science Editor & Co-Host of The Conversation Weekly Podcast, The ConversationLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1918042022-10-06T10:26:28Z2022-10-06T10:26:28ZA secretive legal system lets fossil fuel investors sue countries over policies to keep oil and gas in the ground – podcast<figure><img src="https://images.theconversation.com/files/488053/original/file-20221004-26-bvgsmj.jpg?ixlib=rb-1.1.0&rect=19%2C82%2C4206%2C2724&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Fossil fuel investors can use an obscure legal mechanism found in many international trade agreements to sue countries if their projects are blocked. </span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/oil-gas-platform-burning-power-energy-164604329">curraheeshutter via Shutterstock</a></span></figcaption></figure><p>A new barrier to climate action is opening up in an obscure and secretive part of international trade law, which fossil fuel investors are using to sue countries if policy decisions go against them.</p>
<p>In this episode of <a href="https://theconversation.com/uk/topics/the-conversation-weekly-98901">The Conversation Weekly</a> podcast, we speak to experts about the investor-state dispute settlement (ISDS) mechanism and how it works. Many are worried that these clauses in international trade deals could jeopardise global efforts to save the climate – costing countries billions of dollars in the process. </p>
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<p>ISDS clauses were first introduced into international trade agreements in the post-colonial period. Most of these treaties were between a developed and a developing country. “It was really intended in the first instance to protect the interests of multinational companies from the global north when they were operating in these newly decolonised parts of the world,” explains Kyla Tienhaara, an expert in ISDS and environmental governance at Queen’s University in Ontario, Canada. </p>
<p>Yet Tienhaara says the use of ISDS has “morphed beyond all recognition” of the treaties’ original intentions, due to what she calls “creative lawyering” and the fact the system is stacked in favour of investors and against governments. </p>
<p>A looming concern is the chilling effect these clauses could have on countries’ decisions to phase out fossil fuels or take other action to protect the environment if investors decide to sue for compensation. In April, a summary report by the UN’s Intergovernmental Panel on Climate Change <a href="https://www.veblen-institute.org/IPCC-points-out-the-incompatibility-between-protecting-fossil-investments-and.html">singled out ISDS clauses</a> saying that they may “limit countries’ ability to adopt trade-related climate policies” and stick to their commitments under the 2015 Paris agreement. </p>
<p>In a recent study, Tienhaara and her colleagues estimated that countries could face up to <a href="https://doi.org/10.1126/science.abo4637">US$340 billion in financial and legal risk</a> from cancelling fossil fuel projects covered by ISDS clauses. </p>
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Read more:
<a href="https://theconversation.com/how-treaties-protecting-fossil-fuel-investors-could-jeopardize-global-efforts-to-save-the-climate-and-cost-countries-billions-182135">How treaties protecting fossil fuel investors could jeopardize global efforts to save the climate – and cost countries billions</a>
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<p>Some countries are more vulnerable than others because of the nature of the contracts they’ve entered into. Mozambique, with its large gas and coal reserves, is particularly so, explains Lea Di Salvatore, a PhD candidate at Nottingham University in the UK. </p>
<p>She <a href="https://link.springer.com/referenceworkentry/10.1007/978-3-030-74380-2_26-1">analysed 29 of the country’s mega-projects for gas, coal and hydrocarbons</a> and found that the vast majority are covered by ISDS clauses. This means that “the company can directly go and initiate an arbitration against Mozambique”, she says, if it feels a government policy has negatively affected its investment. </p>
<p>We hear what it’s like inside one of these arbitration rooms from Emilia Onyema, a professor of international commercial law at SOAS, University of London in the UK. “It’s a private process,” she explains. “The parties determine who the arbitrator is. They appoint the arbitrator. They pay the arbitrator. So they have more powers over the process than they would have in litigation.” </p>
<p>And we tell the story of one ISDS case <a href="https://www.theguardian.com/business/2021/jul/25/outrage-as-italy-faces-multimillion-pound-damages-to-uk-oil-firm">launched against Italy</a> by the British oil company, Rockhopper Exploration. In 2016, <a href="https://www.oedigital.com/news/450543-italy-reintroduces-12-mile-exploration-restriction">Italy banned oil drilling 12 nautical miles</a> off its coast, which blocked Rockhopper’s exploration of the offshore Ombrina Mare field in the Adriatic Sea. Maria-Rita D'Orsogna, a US-based mathematician and leading campaigner against oil exploration in Abruzzo, explains what was at stake and what happened next.</p>
<p>Listen to the whole episode on The Conversation Weekly to find out about the fight back against ISDS, including moves to reform a big <a href="https://www.euractiv.com/section/energy/news/eu-uk-win-fossil-fuel-carve-out-in-energy-charter-treaty-deal/">international trade treaty covering the fossil fuel industry</a> and what countries are doing to limit their risk from ISDS climate arbitration. </p>
<p>This episode was produced by Gemma Ware and Mend Mariwany, with sound design by Eloise Stevens. The executive producer was Gemma Ware. Our theme music is by Neeta Sarl. </p>
<p>You can find us on Twitter <a href="https://twitter.com/TC_Audio">@TC_Audio</a>, on Instagram at <a href="https://www.instagram.com/theconversationdotcom/">theconversationdotcom</a> or <a href="mailto:podcast@theconversation.com">via email</a>. You can also sign up to The Conversation’s <a href="https://theconversation.com/newsletter">free daily email here</a>. A transcript of this <a href="https://theconversation.com/secretive-lawsuits-by-fossil-fuel-companies-could-hold-back-climate-action-the-conversation-weekly-podcast-transcript-192871?notice=Article+has+been+updated.">episode is now available</a>. </p>
<p>You can listen to “The Conversation Weekly” via any of the apps listed above, download it directly via our <a href="https://feeds.acast.com/public/shows/60087127b9687759d637bade">RSS feed</a>, or find out <a href="https://theconversation.com/how-to-listen-to-the-conversations-podcasts-154131">how else to listen here</a>.</p><img src="https://counter.theconversation.com/content/191804/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Maria R. D'Orsogna was leader of the Italian "No Oil" Movement. Emilia Onyema often sits as an arbitrator on tribunals in both commercial and state disputes. To date, she has not been involved in any cases related to climate change or fossil fuel extraction. </span></em></p><p class="fine-print"><em><span>Kyla Tienhaara receives funding from the government of Canada through the Canada Research Chairs program. She does pro bono and occasionally paid work for a number of non-profit organizations including IISD, IIED and ClientEarth. Lea Di Salvatore is visiting scholar at the Business, Human Rights and the Environment research centre at the Nova Law School in Lisbon. She is also part of the Rising from the Depths Network. </span></em></p>Experts are concerned that a legal mechanism called investor-state dispute settlement could affect countries’ moves to cut fossil fuel emissions. Listen to The Conversation Weekly.Gemma Ware, Editor and Co-Host, The Conversation Weekly Podcast, The ConversationDaniel Merino, Assistant Science Editor & Co-Host of The Conversation Weekly Podcast, The ConversationLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1628412021-06-16T06:08:06Z2021-06-16T06:08:06ZThere’s a lot we don’t know about the UK trade agreement we are about to sign<p>We’re being told <a href="https://www.trademinister.gov.au/minister/dan-tehan/media-release/new-free-trade-agreement-deliver-jobs-and-business-opportunities-australia-and-united-kingdom">about</a> the new Australia-United Kingdom Free Trade Agreement, but not a lot about most of what’s in it.</p>
<p>After an in-principle agreement overnight, Australia released a five-page <a href="https://cdn.theconversation.com/static_files/files/1688/Australia-UK_FTA_background.pdf?1623815787">summary</a>.</p>
<p>Australian farmers will benefit from tariff-free access to the UK for limited amounts of Australian beef, lamb, sugar and dairy products to the UK (but will have to wait ten years for the full elimination of tariffs). Australian consumers will benefit from immediate zero tariffs on products like UK whiskey and cars. Longer working holiday visas may be available for citizens from both countries.</p>
<p>It will take at least a month for the deal to be finalised and signed, and only after the signing will the Australian public see the full text and a parliamentary committee be given the right to inquire into it but not change it. </p>
<p>This secrecy continues what’s become something of a tradition — one that has attracted the ire of the <a href="https://www.pc.gov.au/inquiries/completed/trade-agreements">Productivity Commission</a> which in 2010 recommended the government commission and publish an independent and transparent assessment of future free trade agreements “at the conclusion of negotiations but before an agreement is signed”.</p>
<p>The parliament’s joint standing committee on treaties (the same one that will examine this agreement) began inquiring into the system mid <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Treaties/Treaty-makingProcess">last year</a> and took <a href="https://theconversation.com/last-to-know-the-european-union-knows-more-about-our-trade-talks-than-we-do-144196">many submissions</a>, but still has not reported.</p>
<h2>As many as 30 unseen chapters</h2>
<p>The timing of the deal is driven by the UK’s post-Brexit desperation to sign one-on-one agreements and the greater prize of being part of the 11-nation Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) including Japan, Australia, Canada, New Zealand, Vietnam, Singapore, Malaysia, Brunei, Mexico, Chile and Peru which the UK has <a href="https://www.chathamhouse.org/2021/03/why-joining-cptpp-smart-move-uk">applied to join</a>.</p>
<p>Like the CPTPP, the Australia-UK Free Trade Agreement is likely to have as many as 30 chapters, some of which restrict the ability of governments to regulate in fields including medicines, essential services and data privacy. </p>
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<a href="https://images.theconversation.com/files/406659/original/file-20210616-3738-1qnaa58.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/406659/original/file-20210616-3738-1qnaa58.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/406659/original/file-20210616-3738-1qnaa58.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=969&fit=crop&dpr=1 600w, https://images.theconversation.com/files/406659/original/file-20210616-3738-1qnaa58.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=969&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/406659/original/file-20210616-3738-1qnaa58.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=969&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/406659/original/file-20210616-3738-1qnaa58.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1218&fit=crop&dpr=1 754w, https://images.theconversation.com/files/406659/original/file-20210616-3738-1qnaa58.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1218&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/406659/original/file-20210616-3738-1qnaa58.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1218&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">UK Trade Minister Greg Hands.</span>
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<p>UK trade minister Greg Hands said last month he wants the deal to include investor-state dispute settlement (ISDS) provisions of the kind excluded from the Australia-European Union current trade talks, and from the <a href="https://theconversation.com/suddenly-the-worlds-biggest-trade-agreement-wont-allow-corporations-to-sue-governments-123582">Regional Comprehensive Economic Partnership </a>recently signed with Japan, China, South Korea, New Zealand and the 10 ASEAN countries.</p>
<p>The provisions would allow UK firms to sue Australian governments in international tribunals over decisions they believed infringed on their interests in a way Australian firms could not.</p>
<p>In return Australian firms could sue UK authorities in a way UK firms could not.</p>
<p>But UK companies are more frequent users of ISDS, having launched <a href="https://investmentpolicy.unctad.org/investment-dispute-settlement/country/221/united-kingdom/investor">90</a> recorded ISDS cases, the third most after the US and the Netherlands. Australian companies have launched <a href="https://investmentpolicy.unctad.org/investment-dispute-settlement/country/11/australia/investor">nine</a>.</p>
<p>Defending the idea in the House of Commons, Hands said the UK had “<a href="https://hansard.parliament.uk/Commons/2021-05-27/debates/759585C3-375D-4EBA-BB6A-08B217C75017/AgriculturalExportsFromAustraliaTariffs?highlight=isds#contribution-CBFF5C34-9754-42FC-AD84-9688A3C11272">never lost an ISDS case</a>”.</p>
<p>There are now <a href="https://investmentpolicy.unctad.org/investment-dispute-settlement">1,104,</a> known ISDS cases with increasing numbers against <a href="http://aftinet.org.au/cms/sites/default/files/Key%20ISDS%20health%20cases_1.pdf#overlay-context=Against_ISDS">health</a> and environment laws, including laws to address <a href="https://theconversation.com/the-fossil-fuel-era-is-coming-to-an-end-but-the-lawsuits-are-just-beginning-107512">climate change</a> and to protect <a href="http://icsidfiles.worldbank.org/icsid/ICSIDBLOBS/OnlineAwards/C3745/DS10808_En.pdf">indigenous rights</a>. </p>
<p>Australians remember that the US <a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279">Philip Morris</a> tobacco company used an obscure Hong Kong investment agreement to sue Australia for billions over our plain packaging law. </p>
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Read more:
<a href="https://theconversation.com/last-to-know-the-eu-knows-more-about-our-trade-talks-than-we-do-144196">Last to know: the EU knows more about our trade talks than we do</a>
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<p>It took the international tribunal almost five years to decide that Philip Morris was not a <a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279">Hong Kong</a> company as it had claimed. Australia had to pay $12 million in legal costs.</p>
<p>ISDS rules in the Australia-UK treaty would give UK mining companies such as Rio Tinto the right to claim <a href="https://www.theguardian.com/commentisfree/2021/jun/01/a-clause-in-the-uk-australia-trade-deal-could-let-companies-sue-governments-we-have-been-here-before">compensation</a> for new laws to protect Indigenous heritage areas, and UK aged care companies such as Bupa the right to claim compensation for new regulations arising from the Aged Care Royal Commission.</p>
<h2>Longer pharmaceutical monopolies</h2>
<p>The UK has also said in its <a href="https://www.gov.uk/government/publications/uks-approach-to-negotiating-a-free-trade-agreement-with-australia/uk-australia-free-trade-agreement-the-uks-strategic-approach">negotiating objectives</a> that it wants to preserve its “existing intellectual property standards” which include rules that provide for longer data protection monopolies on medicines than Australia has. </p>
<p>The UK also supported this demand as a member of the EU before Brexit when it was <a href="http://trade.ec.europa.eu/doclib/docs/2018/july/tradoc_157190.pdf">published by the EU</a> as part of the ongoing EU-Australia FTA negotiations.</p>
<p>Pharmaceutical companies already have 20 year monopolies on new medicines.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/planned-trade-deal-with-europe-could-keep-medicine-prices-too-high-102836">Planned trade deal with Europe could keep medicine prices too high</a>
</strong>
</em>
</p>
<hr>
<p>The UK has an additional “data protection” monopoly of up to ten years before data is released enabling production of cheaper competitors.</p>
<p>The current Australian standard is five years. Adopting the UK standard would delay the availability of cheaper medicines, costing Australia’s Pharmaceutical Benefits Scheme <a href="https://theconversation.com/planned-trade-deal-with-europe-could-keep-medicine-prices-too-high-102836">hundreds of millions</a> of dollars per year.</p>
<p>Unless the text is released before it is signed, we won’t know whether ISDS and longer medicine monopolies are part of the deal.</p>
<p>The Australian government should release the text for public scrutiny and independent assessment of its costs and benefits before it is signed, so that we are able to see what is being traded away before it’s too late.</p>
<hr>
<p><em>June 18, 2021: Since this article was published, the Australian and UK governments have responded to public concerns about secrecy by publishing the <a href="https://www.dfat.gov.au/trade/agreements/negotiations/aukfta/australia-uk-fta-negotiations-agreement-principle#investment">Agreement in Principle</a>. The agreement rules out the inclusion of Investor State Dispute Settlement (ISDS) procedures.</em> </p>
<p><em>Both of these developments are welcome. However the Agreement in Principle does not give detailed information about the up to 30 chapters which are still being negotiated behind closed doors. For instance, the section on intellectual property has no detail about whether the UK standard for longer medicine monopolies will be included in the deal.</em></p><img src="https://counter.theconversation.com/content/162841/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dr Patricia Ranald is an honorary research associate at the University of Sydney and the honorary convener of the Australian Fair Trade and Investment Network. </span></em></p>Australia won’t release the text until after it is signed.Patricia Ranald, Honorary research fellow, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1463842020-09-24T14:52:12Z2020-09-24T14:52:12ZFree trade 2.0: How USMCA does a better job than NAFTA of protecting the environment<figure><img src="https://images.theconversation.com/files/359189/original/file-20200921-14-fv7324.jpg?ixlib=rb-1.1.0&rect=2%2C0%2C1351%2C667&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Then-president of Mexico Enrique Pena Nieto, U.S. President Donald Trump and Prime Minister Justin Trudeau sign the new Canada-U.S.-Mexico Agreement in Buenos Aires, Argentina. The agreement was ratified in April 2020 and came into force last July. </span> <span class="attribution"><span class="source">The Canadian Press</span></span></figcaption></figure><p>Against a backdrop of clashes in Congress and with presidential election campaigns deepening the political divide in the United States, it may feel as though environmental issues are no longer part of the political discussion. The new North American Free Trade Agreement, however, has given environmental standards a boost.</p>
<p>The July 1 ratification of the <a href="https://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/cusma-aceum/index.aspx?lang=eng">United States-Mexico-Canada Agreement</a>, known as the USMCA or the new NAFTA, marked the end of tumultuous negotiations that included the contentious issue of environmental standards.</p>
<p>By putting the environment on the political agenda, the government of Canada placed environmental standards back on the table, even though the issue is not a priority for Donald Trump’s administration.</p>
<p>As a researcher at the Centre d'études sur l'intégration et la mondialisation at the Université du Québec à Montréal, I am interested in how economic power relations shape North American free trade negotiations amid tensions between the United States and its major trading partners.</p>
<h2>Democratic majority pushes issue</h2>
<p>Prior to the negotiation of USMCA, both the left and the auto-sector unions in the United States regularly accused Mexico of <a href="https://www.nytimes.com/2019/12/30/world/americas/mexico-environment-trade.html">illegal waste dumping</a> and “<a href="https://ieim.uqam.ca/IMG/pdf/ARES-IDEDEV-jan2009.pdf">social dumping</a>,” exploiting wage differences between countries to avoid high labour costs. Mexico, in turn, denounced Trump’s anti-NAFTA political discourse. </p>
<p>Mexico was criticized for applying lower environmental and labour standards than its North American partners to maintain a competitive advantage and attract foreign direct investment in its auto industry. This rhetoric took on particular significance in the anti-NAFTA campaign led by Donald Trump, <a href="https://www.reuters.com/article/us-usa-election-idUSKCN0ZE0Z0">first as a presidential candidate in 2016</a> and then <a href="https://www.npr.org/2018/10/01/653203765/u-s-and-canada-reach-deal-to-replace-nafta">as president</a>.</p>
<p>Following the November 2018 midterm elections, which brought a Democratic majority to the House of Representatives, environmental issues became important again. This provided an opportunity to strengthen the presence of environmental standards as the trade deal was renegotiated and ratified.</p>
<h2>Better than NAFTA</h2>
<p>A full chapter of the USMCA deals specifically with environmental issues — a clear innovation compared to NAFTA. It introduces an article (Article 24.8) that refers to seven ratified multilateral environmental agreements (MEAs), and explicitly obliges the signatories to respect these commitments.</p>
<p>MEAs are side agreements signed by NAFTA state parties with other countries to strengthen environmental protection standards in their free-trade relations. This is the first time in North America that a free-trade agreement integrates the environmental commitments made by its signatories.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/357287/original/file-20200909-16-1l2kru0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/357287/original/file-20200909-16-1l2kru0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/357287/original/file-20200909-16-1l2kru0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/357287/original/file-20200909-16-1l2kru0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/357287/original/file-20200909-16-1l2kru0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/357287/original/file-20200909-16-1l2kru0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/357287/original/file-20200909-16-1l2kru0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Extracting oil from an oil field in Kern County, Calif. About 15 billion barrels of oil could be extracted by hydraulic fracturing in the state.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
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</figure>
<p>USMCA was negotiated during the development of the U.S. shale gas industry, pipeline extensions — and protests by Indigenous people — in Canada and increased investment in oil and gas exploration in Mexico. USMCA, unlike NAFTA, <a href="https://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/cusma-aceum/enviro.aspx?lang=eng">introduces new environmental commitments</a> for improving air quality and reducing marine litter.</p>
<h2>Canadian standards take precedence</h2>
<p>The USMCA affirms the right of each party to set and enforce environmental protection standards at the national level. For example, in Canada, the more inclusive Canadian Environmental Protection Act of 1999 (CEPA) takes precedence over the Ozone-depleting Substances and Halocarbon Alternatives Regulations. </p>
<p>The issue of environmental standards is of particular importance to Canada as it relates to <a href="https://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/cusma-aceum/investment-investissement.aspx?lang=eng">investor-state dispute settlement (ISDS)</a>, a major item on the U.S. negotiating agenda.</p>
<p>Foreign investors have repeatedly sued Canada using the ISDS mechanism, on issues that largely related to the strengthening of environmental protection laws. As a result, Canada has <a href="https://www.policyalternatives.ca/sites/default/files/uploads/publications/National%20Office/2018/01/NAFTA%20Dispute%20Table%20Report%202018.pdf">paid more than $300 million in damages to U.S. investors</a>. This situation also made it difficult for Canada and the provinces to update and enforce their environmental regulations. </p>
<p>The USMCA negotiation provided Canada with the opportunity to end the unfavourable investor-state arbitration mechanism. From now on, it will be up to Canadian courts to rule on disputes between U.S. investors and Canada over damages suffered as a result of changes to Canadian laws, including environmental legislation. </p>
<h2>Recognition of the role of Indigenous peoples</h2>
<p>The <a href="https://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/cusma-aceum/initial_ea-ee_initiale.aspx?lang=eng">environment</a> took on a major technical, political and ideological importance in the negotiations following demands by the Democratic majority in Congress, something that affected not only the bargaining process but the ratification as well.</p>
<p>This <a href="https://ipolitics.ca/2020/01/16/u-s-senate-passes-usmca-only-canada-left-to-ratify/">strengthened key aspects of the federal government’s negotiating strategy</a>, allowing it to pursue efforts that reflected Canada’s progressive agenda, including the recognition of the role of Indigenous people in the preservation of biodiversity.</p>
<p>In the end, it means that free trade will have be more sensitive to the effects of climate change and accommodate environmental protection as an essential element of regulatory co-operation, no matter how it evolves during any integration of the North American economy.</p><img src="https://counter.theconversation.com/content/146384/count.gif" alt="La Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Brice Armel Simeu ne travaille pas, ne conseille pas, ne possède pas de parts, ne reçoit pas de fonds d'une organisation qui pourrait tirer profit de cet article, et n'a déclaré aucune autre affiliation que son organisme de recherche.</span></em></p>The Canada-U.S.-Mexico Free Trade Agreement, which came into force in July 2020, puts more emphasis on the environment and gives greater authority in Canada in the matter.Brice Armel Simeu, Doctorant en Économie politique internationale, Chercheur au Centre d'Études sur l'Intégration et la Mondialisation (CEIM), Université du Québec à Montréal (UQAM)Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1453342020-09-09T20:07:59Z2020-09-09T20:07:59ZClive Palmer versus (Western) Australia. He could survive a High Court loss if his company is found to be “foreign”<p>We may not like Clive Palmer as a person, or his business activities, or his politics, but from a legal perspective that should not matter. </p>
<p>All of us, rich or poor, should have equal rights under the rule of law, including access to independent review mechanisms. </p>
<p>So we should be concerned in principle about the oddly-named <a href="https://www.parliament.wa.gov.au/Parliament/Bills.nsf/2F1CFD31ACD372EE482585C100337061/$File/Bill%2B205-1.002.002.pdf">Iron Ore Processing (Mineralogy Pty. Ltd.) Agreement Amendment Act</a>. </p>
<p>It was hastily passed by the Western Australian parliament on August 13 in order to legislate away Palmer’s rights under a contract with Western Australia regarding the Balmoral South mining project. </p>
<p>Former High Court judge Michael McHugh upheld those rights in 2014 and 2019 arbitration awards.</p>
<p>The Act declares the contract to have no effect (s9) and declares both arbitration awards to have no effect (s7). </p>
<p>It makes the contract’s arbitration clause “not valid” (s10).</p>
<p>It says Western Australia cannot be sued and has no liability in any project-related dispute (s11). </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/356856/original/file-20200908-18-1aemhcz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/356856/original/file-20200908-18-1aemhcz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/356856/original/file-20200908-18-1aemhcz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=214&fit=crop&dpr=1 600w, https://images.theconversation.com/files/356856/original/file-20200908-18-1aemhcz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=214&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/356856/original/file-20200908-18-1aemhcz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=214&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/356856/original/file-20200908-18-1aemhcz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=269&fit=crop&dpr=1 754w, https://images.theconversation.com/files/356856/original/file-20200908-18-1aemhcz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=269&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/356856/original/file-20200908-18-1aemhcz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=269&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.parliament.wa.gov.au/Parliament/Bills.nsf/2F1CFD31ACD372EE482585C100337061/$File/Bill%2B205-1.002.002.pdf">Iron Ore Processing (Mineralogy Pty. Ltd.) Agreement Amendment Act 2020</a></span>
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<p>Rules of “natural justice” (including any duty of procedural fairness) are said not to apply to the West Australian government’s conduct, past or future (s12). </p>
<p>Palmer and associates must indemnify Western Australia against any loss connected with them including reduced funding from the Commonwealth (s14).</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-wa-government-legislated-itself-a-win-in-its-dispute-with-clive-palmer-and-put-itself-above-the-law-144360">The WA government legislated itself a win in its dispute with Clive Palmer — and put itself above the law</a>
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<p>Palmer has challenged the statute <a href="https://www.abc.net.au/news/2020-08-26/clive-palmer-suing-mark-mcgowan-john-quigley-in-new-legal-action/12596538">under Australian law</a>. There’s every chance the case will make it to the High Court. </p>
<p>But even that might not be the end of the matter.</p>
<p>He has also foreshadowed a challenge under <a href="https://www.afr.com/companies/mining/wa-s-palmer-legislation-could-end-up-costing-the-commonwealth-billions-20200818-p55mum">international law</a> of the kind allowed under several of Australia’s free trade agreements. </p>
<h2>Palmer might say his company is foreign</h2>
<p>He says his Balmoral South project is an investment made by Mineralogy International, registered in Singapore (and reportedly perhaps <a href="https://thewest.com.au/business/mining/palmer-to-put-himself-first-with-singapore-sling-ng-b881101575z">for this purpose</a>), and so is protected under a free trade agreement. </p>
<p>Australia’s <a href="https://www.dfat.gov.au/trade/agreements/in-force/safta/Pages/singapore-australia-fta">Free Trade Agreement with Singapore</a> was signed in 2003 and amended in 2017 to refine its <a href="https://theconversation.com/au/topics/isds-16000">investor-state dispute settlement</a> provisions bringing them into line with the <a href="https://www.dfat.gov.au/trade/agreements/in-force/cptpp/Pages/comprehensive-and-progressive-agreement-for-trans-pacific-partnership">Comprehensive and Progressive Agreement for Trans-Pacific Partnership</a>, in force between Australia and six other nations including Singapore and also the so-called <a href="https://www.dfat.gov.au/trade/agreements/in-force/aanzfta/Pages/general-review-of-the-asean-australia-new-zealand-fta">ASEAN+ treaty</a>. </p>
<p>Provisions in such treaties allow foreign investors to seek compensation from Australia for <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2767996">acts of expropriation</a>. </p>
<h2>Foreigners get extra rights</h2>
<p>They cover not only direct expropriation – where the government acquires property – as do <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2802450">similar provisions</a> in the Australian Constitution, but also indirect expropriation, where a government prevents an investor from exercising property rights. </p>
<p>Australia has only once squarely faced the use of such provisions, after the High Court dismissed a challenge to its 2010 tobacco plain packaging legislation.</p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/356877/original/file-20200908-24-1gcjcwh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/356877/original/file-20200908-24-1gcjcwh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=971&fit=crop&dpr=1 600w, https://images.theconversation.com/files/356877/original/file-20200908-24-1gcjcwh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=971&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/356877/original/file-20200908-24-1gcjcwh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=971&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/356877/original/file-20200908-24-1gcjcwh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1220&fit=crop&dpr=1 754w, https://images.theconversation.com/files/356877/original/file-20200908-24-1gcjcwh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1220&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/356877/original/file-20200908-24-1gcjcwh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1220&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Philip Morris Asia’s use of a Hong Kong treaty was found to be an abuse of process.</span>
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<p>Philip Morris Asia, a Hong Kong based company which took control of Philip Morris trademarks when Australia was preparing its plain packaging legislation, used a Hong Kong-Australia investment treaty to claim <a href="https://www.italaw.com/sites/default/files/case-documents/italaw7303_0.pdf">US$4.16 billion</a> for indirect expropriation.</p>
<p>The arbitration tribunal dismissed that claim as an “<a href="https://www.italaw.com/sites/default/files/case-documents/italaw7303_0.pdf">abuse of process</a>” under customary international law. </p>
<p>Philip Morris Asia was found to have obtained control of the trademarks in order to gain investment treaty protection when the dispute was foreseeable. </p>
<p>The <a href="https://www.dfat.gov.au/trade/agreements/in-force/safta/Pages/singapore-australia-fta">Singapore-Australia Free Trade Agreement</a> further commits Australia to providing the “customary international law minimum standard of treatment to foreigners”. </p>
<p>This “includes the obligation not to deny justice in criminal, civil or administrative adjudicatory proceedings in accordance with the principle of due process embodied in the principal legal systems of the world”.</p>
<p>Why promise additional rights to foreign investors? </p>
<p>Because domestic law may not meet international standards. The extension of such rights can encourage domestic investors press for better local standards. </p>
<p>Offering the global standard can also encourage more <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2824090">foreign direct investment</a>.</p>
<h2>Palmer might face problems…</h2>
<p>If Mineralogy International does try to file an investor state dispute claim, it will have to establish that its investment is covered and that it is a foreign investor for the purpose of the treaty.</p>
<p>Australia might invoke a “denial of benefits” provision if Mineralogy International lacks substantial business activities in Singapore. </p>
<p>It might also allege “forum shopping” of the kind Philip Morris Asia was <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2842065">found to have engaged in</a>. </p>
<h2>…but those rights are important</h2>
<p>This is how international law is supposed to work. As with human rights treaties, nations consent to international standards. </p>
<p>Impartial investor state dispute settlement procedures make a national commitments to investors credible. Exceptions acknowledge abuses of process.</p>
<p>If provisions generate problems, such as <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3227401">costs and delays</a>, Australia can negotiate improvements and review and modernise old treaties. </p>
<p>It did that with the <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3548358">Hong Kong Australia treaty</a> after the Philip Morris case and it has <a href="https://www.dfat.gov.au/trade-and-investment/discussion-paper-review-australias-bilateral-investment-treaties">just committed</a> to do it with the remaining older treaties.</p>
<p>An innovative way forward would be adding compulsory mediation before arbitration, as with the <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3548358">Australia-Indonesia Free Trade Agreement</a> signed last year.</p><img src="https://counter.theconversation.com/content/145334/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Luke Nottage received funding from the Australian Research Council over 2014-8 for a joint interdisciplinary Discovery Project examining Australia's investment treaties and dispute management in Asia-Pacific context (DP140102526). He was also a non-resident Fellow at the Centre for International Governance Innovation in Canada over 2016-7 for its book project on "Investor-State Arbitration Between Developed Democracies". </span></em></p>Foreign companies can get rights Australian companies can’t, so long as they are actually foreign.Luke Nottage, Professor, Sydney Law School, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1366042020-04-23T03:52:53Z2020-04-23T03:52:53ZCorporations prepare to sue as pandemic reveals trade flaws<figure><img src="https://images.theconversation.com/files/329955/original/file-20200423-47815-1diq0cu.jpg?ixlib=rb-1.1.0&rect=48%2C101%2C2044%2C1178&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://unsplash.com/@peterlaster">Pedro Lastra/Unsplash</a></span></figcaption></figure><p>Global companies are positioning themselves to use little-known rules in trade agreements such as the Comprehensive Progressive Trans-Pacific Partnership (<a href="https://theconversation.com/the-trans-pacific-partnership-is-back-experts-respond-87432">CPTPP</a>) to claim millions of dollars in compensation for restrictions imposed during the pandemic.</p>
<p>They and other companies have successfully lobbied for rules in the CPTPP and other bilateral and regional agreements that give them rights to bypass courts including Australia’s High Court and sue governments in extraterritorial tribunals for income they claim restrictions have cost them, using so-called Investor-State Dispute Settlement (ISDS) procedures.</p>
<p>Such provisions do not exist in the rules of the World Trade Organisation iteslf, which is the body formally charged with regulating global trade.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279">When even winning is losing. The surprising cost of defeating Philip Morris over plain packaging</a>
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<p>The Philip Morris tobacco company used such rules in a Hong Kong-Australia agreement to claim billions of dollars in compensation from Australian for plain packaging legislation. </p>
<p>Defeating this claim took Australia seven years and <a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279">A$12 million in legal costs.</a></p>
<p>There have been <a href="https://theconversation.com/the-fossil-fuel-era-is-coming-to-an-end-but-the-lawsuits-are-just-beginning-107512">increasing numbers</a> of such cases against governments regulating to reduce carbon emissions and combat climate change.</p>
<p>An international arbitration <a href="https://www.acerislaw.com/the-covid-19-pandemic-and-investment-arbitration/">law firm </a> Aceris Law LLC has told its clients</p>
<blockquote>
<p>while the future remains uncertain, the response to the COVID-19 pandemic is likely to violate various protections provided in bilateral investment treaties and may bring rise to claims in the future by foreign investors</p>
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<p>An Australian law firm <a href="https://www.lexology.com/Events/Details/7930">Alston & Bird</a> is advertising an event called “The coming wave of COVID-19 arbitration – looking ahead”.</p>
<p>Legal scholars critical of ISDS say governments could face an <a href="https://www.iisd.org/library/investor-state-claims-amidst-covid-19">avalanche</a> of ISDS cases after the pandemic is over. </p>
<h2>ISDS clauses establish rights to sue</h2>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/329947/original/file-20200423-47810-1jt8tif.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/329947/original/file-20200423-47810-1jt8tif.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/329947/original/file-20200423-47810-1jt8tif.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=971&fit=crop&dpr=1 600w, https://images.theconversation.com/files/329947/original/file-20200423-47810-1jt8tif.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=971&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/329947/original/file-20200423-47810-1jt8tif.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=971&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/329947/original/file-20200423-47810-1jt8tif.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1220&fit=crop&dpr=1 754w, https://images.theconversation.com/files/329947/original/file-20200423-47810-1jt8tif.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1220&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/329947/original/file-20200423-47810-1jt8tif.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1220&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Phillip Morris lost its case against Australia’s plain packs law in the High Court, then went to an extraterritorial tribunal.</span>
<span class="attribution"><span class="source">LUKAS COCH/AAP</span></span>
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<p>Foreign investors could allege that governments are breaching the “direct expropriation” clauses of ISDS rules by appropriating private health and other assets for public use. </p>
<p>Lock down rules that affect profits could be interpreted as “indirect expropriation”.</p>
<p>The pandemic is also raising questions about other aspects of Australia’s trade agreements. </p>
<p>Despite pleas from the <a href="https://www.pc.gov.au/news-media/speeches/free-trade-agreements">Productivity Commission</a>, each is <a href="https://www.smh.com.au/opinion/trade-agreements-need-more-public-and-parliamentary-scrutiny-20150501-1mxqc9.html">negotiated in secret</a> without an <a href="https://www.smh.com.au/politics/federal/trade-minister-andrew-robb-criticised-for-seeking-tpp-ratification-without-independent-analysis-20160209-gmpmwf.html">independent evaluation </a>of its costs and benefits.</p>
<p>Often the agreements open up <a href="https://link.springer.com/chapter/10.1007%2F978-3-319-29215-1_6">essential services</a> including health, to private foreign investment, with only limited carve outs to allow regulation which can be wound back, but not widened, over time.</p>
<p>They have also allowed pharmaceutical companies to <a href="https://www.nytimes.com/2015/01/31/opinion/dont-trade-away-our-health.html">increase their 20-year monopoly on new medicines</a>, delaying the availability of cheaper medicines. </p>
<p>In the past month the realities of the pandemic have forced the Australian government to (at least temporarily) back away from this approach.</p>
<p>It has <a href="https://www.theguardian.com/australia-news/2020/mar/31/federal-government-pay-half-integrate-private-public-hospitals-covid-19-response">directed private hospitals</a> to treat pandemic patients.</p>
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Read more:
<a href="https://theconversation.com/three-simple-things-australia-should-do-to-secure-access-to-treatments-vaccines-tests-and-devices-during-the-coronavirus-crisis-136052">Three simple things Australia should do to secure access to treatments, vaccines, tests and devices during the coronavirus crisis</a>
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<p>It has assisted local firms to reestablish the capacity to manufacture equipment such as <a href="https://www.abc.net.au/news/2020-03-27/inside-australias-only-medical-mask-factory/12093864">facemasks</a>. </p>
<p>And it has <a href="https://www.smh.com.au/politics/federal/foreign-buyers-face-scrutiny-on-every-bid-after-sharemarket-slump-20200329-p54f1s.html">ramped up</a> screening of foreign investment by the Foreign Investment Review Board, in a way trade agreements would <a href="https://www.dfat.gov.au/trade/agreements/in-force/chafta/fact-sheets/Pages/chafta-outcomes-at-a-glance">normally prevent</a>.</p>
<p>Post-pandemic trade policies should reject both the extremes of recent agreements and the Trump and Hanson policies of building walls and a return to high tariffs.</p>
<h2>Post-pandemic, we should wind such clauses back</h2>
<p>Australia should also reject the trap of taking sides in the US-China trade wars.</p>
<p>Trade agreements should be negotiated openly in a system that takes account of the specific needs of developing countries.</p>
<p>They should reinforce internationally-agreed and fully-enforceable labour rights and environmental standards, allow countries such as Australia to maintain the manufacturing capacity that will be needed in the event of crises and enable governments to regulate for purposes of public health and the environment. </p>
<p>They most certainly should not strengthen medicine or other monopolies, or give additional legal rights such as ISDS to global corporations that already have enormous market power.</p><img src="https://counter.theconversation.com/content/136604/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dr Patricia Ranald is the Convener of the Australian Fair Trade and Investment Network of community groups which advocates for fair trade based on human rights, labour rights and environmental sustainability.</span></em></p>Investor State Dispute Settlement Procedures open the prospect of legal cases it would cost Australia millions to defend.Patricia Ranald, Honorary research associate, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1263432019-11-05T01:22:15Z2019-11-05T01:22:15ZIndia’s not joining the latest free-trade deal which limits Australia’s market access<p>Australian prime minister Scott Morrison and other leaders involved in the Regional Comprehensive Economic Partnership (<a href="https://dfat.gov.au/trade/agreements/negotiations/rcep/Pages/regional-comprehensive-economic-partnership.aspx">RCEP</a>) <a href="https://asean.org/joint-leaders-statement-regional-comprehensive-economic-partnership-rcep/">announced</a> late yesterday that 15 of the 16 countries have finalised the text, and are prepared to sign the trade deal in early 2020. </p>
<p>India is the only one not to join, a joint leaders’ statement saying the country had “significant outstanding issues”. Negotiations will continue in the hope it may join later.</p>
<p>The RCEP now involves Australia, New Zealand, China, Japan, South Korea and the 10 Association of Southeast Asian Nations (<a href="https://asean.org/">ASEAN</a>) countries, covering 2.5 billion people.</p>
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Read more:
<a href="https://theconversation.com/arrogance-destroyed-the-world-trade-organisation-what-replaces-it-will-be-even-worse-125321">Arrogance destroyed the World Trade Organisation. What replaces it will be even worse</a>
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<h2>A lost Indian market, for now, and concerns about corporate power</h2>
<p>India’s absence severely diminishes the market access Australia hoped to gain. Australia already has a free trade agreement with ASEAN, and has bilateral free trade agreements with all of the other countries.</p>
<p>India would have been the main area of additional market access for Australian agricultural and other exports.</p>
<p>RCEP negotiations have dragged on since 2012. Much attention has focused on India’s <a href="https://www.theguardian.com/business/2019/nov/04/worlds-largest-trade-deal-rcep-faces-delay-as-india-pushes-back-against-china">resistance to lower tariffs</a> and emphasised the importance of concluding a major trade deal in the face of US president Donald Trump’s America-first <a href="https://theconversation.com/are-trumps-tariffs-legal-under-the-wto-it-seems-not-and-they-are-overturning-70-years-of-global-leadership-121425">protectionism</a>. </p>
<p>But there is a hidden contentious agenda of non-tariff issues that has influenced India’s decision and could restrict future government regulation by giving more rights to global corporations.</p>
<p>These deserve more public discussion in Australia, and reflect the widely divergent levels of economic development of RECP countries.</p>
<h2>A secret deal</h2>
<p>As usual, the wording of the RECP deal is secret. The final text will not be revealed until after it is signed.</p>
<p>It’s a process widely criticised by both <a href="https://www.smh.com.au/opinion/trade-agreements-need-more-public-and-parliamentary-scrutiny-20150501-1mxqc9.html">civil society groups</a> and the <a href="https://www.pc.gov.au/inquiries/completed/trade-agreements/report/trade-agreements-report.pdf">Productivity Commission</a>.</p>
<p>This secrecy favours corporate players, which have the most resources to lobby governments.</p>
<p><a href="https://rceplegal.wordpress.com/">Leaked documents</a> reveal the industrialised countries, including Japan, South Korea and Australia, have been pushing non-tariff rules that suit their major corporations, similar to those in the controversial Trans-Pacific Partnership (<a href="https://dfat.gov.au/trade/agreements/in-force/cptpp/pages/comprehensive-and-progressive-agreement-for-trans-pacific-partnership.aspx">TPP</a>).</p>
<p>These have been resisted by developing countries, which have more vulnerable populations, and wish to preserve regulatory space to develop local industries.</p>
<h2>Concern over foreign investor rights</h2>
<p>The contested proposals include foreign investor rights to bypass national courts and sue governments for millions of dollars in international tribunals if they can argue a change in law or policy will harm their investment. This is known as Investor-State Dispute Settlement or <a href="https://dfat.gov.au/trade/investment/Pages/investor-state-dispute-settlement.aspx">ISDS</a>.</p>
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<em>
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Read more:
<a href="https://theconversation.com/suddenly-the-worlds-biggest-trade-agreement-wont-allow-corporations-to-sue-governments-123582">Suddenly, the world's biggest trade agreement won't allow corporations to sue governments</a>
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<p>Tobacco company Philip Morris <a href="https://theconversation.com/australias-plain-packaging-win-over-philip-morris-should-take-the-heat-off-isds-52541">used ISDS</a> to sue our government for compensation over our plain packaging law, a public health measure designed to discourage young smokers. Australia won in the end, <a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279">but at a cost to taxpayers of $12 million</a>.</p>
<p>Most of the <a href="https://investmentpolicy.unctad.org/investment-dispute-settlement">983 known ISDS cases</a> have been taken against developing countries, with increasing numbers against <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3012538">health</a>, <a href="https://theconversation.com/the-fossil-fuel-era-is-coming-to-an-end-but-the-lawsuits-are-just-beginning-107512">environment</a>, <a href="http://arbitrationblog.kluwerarbitration.com/2017/12/16/bear-creek-mining-v-peru/">indigenous land rights</a>, <a href="http://www.bresserpereira.org.br/terceiros/2014/agosto/14.08.injustice-industry.pdf">labour laws</a> and other public interest regulation in both developing and industrialised countries.</p>
<p>RCEP members <a href="https://hsfnotes.com/arbitration/2017/03/16/mixed-messages-to-investors-as-india-quietly-terminates-bilateral-investment-treaties-with-58-countries/">India</a> and <a href="https://www.abacademies.org/articles/Bilateral-investment-treaties-bits-in-indonesia-a-paradigm-shift-issues-and-challenges-1544-0044-21-1-148.pdf">Indonesia</a> have policies to exclude or severely restrict investor rights in new agreements.</p>
<p>ISDS has been reportedly <a href="https://theconversation.com/suddenly-the-worlds-biggest-trade-agreement-wont-allow-corporations-to-sue-governments-123582">excluded from the RCEP text</a>. India was one of the main opponents of ISDS. We won’t know for sure whether ISDS is still excluded until the text is released after signing.</p>
<h2>Other concerns over patents and e-commerce</h2>
<p>Even more contentious are proposals that pharmaceutical companies should be given <a href="https://theconversation.com/rcep-the-trade-agreement-youve-never-heard-of-but-should-be-concerned-about-42885">longer patent monopolies on medicines than the current 20 years</a>. This would delay the availability of cheaper medicines, at greatest cost to developing countries.</p>
<p>There are also proposals to extend to developing countries’ rules on patenting of seeds and plants that apply to industrialised countries. This would make it more difficult for millions of small-scale farmers in developing countries to <a href="https://www.grain.org/article/entries/5405-new-mega-treaty-in-the-pipeline-what-does-rcep-mean-for-farmers-seeds-in-asia">save and exchange seeds with each other</a> as they have done for centuries. They lack the capacity to use the legal system to obtain patent rights and lack the funds to buy patented seeds.</p>
<p>The RCEP also includes an e-commerce chapter that mandates free cross-border data flows for global corporations such as Google and Facebook. This makes it more difficult for governments to regulate them.</p>
<p>For example, if trade rules forbid requirements to store data locally, then national privacy laws and other consumer protections cannot be applied to data stored in other countries.</p>
<p>The recent <a href="https://www.accc.gov.au/system/files/Digital%20platforms%20inquiry%20-%20final%20report.pdf">Digital Platforms</a> report of the Australian Consumer and Competition Commission <a href="https://www.thedrum.com/news/2019/07/30/what-the-acccs-final-report-digital-platforms-the-australian-government-means">recommended more, not less regulation</a> of these corporations. That was in the face of scandals about violations of consumer privacy, misuse of data in elections and tax evasion.</p>
<p><a href="https://www.lowyinstitute.org/the-interpreter/are-free-trade-deals-expanding-digital-divide">Developing countries are also concerned</a> rules favouring the global tech companies will lock in their market dominance at the expense of local IT industry development.</p>
<p>These conflicts between governments have been deepened by national pressures from civil society groups in RCEP countries including Australia. When RECP negotiations were held in Australia in July this year, 52 community organisations, including public health, union, church, environment and aid groups endorsed a <a href="http://aftinet.org.au/cms/sites/default/files/190618%20final%20letter%20to%20LNP%20Minister_0.pdf#overlay-context=node/1748">letter to the trade minister Simon Birmingham</a>. They asked him to oppose ISDS and longer medicine monopolies in the RCEP, and to release the text for independent evaluation before it is signed.</p>
<h2>Show us the deal</h2>
<p>Even without India in the deal, the Australian government <a href="https://trademinister.gov.au/releases/Pages/2019/sb_mr_191104.aspx">says it will boost local jobs and exports</a>.</p>
<hr>
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Read more:
<a href="https://theconversation.com/myth-busted-chinas-status-as-a-developing-country-gives-it-few-benefits-in-the-world-trade-organisation-124602">Myth busted: China’s status as a developing country gives it few benefits in the World Trade Organisation</a>
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<p>But without India, claimed market access gains are marginal for Australia and must be evaluated against the costs of expanded corporate rights and restraints on future government regulation.</p>
<p>That’s why the text of the RCEP deal should be released before it is signed and there should be independent evaluation of its costs and benefits for both Australia and its trading partners.</p><img src="https://counter.theconversation.com/content/126343/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Pat Ranald an honorary fellow at the University of Sydney and the honorary convener of the the Australian Fair Trade and Investment Network</span></em></p>Australia was hoping to get broader access to Indian markets as part of a new trade deal that covers almost half of the world’s population.Patricia Ranald, Research fellow, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1235822019-09-16T20:38:38Z2019-09-16T20:38:38ZSuddenly, the world’s biggest trade agreement won’t allow corporations to sue governments<figure><img src="https://images.theconversation.com/files/292564/original/file-20190916-19076-1kwqch6.jpg?ixlib=rb-1.1.0&rect=153%2C191%2C1457%2C658&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The 16 nations negotiating the Regional Comprehensive Economic Partnership account for almost half the world's population.</span> <span class="attribution"><span class="source">Shutterstock/Datawrapper</span></span></figcaption></figure><p>The Regional Comprehensive Economic Partnership has been <a href="https://theconversation.com/are-trumps-tariffs-legal-under-the-wto-it-seems-not-and-they-are-overturning-70-years-of-global-leadership-121425">touted</a> as the best hope for keeping world trade flowing after the attacks on the World Trade Organisation. </p>
<p>The WTO isn’t dead yet, but in a two-pronged attack, US President Donald Trump has been flouting the spirit if not the letter of its rules by on one hand imposing tariffs on China and other countries, and on the other blocking appointments to its appellate body. The latter means that after December the appellate body will no longer have enough members to <a href="https://theconversation.com/are-trumps-tariffs-legal-under-the-wto-it-seems-not-and-they-are-overturning-70-years-of-global-leadership-121425">hear new cases</a>.</p>
<p>Although nothing like a proper replacement for the WTO (it would have 16 member nations instead of the WTO’s 164) the Regional Comprehensive Economic Partnership (RCEP) is being talked about as a backstop. The 16 RCEP members account for almost half the world’s population; among them China, India, Japan, Indonesia, Malaysia, Vietnam, Australia, and New Zealand.</p>
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Read more:
<a href="https://theconversation.com/are-trumps-tariffs-legal-under-the-wto-it-seems-not-and-they-are-overturning-70-years-of-global-leadership-121425">Are Trump's tariffs legal under the WTO? It seems not, and they are overturning 70 years of global leadership</a>
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<p>The RCEP negotiations have dragged on since 2012, in part because of what had been seen as a near intractable sticking point: so-called investor-state dispute settlement (ISDS) procedures. </p>
<h2>ISDS was one of worst parts of the RCEP</h2>
<p>The World Trade Organisation doesn’t have ISDS. In the WTO, governments can take action against governments under WTO rules but corporations can’t sue governments.</p>
<p>ISDS provisions, present in many one-on-one or regional trade deals, allow foreign corporations (but not local corporations) to take on governments.</p>
<p>When the Philip Morris tobacco company lost its case against the Australian government over plain packaging laws in Australia’s High Court, it was able to have a second go in an international tribunal using the ISDS provisions of an Australia-Hong Kong investment treaty. This right would not have been available to an Australian company.</p>
<p>Although Australia successfully had the case thrown out, it took it seven years and cost A$24 million. Australia recovered only <a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279">A$12 million</a> from Philip Morris.</p>
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Read more:
<a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279">When even winning is losing. The surprising cost of defeating Philip Morris over plain packaging</a>
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<p>ISDS provisions were developed in the post-colonial period after World War II to compensate international investors for the direct expropriation or taking of property by governments. But over the past 20 years they expanded to include “indirect” expropriation, “minimum standard of treatment” and “legitimate expectations”, which do not involve taking of physical property and do not exist in many national legal systems.</p>
<p>Because the cases are very costly, they are mostly used by large global companies that already have enormous market power, including tobacco, pharmaceutical, agribusiness, mining and energy companies.</p>
<p>There are now <a href="https://investmentpolicyhub.unctad.org/ISDS">942</a> known ISDS cases, with increasing numbers against <a href="http://aftinet.org.au/cms/sites/default/files/Key%20ISDS%20health%20cases_1.pdf#overlay-context=Against_ISDS">health</a> and environment laws, including laws to address <a href="https://theconversation.com/the-fossil-fuel-era-is-coming-to-an-end-but-the-lawsuits-are-just-beginning-107512">climate change</a>.</p>
<h2>The tide is turning against it</h2>
<p>Legal experts like former High Court Chief Justice <a href="http://www.hcourt.gov.au/assets/publications/speeches/current-justices/frenchcj/frenchcj09jul14.pdf">Robert French</a> have noted they are conducted by temporary tribunals often presided over by <a href="https://www.bilaterals.org/IMG/pdf/isds-the_wild,_wild_west_of_international_law_and_arbitration.pdf">practising advocates</a> who can represent a corporation or government in one case and then sit on a tribunal the next, calling into question their independence. The decisions need not make use of precedents and have no appeals, meaning they need not be consistent. </p>
<p>Both the United States and European Union are moving against ISDS provisions. In January the 28 EU member states decided to <a href="https://ec.europa.eu/info/publications/190117-bilateral-investment-treaties_en">terminate ISDS arrangements between themselves</a>. </p>
<p>The EU is not including ISDS in any of its current negotiations, including those for a EU-Australia free trade agreement.</p>
<p>In the longer term, Europe is pursuing a controversial proposal for a permanent Multilateral Investment Court, which would once again allow foreign investors to sue sovereign governments but would address <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2692122">procedural concerns about temporary tribunals</a>. It hasn’t yet gained support from the US, Japan, Australia or other key players, so is not likely to be implemented soon.</p>
<p>The US and Canada have excluded ISDS from their part of the new North America Free Trade Agreement, known as the <a href="https://www.iisd.org/library/usmca-investors">United States-Mexico-Canada Agreement</a>. </p>
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Read more:
<a href="https://theconversation.com/how-is-new-nafta-different-a-trade-expert-explains-104212">How is new NAFTA different? A trade expert explains</a>
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<p>Two institutions that oversee ISDS cases, the United Nations Commission on International Trade Law and the World Bank International Centre for Settlement of Investment Disputes, are conducting <a href="https://uncitral.un.org/sites/uncitral.un.org/files/wp166.pdf">reviews</a> of the system.</p>
<h2>It looks as if the RCEP will be free of it</h2>
<p>Australia is notoriously tight-lipped about international trade negotiations. But late last week Malaysia’s trade minister <a href="https://themalaysianreserve.com/2019/09/13/rcep-talks-to-proceed-without-isds/">Datuk Darell Leiking</a> revealed that Malaysia and each of the other 15 parties to the RCEP negotiations had agreed to exclude ISDS provisions from the deal.</p>
<p>Malaysia, India, Indonesia and New Zealand are all officially opposed to ISDS provisions, but this is the first public sign that all the RCEP countries have agreed to exclude it.</p>
<p>“Once the agreement is in force, which is within two years, the member states will re-look into it and see whether or not we are going to have the ISDS. But it must be an agreement made by all countries,” he is quoted as saying. “For now, there is no ISDS.” </p>
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<strong>
Read more:
<a href="https://theconversation.com/the-fossil-fuel-era-is-coming-to-an-end-but-the-lawsuits-are-just-beginning-107512">The fossil fuel era is coming to an end, but the lawsuits are just beginning</a>
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<p>Opposition to ISDS is growing. The Australian government’s apparent agreement to remove ISDS provisions from the RCEP raises questions about why it is continuing to pursue such provisions in the <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Treaties/Indonesia-AustraliaCEPA">Indonesian</a> and <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Treaties/A-HKFTA">Hong Kong</a> trade deals currently being reviewed by the parliament’s joint standing committee on treaties. </p>
<p>It also raises the question of whether Labor, the Greens and the Centre Alliance, each of which has has policies opposing ISDS, will support the agreements when committee reports on them in mid-October.</p>
<h2>But problems remain</h2>
<p>Defeating ISDS in the RCEP will be a victory for social movements and governments concerned to retain public interest regulation. </p>
<p>But other problematic proposals remain on the RCEP agenda. </p>
<p>These include <a href="https://croakey.org/calls-to-end-secrecy-on-trade-negotiations-underway-this-week-amid-public-health-concerns/">longer monopolies for medicines</a> that would delay the the availability of cheaper medicines and would have the worst impacts in developing countries. </p>
<p>It remains to be seen whether this and other sticking points can be resolved and the negotiations completed by their current target date of the end of 2019.</p><img src="https://counter.theconversation.com/content/123582/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Pat Ranald is an honorary research fellow at the University of Sydney and the honorary convener of the Australian Fair Trade and Investment Network</span></em></p>The biggest barrier to Australia and much of the rest of the world signing up to the world’s biggest trading bloc appears to have been removed.Patricia Ranald, Research fellow, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1204142019-07-22T20:42:48Z2019-07-22T20:42:48ZWorld Bank ruling against Pakistan shows global economic governance is broken<figure><img src="https://images.theconversation.com/files/285016/original/file-20190721-116562-nqpql.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C3964%2C2614&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A Pakistani man walks past a shop that was closed due to a recent strike in Peshawar, Pakistan. Hundreds of thousands of Pakistani businesses went on strike in a nationwide protest against an increased sales tax, which opposition political parties said was imposed as part of the International Monetary Fund's recent $6 billion bailout package for Islamabad. </span> <span class="attribution"><span class="source">(AP Photo/Mohammad Sajjad)</span></span></figcaption></figure><p>It’s been a rough month for Pakistan’s Prime Minister Imran Khan.</p>
<p>It started off with the International Monetary Fund approving a US$6 billion dollar loan to the country. The <a href="https://www.newsradio.lk/international/strict-imf-bailout-conditions-on-pakistan/">strict conditions</a> on the loan meant that instead of expanding the <a href="https://www.bloomberg.com/news/articles/2018-07-05/imran-khan-seeks-to-make-graft-ridden-pakistan-a-welfare-state">welfare state</a>, Khan’s government had to impose “<a href="https://www.wsj.com/articles/pakistan-offers-sharp-shifts-to-win-imf-bailout-11561973412">shock therapy</a>” austerity measures. </p>
<p>Unsurprisingly, this resulted in <a href="https://www.reuters.com/article/us-pakistan-strike/pakistani-traders-strike-over-imf-austerity-measures-idUSKCN1U80C2">nationwide strikes</a>. </p>
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Read more:
<a href="https://theconversation.com/imran-khan-hopes-to-transform-pakistan-but-hell-have-far-less-power-than-past-leaders-100643">Imran Khan hopes to transform Pakistan but he'll have far less power than past leaders</a>
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<p>Then, less than two weeks later, a secretive World Bank tribunal ordered Pakistan <a href="https://www.reuters.com/article/us-pakistan-mine-military/world-bank-court-orders-pakistan-pay-58-billion-damages-to-tethyan-copper-idUSKCN1U80GT">to pay a mining company US$5.8 billion dollars</a> — nearly as much as the IMF loan — to resolve an eight year-long dispute. </p>
<p>Why would an arm of the development pillar of the <a href="https://www.thebalance.com/bretton-woods-system-and-1944-agreement-3306133">Bretton Woods system</a> require a country in crisis to do something that would completely undermine the actions of the financial stability tenets of that same system? </p>
<p>What does it say about the state of global economic governance? Is it broken? </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1150732758466981889"}"></div></p>
<h2>Protecting corporate profits</h2>
<p>The <a href="https://icsid.worldbank.org/en/">International Centre for the Settlement of Investment Disputes</a> was established in 1966 as part of the World Bank Group. The centre oversees arbitrations between foreign companies and states in a process known as the investor-state dispute settlement (ISDS). </p>
<p>ISDS is hugely controversial for a variety of reasons ranging from the <a href="https://www.nytimes.com/2004/09/27/opinion/the-secret-trade-courts.html">secrecy of the hearings</a> to the <a href="https://digitalcommons.osgoode.yorku.ca/cgi/viewcontent.cgi?article=1335&context=all_papers">substantial costs</a> associated with defending a claim and the ability of corporations to challenge <a href="https://www.theguardian.com/business/2018/jul/02/revealed-39m-cost-of-defending-australias-tobacco-plain-packaging-laws">health</a> and <a href="https://theconversation.com/the-fossil-fuel-era-is-coming-to-an-end-but-the-lawsuits-are-just-beginning-107512">environmental measures</a>.</p>
<p>The case that cost Pakistan $5.8 billion did not revolve around such measures but rather the decision of a provincial government to backtrack on a <a href="https://herald.dawn.com/news/1153283">sweetheart deal</a> that had been offered to a mining firm, allegedly the <a href="https://www.dawn.com/news/1494099">result of corruption</a>. Leaving the merits of the case to one side — it is difficult to assess the tribunal’s reasoning when the award isn’t public, after all — let’s take a closer look at the payout. </p>
<p>According to the mining company — Tethyan Copper, partially owned by Canada’s Barrick Gold — it spent <a href="http://www.tethyan.com">US$220 million on exploration activities</a> before things went south. One might argue that a fair outcome, if the government was solely to blame, would be for the award to cover these sunk costs. Instead it was more than 25 times that amount. That is because the tribunal chose to award the company “lost future profits” from the project.</p>
<h2>No crystal balls</h2>
<p>Arbitrators don’t have crystal balls. They don’t know what the value of a mineral will be in a year, let alone 30 years. And they are lawyers, not market analysts. So how do they decide how much profit a firm would have made in a hypothetical alternative future? </p>
<p>The answer is, partially, that they rely on “experts” brought in by each of the parties to the dispute. These experts provide a best guess for what they think a project is worth. International law scholar Robert Howse calls this <a href="https://www.analysisgroup.com/globalassets/uploadedfiles/content/news_and_events/news/2019-scrutiny-creeps-in-on-damages-investment-arbitration.pdf.pdf">“junk science.”</a></p>
<p>Unsurprisingly, the state’s expert often provides a low-ball estimate for the value of a project and the investor’s expert gives an inflated value. Faced with this discrepancy, arbitrators will often choose to <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2273969">go down the middle </a> and pick an arbitrary value. Tethyan Copper had originally sought <a href="https://tribune.com.pk/story/1612383/1-pakistan-faces-11-43b-damages-claims-reko-diq-mining-case/">more than US$11 billion in damages</a>, suggesting that the tribunal in this case may have taken this approach.</p>
<p>When it comes to the calculation of damages, there are very few constraints on arbitrators. As noted in <a href="https://www.italaw.com/sites/default/files/case-documents/ita0006.pdf">one award</a>, a tribunal generally has the freedom to “arrive at a figure with which it is comfortable in all the circumstances of the case.” </p>
<p>Did the arbitrators in this case consider that the owners of Tethyan Copper —Antofogasta of Chile and Barrick Gold — had long ago <a href="https://business.financialpost.com/commodities/mining/i-dont-expect-barrick-to-get-paid-5-83-billion-arbitration-win-in-pakistan-leaves-unanswered-questions">written off the project </a> and continued to be very <a href="https://www.forbes.com/sites/greatspeculations/2019/05/10/can-barrick-gold-sustain-the-momentum-through-fy-2019-after-a-strong-first-quarter/#30e2ec437663">profitable</a> firms? Did they consider the records of these companies in terms of alleged <a href="http://londonminingnetwork.org/2018/05/antofagasta-we-demand-answers-and-accountability/">corruption</a> and <a href="https://miningwatch.ca/news/2019/5/7/new-ceo-same-human-rights-and-environmental-abuses-barrick-mine-sites">human rights abuses</a> in other countries? </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/285017/original/file-20190721-116573-159h680.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/285017/original/file-20190721-116573-159h680.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/285017/original/file-20190721-116573-159h680.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=415&fit=crop&dpr=1 600w, https://images.theconversation.com/files/285017/original/file-20190721-116573-159h680.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=415&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/285017/original/file-20190721-116573-159h680.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=415&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/285017/original/file-20190721-116573-159h680.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=521&fit=crop&dpr=1 754w, https://images.theconversation.com/files/285017/original/file-20190721-116573-159h680.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=521&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/285017/original/file-20190721-116573-159h680.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=521&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Pakistan’s Prime Minister Imran Khan is seen speaking at the World Government Summit in Dubai, United Arab Emirates, in February 2019.</span>
<span class="attribution"><span class="source">(AP Photo/Jon Gambrell)</span></span>
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<p>Did they consider that US$5.8 billion is one eighth of Pakistan’s total government budget for 2019/20? Did they consider that the country is facing an economic crisis? It seems the answer may have been “no” on all counts though, again, we are left guessing about the tribunal’s justifications for its award.</p>
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<h2>A way out</h2>
<p>An international process is currently underway to come up with <a href="http://www.uncitral.org/uncitral/en/commission/working_groups/3Investor_State.html">reforms</a> to ISDS, and excessive damages awards have been identified as an area of concern for states. A number of countries, most recently <a href="https://occupyfta.blogspot.com/2019/07/korean-prime-minister-agreed-to-abolish.html">South Korea</a>, have come to the wise decision that the best way forward is to opt out of ISDS altogether. </p>
<p>In practice, this means individual states terminating the <a href="https://investmentpolicy.unctad.org/international-investment-agreements">thousands of investment treaties</a> that provide access to arbitration, which can be a difficult and time-consuming process. A preferable approach would be for states to co-ordinate their efforts, for example through a <a href="https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/uncitral_recs_and_justification_final.pdf">multilateral exit agreement</a>. </p>
<p>Abolishing ISDS won’t solve all of the problems of global economic governance. But it seems a very good place to start.</p><img src="https://counter.theconversation.com/content/120414/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kyla Tienhaara receives funding from the Canada Research Chairs (CRC) program and the Social Science and Humanities Research Council (SSHRC) (Government of Canada). She occasionally does pro-bono work for not-for-profit organizations.</span></em></p>Abolishing the secretive World Bank Tribunal known as the ISDS won’t solve all of the problems of global economic governance. But it seems a very good place to start.Kyla Tienhaara, Canada Research Chair in Economy and Environment, Queen's University, OntarioLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1142792019-03-26T17:57:09Z2019-03-26T17:57:09ZWhen even winning is losing. The surprising cost of defeating Philip Morris over plain packaging<p>Australia scored a victory over the tobacco giant Philip Morris in the High Court in 2012. The court held that Australia’s plain cigarette packaging laws <a href="http://www.hcourt.gov.au/cases/case-s389/2011">were legal</a> and did not constitute an unjust confiscation of trademarks and intellectual property. Philip Morris had to pay all of Australia’s costs.</p>
<p>If it had been an Australian company, that’s where it would have ended. </p>
<p>But because of a once obscure but increasingly common class of provisions in international treaties known as an ISDS (remember that name) it tried again.</p>
<h2>ISDS actions are costly…</h2>
<p>ISDS or <a href="http://aftinet.org.au/cms/Against_ISDS">investor-state dispute settlement</a> clauses give to foreign companies rights unavailable to local companies. They get to claim billions in compensation through an extraterritorial tribunal if they believe their rights have been infringed on even after losing in Australia’s highest court.</p>
<p>Philip Morris, a US company, moved ownership of its Australian operations to Hong Kong to take advantage of ISDS in an Australia-Hong Kong investment treaty.</p>
<p>The case made headlines around the world, in part because it scared other countries out of following Australia’s plain packaging law and being on the hook for massive compensation and legal fees if they lost.</p>
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<figcaption><span class="caption">Australia versus Philip Morris. Last Week Tonight with John Oliver (HBO) February 2015.</span></figcaption>
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<p>In December 2015 Australia won, completely. </p>
<p>The tribunal decided said that Philip Morris was not a Hong Kong company and had moved ownership of its Australian operations to Hong Kong in order to take advantage of the ISDS provision.</p>
<p>And that’s where things rested until late last month when a half a decade later a freedom of information request revealed how much Australia’s win cost it.</p>
<p>Australia’s external legal fees and arbitration costs amounted to almost A$24 million. It is likely to have had to bear substantial internal costs in the departments of health, attorney generals and foreign affairs and trade on top of the A$24 million.</p>
<p>Even though Philip Morris had its case thrown out on the grounds that it was an abuse of process, it will <a href="http://aftinet.org.au/cms/sites/default/files/190322%20Unredacted%2BExcerpt%2Bof%2BCosts%2BAward.pdf#overlay-context=users/editor">only have to pay half</a> of Australia’s costs.</p>
<h2>…even if you win</h2>
<p>There are now <a href="https://investmentpolicyhub.unctad.org/ISDS">942</a> known ISDS cases, with increasing numbers against <a href="http://aftinet.org.au/cms/sites/default/files/Key%20ISDS%20health%20cases_0.pdf#overlay-context=Against_ISDS">health</a> and <a href="http://aftinet.org.au/cms/ISDS">environment</a> laws, including laws to address <a href="https://theconversation.com/the-fossil-fuel-era-is-coming-to-an-end-but-the-lawsuits-are-just-beginning-107512">climate change</a>.</p>
<p>Australia’s tobacco plain packaging laws were recommended by the <a href="https://www.who.int/tobacco/global_report/2011/en/">World Health Organisation</a> and designed to reduce the numbers of young people becoming new smokers. Research showed that young people were attracted to the glamorous images on the packaging, and that plain packaging could reduce the attraction.</p>
<p>The tobacco plain packaging law was passed with bipartisan support in 2011. The tobacco companies responded with a barrage of strategies to obstruct the law. They claimed billions of dollars of compensation in the High Court, and <a href="http://www.scoop.co.nz/stories/PO1208/S00225/philip-morris-on-australian-plain-packaging-for-tobacco.htm">helped other governments</a> take a dispute with Australia in the World Trade Organisation. </p>
<h2>And they are secretive</h2>
<p>Until now the loss in the tribunal set up under ISDS provisions has been a secret. It was blacked out in the publication of the original <a href="https://pcacases.com/web/sendAttach/2190">costs decision</a> in 2017.</p>
<p>ISDS tribunals have notoriously lower standards of transparency than national courts but costs figures have been published in other ISDS cases. The refusal to reveal them was a new low in secrecy. <a href="http://aftinet.org.au/cms/node/1434">Community organisations</a> argued that taxpayers had the right to know.</p>
<p>The first <a href="https://www.theguardian.com/business/2018/jul/02/revealed-39m-cost-of-defending-australias-tobacco-plain-packaging-laws">FOI case</a> to reveal the costs, launched by Senator Nick Xenophon and continued by Senator Rex Patrick, resulted in the Australian government releasing internal government figures in 2018 which showed invoices for external legal costs of A$39 million. </p>
<p>The government later claimed the A$39 million covered the ISDS case, the earlier High Court challenge and the World Trade Organisation case. It refused to reveal the specific ISDS legal costs and what percentage of the total costs had been awarded to Australia.</p>
<p>The most recent FOI case on the ISDS costs, launched in 2017 by a <a href="https://www.iareporter.com/articles/final-costs-details-are-released-in-philip-morris-v-australia-following-request-by-iareporter/">legal publication</a>, took another two years to reveal in February that the costs were almost $A24 million but Australian taxpayers were awarded only <a href="http://aftinet.org.au/cms/sites/default/files/190322%20Unredacted%2BExcerpt%2Bof%2BCosts%2BAward.pdf#overlay-context=users/editor">half of this</a>.</p>
<p>This decision reinforces the case against ISDS provisions. Australia could afford to defend the case, but A$12 million is still a loss to taxpayers that could have been spent on health or other community services. </p>
<h2>Other countries are phasing them out</h2>
<p>It is a cost poorer countries simply cannot afford. Uruguay was only able to defend its tobacco regulation against a Philip Morris ISDS case because the <a href="https://www.theguardian.com/society/2015/mar/18/bloomberg-gates-foundation-fund-nations-legal-fight-big-tobacco-courts">Bloomberg Foundation</a> funded its legal costs.</p>
<p>Faced with increasing numbers of ISDS cases, India, South Africa and Indonesia have <a href="https://www.citizen.org/sites/default/files/pcgtw_fdi-inflows-from-bit-termination_0.pdf">cancelled</a> ISDS arrangements without negative impacts on investment. </p>
<p>The EU is <a href="https://www.politico.eu/article/juncker-proposes-fast-tracking-eu-trade-deals/">excluding ISDS from its current deals</a>, including the <a href="https://www.pm.gov.au/media/press-conference-minister-trade-tourism-and-investment-and-eu-trade-commissioner">EU Australia FTA</a> now being negotiated, but is pursuing longer-term but equally <a href="https://drive.google.com/file/d/1s-bTcSJBRw1ShnQKGaxR8TSJ2TPd1Mrs/view">controversial</a> proposals for a multilateral investment court. The US and Canada have excluded ISDS from the revised <a href="https://www.iisd.org/library/usmca-investors">North America Free Trade Agreement</a>.</p>
<p>On Tuesday this week Australia and Hong Kong signed a <a href="https://dfat.gov.au/trade/agreements/not-yet-in-force/a-hkfta/a-hkfta-text/Pages/default.aspx">free trade agreement</a> and a new <a href="https://dfat.gov.au/trade/agreements/not-yet-in-force/a-hkfta/Pages/the-investment-agreement-text.aspx">investment agreement</a>, that will continue to include ISDS. </p>
<p>The government claims that it has more safeguards for changes to public health laws than the old one that it replaces. It specifically excludes tobacco regulation and regulation relating to Medicare, the Pharmaceutical Benefits Scheme, the Therapeutic Goods Administration and the Gene Technology regulator. </p>
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Read more:
<a href="https://theconversation.com/canada-has-an-isds-clause-with-the-us-it-has-faced-35-challenges-is-this-australias-future-48757">Canada has an ISDS clause with the US. It has faced 35 challenges. Is this Australia's future?</a>
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<p>But the need for those specific exceptions suggests that the general safeguards for public interest regulations are ineffective. They wouldn’t prevent cases being brought against Australia over energy or climate change regulations or changes in industrial relations laws.</p>
<p>Australia should exclude ISDS from current trade negotiations, and remove it from existing agreements. The Coalition government still supports ISDS, but Labor has pledged to outlaw it and remove it from the deals we have, as have the Greens and Centre Alliance. </p>
<p>It will take continued community pressure to ensure that actually happens if the government changes in the coming election.</p><img src="https://counter.theconversation.com/content/114279/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Pat Ranald is an honorary Research Fellow at the University of Sydney and the honorary Convener of the Australian Fair Trade and Investment Network of community organisations.</span></em></p>Australia comprehensively defeated the tobacco giant, but is left with a multi million dollar bill.Patricia Ranald, Research fellow, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1128532019-03-05T19:06:16Z2019-03-05T19:06:16ZIt’s more than a free trade agreement. But what exactly have Australia and Indonesia signed?<figure><img src="https://images.theconversation.com/files/262101/original/file-20190305-48438-168142a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Simon Birmingham and Enggartiasto Lukita have signed an agreement that might never be ratified in that form.</span> <span class="attribution"><span class="source">DFAT</span></span></figcaption></figure><p>Australia’s trade minister Simon Birmingham and his Indonesian counterpart Enggartiasto Lukita signed the Indonesia-Australia Comprehensive Economic Partnership Agreement on Monday. Only afterwards (as is often the case) did we get to see what was in it.</p>
<p>We might never see an independent assessment of its costs and benefits.</p>
<p>Beforehand the Department of Foreign Affairs and Trade released a summary of the good news about increased Australian agricultural and education exports, together with statements of support from export industry representatives.</p>
<p>It said more than 99% of Australian goods exports by value would enter Indonesia duty free or under significantly improved preferential arrangements by 2020. Indonesia will guarantee automatic issue of import permits for key products including live cattle, frozen beef, sheep meat, feed grains, rolled steel coil, citrus products, carrots and potatoes. Australia will immediately <a href="https://dfat.gov.au/trade/agreements/not-yet-in-force/iacepa/Pages/ia-cepa-key-outcomes-for-australia.aspx">eliminate remaining tariffs</a> on Indonesian imports into Australia.</p>
<p>But most deals have winners and losers. The devil is in the detailed <a href="https://dfat.gov.au/trade/agreements/not-yet-in-force/iacepa/iacepa-text/Pages/default.aspx">text</a>, released only after the ceremony. </p>
<h2>Employment rights? The environment?</h2>
<p>First, what’s missing. There are no chapters committing both governments to implement basic labour rights and environmental standards as defined in the United Nations agreements, and to prevent them from seeking trade advantages by reducing these rights and standards.</p>
<p>Such chapters are increasingly included in trade deals like the Comprehensive Progressive Trans-Pacific Partnership (<a href="http://aftinet.org.au/cms/node/1599">TPP-11</a>) encompassing nations including Brunei, Malaysia, Mexico, Peru and Vietnam, and the Australia-EU Free Trade Agreement at present under negotiation. </p>
<p>They acknowledge that trade agreements increase competitive pressures, and are intended to prevent a race to the bottom on labour rights and environmental standards.</p>
<p>The fact they are missing from the Indonesia-Australia agreement shows neither government sees them as a priority.</p>
<h2>Extra-national tribunals</h2>
<p>The deal does include something else contentious that was included in the Trans-Trans-Pacific Partnership; so-called <a href="https://dfat.gov.au/trade/agreements/not-yet-in-force/iacepa/iacepa-text/Pages/default.aspx">investor-state dispute settlement clauses</a>, in Chapter 14, Section B.</p>
<p>They give <a href="http://aftinet.org.au/cms/ISDS">special rights to foreign corporations</a> to bypass local courts and sue governments for millions of dollars in extra-national tribunals if they believe a change in law or policy will harm their investment.</p>
<p>The tobacco giant Philip Morris <a href="http://isdsblog.com/2016/05/26/philip-morris-asia-limited-v-australia/">tried it in 2011</a> using investor-state dispute settlement provisions in an obscure Australia Hong Kong agreement after it lost a fight against Australia’s plain packaging laws in the High Court. It eventually lost in the international tribunal, although after four years and at the cost to Australia of <a href="https://www.theguardian.com/business/2018/jul/02/revealed-39m-cost-of-defending-australias-tobacco-plain-packaging-laws">nearly 40 million dollars</a>.</p>
<h2>Temporary migrant workers</h2>
<p>Article 12.9 of the Indonesia-Australia agreement will give Indonesia an additional 4,000 temporary working holiday visas, and a commitment over the next three years to negotiate arrangements for more “contractual service providers”.</p>
<p>Unlike permanent migrants, who have the same rights as other workers, temporary workers and contractual service providers are tied to one employer and can be deported if they lose their jobs, and so are vulnerable to exploitation, as shown by recent <a href="http://apo.org.au/system/files/120406/apo-nid120406-483146.pdf">research</a>.</p>
<p>After signing, the implementing legislation has to be passed by both the Australian and Indonesian parliaments before it can come into force.</p>
<h2>And not for some time</h2>
<p>In Australia, the next steps are for the treaty to be reviewed by the Joint Standing Committee on Treaties. But the likely calling of the federal election in April will dissolve this committee. The committee will be reconstituted after the election with the winning party having a majority.</p>
<p>Last year Labor faced a strong backlash from its membership and unions when it supported the implementing legislation for the TPP-11 despite the fact that it was contrary to the then Labor policy. </p>
<p>This led to the adoption of an even stronger policy at its <a href="https://www.alp.org.au/media/1539/2018_alp_national_platform_constitution.pdf">national conference</a> and a <a href="https://parlinfo.aph.gov.au/parlInfo/download/legislation/ems/r6201_ems_f52a2980-5bf9-48d2-a9a1-f654acb16383/upload_pdf/18215EMClare.pdf;fileType=application%2Fpdf">draft bill</a> that would apply to both future and existing trade agreements.</p>
<p>It requires independent assessments of the economic, social and environmental impacts of future trade agreements before they are ratified, outlaws investor-state dispute settlement clauses and the removal of labour market testing for temporary workers, mandates labour rights and environmental clauses and requires the renegotiation of non-compliant agreements should Labor win office.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-senate-is-set-to-approve-it-but-what-exactly-is-the-trans-pacific-partnership-104918">The Senate is set to approve it, but what exactly is the Trans Pacific Partnership?</a>
</strong>
</em>
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<p>If the Coalition wins office but not a Senate majority, and Labor implements its policy, a Coalition government could face opposition to ratification of the Indonesia-Australia agreement in the Senate.</p>
<p>If Labor wins government, it will face pressure from its base to implement its policy to conduct an independent assessment and renegotiate the provisions before ratification.</p>
<p>In Indonesia, which has elections in April, the deal could also face a rocky road.</p>
<p>Criticisms of the process led civil society groups to lodge a case which resulted in a <a href="http://igj.or.id/statement-of-the-advocacy-team-for-economic-justice-in-the-post-court-verdict-concerning-the-international-treaty-law/?lang=en">ruling by the Indonesian Constitutional Court</a> in November that the Indonesian President cannot approve trade agreements without parliamentary approval. </p>
<p>The opposition parties have been sceptical about the deal. Azam Azman Natawijana, deputy chairman of the parliamentary committee overseeing trade, was quoted in <a href="https://www.theaustralian.com.au/national-affairs/union-threat-to-scupper-agreement-withjakarta/news-story/29f624086de08da84cb35fd5a8492d46">The Australian</a> saying he expected the ratification process to be protracted.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/investor-rights-to-sue-governments-pose-real-dangers-40004">Investor rights to sue governments pose real dangers</a>
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<img src="https://counter.theconversation.com/content/112853/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Pat Ranald is Coordinator of the Australian Fair Trade and Investment Network, a network of community organizations, including church groups, human rights groups, public health, union and environmental organizations. AFTINET advocates for fair trade policies based on human rights, labour rights and environmental sustainability.</span></em></p>No commitments on environmental standards, but foreign corporations will shore up their rights to sue the Australian and Indonesian governments.Patricia Ranald, Research fellow, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/919402018-04-11T11:42:44Z2018-04-11T11:42:44ZPost-Brexit trade deals will expose the myth of ‘taking back control’<p>The <a href="http://www.dailymail.co.uk/news/article-5547303/Daily-Mail-petition-blue-passports-Britain-reaches-150k.html">recent kerfuffle</a> over Britain’s post-Brexit passports being made by a Franco-Dutch company exemplifies the level of control that will be “taken back” by the UK government in March 2019. The UK might be leaving the EU, but it will remain a part of the global economy. Contracts – like who makes the country’s passports – will be beholden to business interests.</p>
<p>Similarly, <a href="https://www.ft.com/content/7fcd730e-2ddd-11e8-9b4b-bc4b9f08f381">rules on public procurement</a> (if surprisingly omitted from a post-Brexit UK-EU trade deal), would still be regulated by the World Trade Organisation (WTO) general procurement agreement, to which the UK is a signatory. This means public contracts will be open to competition. Indeed, it is the importance of existing and new post-Brexit trade deals which will expose the myth that meaningful democratic control can be taken back. </p>
<p>Three important aspects of international trade deals will limit the UK’s democratic control over trade. They are: the use of investor-state dispute settlement arrangements; procurement arrangements; and the current UK government’s Trade Bill.</p>
<h2>This is about more than tariffs</h2>
<p>The current focus on post-Brexit trade arrangements has tended to fall upon the level of tariffs imposed on imports. This fear has been reinforced by the dispute taking place between <a href="https://theconversation.com/uk/topics/us-china-trade-17448">the US and China</a> after Donald Trump announced tariffs on US$60 billion worth of Chinese imports and China prepared retaliatory tariffs of its own. </p>
<p>But, as economists Phedon Nicolaides and Thibault Roy <a href="https://link.springer.com/article/10.1007/s10272-017-0654-y">have explained</a>, this misses the point. Trade agreements are hardly about tariffs and border restrictions anymore. </p>
<blockquote>
<p>Now, trade agreements are ‘deep’, in the sense that they are mainly about … domestic product standards, health and safety rules, regulation of establishment, and investment and public procurement.</p>
</blockquote>
<p>With the UK as a member of the EU single market, the EU has exclusive rights for negotiating its <a href="http://www.lisbon-treaty.org/wcm/the-lisbon-treaty/treaty-on-the-functioning-of-the-european-union-and-comments/part-5-external-action-by-the-union/title-2-common-commercial-policy/495-article-207.html">trade deals</a>. This extends to the current <a href="https://theconversation.com/should-the-uk-remain-in-the-eu-customs-union-after-brexit-63179">customs union arrangements</a>, which countries outside the single market have with the EU. </p>
<p>But, irrespective of whether new trade deals are negotiated post-Brexit by the EU (with the UK inside a customs union) or independently by the British government, two characteristics of the new generation trade deals raise issues of control. </p>
<h2>Investor-State Dispute Settlement</h2>
<p>The ultimate threat to democracy arises out of the so-called Investor-State Dispute Settlement (ISDS) arrangements. These are enshrined in new trade deals negotiated outside of the WTO and permit transnational corporations to take governments to court if their profits, or even potential profits, <a href="https://rosalux.gr/sites/default/files/publications/ttip_web.pdf">are threatened by legislative action</a>. And not just any court, these courts are independent of the national court system, using a secret dispute resolution apparatus instead. </p>
<p>The secrecy which surrounds settlement procedures makes analysis of their impact difficult to establish. But drawing on the the UN trade body, UNCTAD’s database, it’s possible to see the significant increase in ISDS cases in recent years, with 56 new cases in 2012, 59 in 2013 <a href="http://investmentpolicyhub.unctad.org/News/Database/Home/537">and 62 in 2016</a>.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/214251/original/file-20180411-566-ewwu13.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/214251/original/file-20180411-566-ewwu13.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=398&fit=crop&dpr=1 600w, https://images.theconversation.com/files/214251/original/file-20180411-566-ewwu13.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=398&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/214251/original/file-20180411-566-ewwu13.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=398&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/214251/original/file-20180411-566-ewwu13.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=500&fit=crop&dpr=1 754w, https://images.theconversation.com/files/214251/original/file-20180411-566-ewwu13.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=500&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/214251/original/file-20180411-566-ewwu13.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=500&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">ISDS gives power to private business interests.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/wooden-gavel-on-table-attorney-working-736350223?src=l3JvE-PXTzwsEfmRiIAiVw-1-23">shutterstock.com</a></span>
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<p>Notable cases relate to French company Veolia using ISDS <a href="http://investmentpolicyhub.unctad.org/ISDS/Details/458">to compensate for loss of profit</a> when the Egyptian government raised the country’s minimum wage. And, in Europe, Swedish company Vattenfall is using ISDS <a href="http://investmentpolicyhub.unctad.org/ISDS/Details/467">to press for compensation of €3.7 billion</a> following the German government’s decision, post-Fukushima, to end nuclear power generation. The outcome of both cases are still pending.</p>
<p>The largest known settlement is the US$2.3 billion secured by US oil company Occidental against the government of Ecuador, over the latter’s (apparently lawful) termination of an oil concession contract. This was later negotiated down to a mere <a href="https://www.reuters.com/article/ecuador-occidental/ecuador-to-pay-980-million-to-occidental-for-asset-seizure-idUSL2N14X0U420160113">US$980m</a>. </p>
<h2>Bad competition</h2>
<p>Most new generation trade deals now focus on the opening up of public services to competition. This allows overseas transnational corporations the opportunity to win contracts, usually based upon reducing labour costs through laying off staff and introducing worse terms and conditions of employment. </p>
<p>As the global labour foodworkers’ federation, the IUF, <a href="http://www.iuf.org/w/sites/default/files/TradeDealsThatThreatenDemocracy-e_0.pdf">has noted</a>, they do this by “restricting the regulatory power of governments and locking the system into place” to prevent new regulation or reversing privatisation.</p>
<p>This privatisation objective is likely to be at the heart of negotiations in post-Brexit trade deals. And this is in spite of the disastrous way that public services have been put out to tender in recent years – as with the recent <a href="https://theconversation.com/pfi-has-been-a-failure-and-carillion-is-the-tip-of-the-iceberg-90487">collapse of construction firm Carillion</a>.</p>
<h2>An inauspicious start for the UK</h2>
<p>A final problem with the negotiation of trade deals relates to the negotiation process itself. Most trade negotiations are held in secret, with governments subject to intense and expensive lobbying <a href="https://www.huffingtonpost.co.uk/entry/free-trade-agreements-lobbying_n_906623">from transnational corporations</a>. Citizens or even politicians have little access to the negotiators or the documents involved. </p>
<p>In this respect the evidence so far of the current government’s approach to trade deals is concerning. The <a href="https://services.parliament.uk/bills/2017-19/trade.html">Trade Bill</a> legislation, currently going through the UK parliament, seeks to implement into law any new trade deal the government negotiates with non-EU countries. </p>
<p>The TUC and the Trade Justice Movement have expressed concerns that the government is again – as with the European Union (Withdrawal) Bill – seeking to introduce legislative change <a href="https://www.lrdpublications.org.uk/publications.php?pub=LR&iss=1908&id=idp109544&fromopp=y">without proper parliamentary scrutiny</a>. Central to this would be the power given to the government at the expense of parliament when it comes to negotiating trade deals. </p>
<p>Claims that Brexit will allow power to be taken back from Brussels to Westminster, therefore, needs a far higher degree of scrutiny. The UK outside of the EU will still operate in a global economy characterised by trade deals, through which governments have ceded (or even abdicated) responsibility for economic management to the investment strategies of transnational corporations. </p>
<p>This means that any new trade deals which follow recent practice will lack democratic safeguards. And safeguards already appear to be excluded from the government’s central legislation in this area, the Trade Bill.</p><img src="https://counter.theconversation.com/content/91940/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Steve French does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Three important aspects of international trade deals will limit the UK’s democratic control over trade.Steve French, Senior Lecturer in Industrial Relations and HRM, Keele UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/906192018-01-24T05:37:26Z2018-01-24T05:37:26ZFarmers and services industry the winners under the revised Trans-Pacific Partnership trade deal<p>The revived trade agreement, now known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), has finally made it across the line. It’s a considerable win for Australian farmers and service providers, in a trading area <a href="http://dfat.gov.au/trade/resources/trade-statistics/pages/trade-statistics.aspx">worth about</a> A$90 billion.</p>
<p>The 11 remaining countries from the initial Trans-Pacific Partnership agreement finally <a href="http://www.abc.net.au/news/2018-01-24/tpp-resurrected-as-nations-get-set-to-sign-trade-deal/9354502">agreed to go ahead</a> with the deal without the US, at the annual meeting of the World Economic Forum in Davos, Switzerland. </p>
<p>The deal reduces the scope for controversial investor-state dispute settlements, where foreign investors can bypass national courts and sue governments for compensation for harming their investments. It introduces stronger safeguards to protect the governments’ right to regulate in the public interest and prevent unwarranted claims.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/australias-tenuous-place-in-the-new-global-economy-87346">Australia's tenuous place in the new global economy</a>
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<p>Despite earlier <a href="http://www.smh.com.au/business/workplace-relations/tpp-unions-fear-impact-on-australian-workers-20151005-gk22tj.html">union fears of the impact for Australian workers</a>, the <a href="https://www.mfat.govt.nz/assets/Trans-Pacific-Partnership/Text/19.-Labour-Chapter.pdf">CPTPP</a> does not regulate the movement of workers. It only has minor changes to domestic labour rights and practices.</p>
<p>The new agreement is more of an umbrella framework for separate yet coordinated bilateral deals. In fact, Australia’s Trade Minister Steven Ciobo <a href="https://www.ft.com/content/7a10d70a-0031-11e8-9650-9c0ad2d7c5b5">said</a>:</p>
<blockquote>
<p>The agreement will deliver 18 new free trade agreements between the CPTPP parties. For Australia that means new trade agreements with Canada and Mexico and greater market access to Japan, Chile, Singapore, Malaysia, Vietnam and Brunei.</p>
</blockquote>
<p>It <a href="http://dfat.gov.au/trade/agreements/tpp/news/Pages/trans-pacific-partnership-ministerial-statement.aspx">means a speedier process</a> for reducing import barriers on key Australian products, such as beef, lamb, seafood, cheese, wine and cotton wool.</p>
<p>It also promises less competition for Australian services exports, encouraging other governments to look to use Australian services and reducing the regulations of state-owned enterprises. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-trans-pacific-partnership-is-back-experts-respond-87432">The Trans-Pacific Partnership is back: experts respond</a>
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<p>Australia now also has new bilateral trade deals with Canada and Mexico as part and parcel of the new agreement. This could be worth a lot to the Australian economy if it were to <a href="https://www.aspistrategist.org.au/us-china-trade-war-pay-dividends-australia/">fill commercial gaps</a> created by potential trade battles within North America and between the US and China. </p>
<h2>What’s in and out of the new agreement</h2>
<p>The new CPTPP rose from the ashes of the old agreement because of the inclusion of a <a href="http://dfat.gov.au/trade/agreements/tpp/news/Documents/annex-2.pdf">list of 20 suspended provisions</a> on matters that were of interest for the US. These would be revived in the event of a US comeback. </p>
<p>These suspended provisions involved substantial changes in areas like investment, public procurement, intellectual property rights and transparency. With the freezing of further copyright restrictions and the provisions on investor-state dispute settlements, these suspensions appear to re-balance the agreement in favour of Australian governments and consumers.</p>
<p>In fact, the scope of investor-state dispute settlements <a href="https://www.mfat.govt.nz/assets/Trans-Pacific-Partnership/Text/9.-Investment-Chapter.pdf">are narrower in the CPTPP</a>, because foreign private companies who enter into an investment contract with the Australian government will not be able to use it if there is a dispute about that contract. The broader safeguards in the agreement make sure that the Australian government cannot be sued for measures related to public education, health and other social services. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-developing-countries-are-dumping-investment-treaties-56448">Why developing countries are dumping investment treaties</a>
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<p>The one part of the agreement <a href="https://www.mfat.govt.nz/assets/Trans-Pacific-Partnership/Text/12.-Temporary-Entry-for-Business-Persons.pdf">relating to the temporary entry for business people</a> is rather limited in scope and does not have the potential to impact on low-skilled or struggling categories of Australian workers. In fact, <a href="https://www.mfat.govt.nz/assets/Trans-Pacific-Partnership/Annexes/12-A.-Australia-Temporary-Entry-for-Business-Persons.pdf">it only commits Australia</a> to providing temporary entry (from three months, up to two years) of only five generic categories of CPTPP workers. These include occupations like installers and servicers, intra-corporate transferees, independent executives, and contractual service suppliers. </p>
<p>The above categories squarely match the shortages in the Australian labour market, according to the <a href="https://www.homeaffairs.gov.au/trav/work/work/skills-assessment-and-assessing-authorities/skilled-occupations-lists">Lists of Eligible Skilled Occupation</a> of the Home Affairs Department. </p>
<p>Bits of the original agreement are still included in the CPTPP such as tariffs schedules that slash custom duties on 95% of trade in goods. But this was the easy part of the deal. </p>
<h2>Before the deal is signed</h2>
<p>The new agreement will be formally signed in Chile on March 8 2018, and will enter into force as soon as at least six members ratify it. This will probably happen later in the year or in early 2019. </p>
<p>The geopolitical symbolism of this timing is poignant. The CPTPP is coming out just as Donald <a href="https://www.ft.com/content/ea72a0f6-ffc7-11e7-9650-9c0ad2d7c5b5">Trump raises the temperature</a> in the China trade battle by introducing new tariffs. It also runs alongside China’s attempts to finalise a much bigger regional trade agreement, the 16-nation Regional Comprehensive Economic Partnership. </p>
<p>Even though substantially the CPTPP is only a TPP-lite at best, it still puts considerable pressure on the US to come out of Trump’s protectionist corner.</p>
<p>It spells out the geopolitical consequences of the <a href="https://theconversation.com/in-the-economic-power-struggle-for-asia-trump-and-xi-jinping-are-switching-policies-90173">US trade policy switch</a>, namely that the Asia Pacific countries are willing to either form a more independent bloc or align more closely with Chinese interests. </p>
<p>Will this be enough to convince the Trump administration to reverse its course on global trade? At present, this seems highly unlikely. To bet on the second marriage of the US with transpacific multilateral trade would be a triumph of hope over experience.</p><img src="https://counter.theconversation.com/content/90619/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Giovanni Di Lieto is affiliated with the Australian Institute of International Affairs (AIIA).</span></em></p>The new TPP means fewer barriers for Australian exports, but there a number of loose ends – not least if the United States decides to rejoin.Giovanni Di Lieto, Lecturer, Bachelor of International Business, Monash Business School, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/874322017-11-14T06:38:16Z2017-11-14T06:38:16ZThe Trans-Pacific Partnership is back: experts respond<p>The <a href="http://dfat.gov.au/trade/agreements/tpp/news/Pages/trans-pacific-partnership-ministerial-statement.aspx">latest incarnation</a> of the Trans-Pacific Partnership (TPP) is said to have “<a href="http://www.smh.com.au/federal-politics/political-news/its-the-trans-pacific-partnership-with-fewer-bad-bits-20171112-gzjo48.html">fewer bad bits</a>”. But as our experts point out below, there’s still a great deal wrong with, or missing from, the regional free trade agreement. </p>
<p>The new TPP is informally known as the TPP11, after the United States pulled out of the original 12-country bloc earlier this year.</p>
<p>While the agreement has not yet been finalised, the 11 trade ministers have <a href="http://dfat.gov.au/trade/agreements/tpp/news/Pages/trans-pacific-partnership-ministerial-statement.aspx">released a statement</a> saying that the “core elements” have been agreed. </p>
<p>Twenty provisions from the original TPP <a href="http://dfat.gov.au/trade/agreements/tpp/news/Documents/annex-2.pdf">have been suspended</a>, but there are still a few areas to be worked out, including those relating to state-owned enterprises.</p>
<p>The Conversation’s experts respond:</p>
<hr>
<p><strong>Peter Robertson, Dean and Professor, University of Western Australia Business School:</strong></p>
<p>Trade deals such as the TPP11 that include some countries and exclude others are inherently flawed mechanisms for extracting the most benefit from trade (also known as “<a href="https://open.lib.umn.edu/principleseconomics/chapter/17-1-the-gains-from-trade/">gains from trade</a>”). </p>
<p>All trade deals are about “swings and roundabouts”. That is, a redistribution of income from producers to consumers and governments. For example, when we remove tariffs on automobiles, then consumers gain but producers and their employees lose. When we impose a tariff on agriculture, consumers lose by paying higher prices at the grocery store and producers gain. </p>
<p>Under reasonable circumstances there is reason to believe that the sum of the gains exceeds the losses. But when you add up all the potential winners and losers from the TPP11, from an Australian perspective you end up with pretty much zero. Or, to be more precise, <a href="https://piie.com/system/files/documents/wp17-10.pdf">an 0.5% increase</a> in GDP by 2030.</p>
<p>The gains are so small because the TPP11 diverts attention away from big trade issues like agricultural protectionism in Europe and the US, and focuses on smaller issues among a few countries who have <a href="https://www.austrade.gov.au/Australian/Export/free-trade-agreements">mostly</a> already liberalised every sector that is possible given the current political willpower.</p>
<p>From a global perspective the TPP11 could even have negative effects because it encourages us to buy from member countries, and not from outsider countries who may in fact have better and cheaper products.</p>
<p>The biggest winners in the world from current protectionist arrangements are the agricultural producers in Japan, the US and Europe where agricultural protection remains extreme and untouchable politically. We need trade agreements that focus on the big issues, not the small ones.</p>
<hr>
<p><strong>Pat Ranald, Research Associate, University of Sydney:</strong></p>
<p>The TPP11 retains all provisions on Investor-State Dispute Settlement (ISDS) from the previous TPP, except for two narrow improvements which only apply if investors have specific contracts or authorisations with governments.</p>
<p>Despite claimed “<a href="http://www.abc.net.au/news/2015-11-06/tienhaara-ttp-investment/6918810">safeguards</a>”, ISDS enables all other foreign investors to bypass national courts and sue governments for compensation in international tribunals if they can argue that changes in domestic laws or policies harm their investment. The cases are tried by tribunals composed of investment lawyers who can continue to represent clients. There is no independent judiciary, and no precedents or appeals to ensure consistency of decisions.</p>
<p>Many of the <a href="http://investmentpolicyhub.unctad.org/ISDS">817 known cases</a> involve public interest laws. Swiss Pharmaceutical company <a href="http://isds.bilaterals.org/?investigation-as-colombia-pushes">Novartis</a> is suing the Colombian government over the plans to reduce prices on a patented treatment for leukaemia. The US firm <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3002626">Bilcon</a> won its claim against the Canadian government for US$101 million after a provincial government refused to approve a quarry in an ecologically sensitive area. The French company <a href="http://www.bresserpereira.org.br/terceiros/2014/agosto/14.08.injustice-industry.pdf">Veolia</a> is claiming compensation from the Egyptian government for a rise in the minimum wage.</p>
<p>Even if a government wins a case, defending it can take years and cost millions. The US tobacco firm Philip Morris shifted some assets to Hong Kong and used ISDS in an Australia-Hong Kong investment agreement to claim billions in compensation for Australia’s plain packaging law. It took more than four years and <a href="http://www.smh.com.au/federal-politics/political-news/australia-faces-50m-legal-bill-in-cigarette-plain-packaging-fight-with-philip-morris-20150728-gim4xo.html">reportedly</a> cost A$50 million in legal fees for the <a href="http://www.smh.com.au/comment/the-dismissal-of-a-case-against-plain-cigarette-packaging-is-good-news-for-taxpayers-20151218-glrb53.html">tribunal</a> to decide that Philip Morris was not a Hong Kong company.</p>
<p>ISDS gives additional legal rights to global corporations to sue governments in unfair international tribunals, undermining democratic regulation in the public interest. Trade agreements should not increase corporate power at the expense of communities.</p>
<hr>
<p><strong>Kimberlee Weatherall, Professor and Associate Dean (Research),
The University of Sydney Law School</strong></p>
<p>The TPP11 suspends the most controversial copyright provisions. But not everything controversial is out.</p>
<p>The TPP11 will no longer extend the term of copyright to 70 years after the author’s death - a big deal for <a href="https://www.ic.gc.ca/eic/site/cipointernet-internetopic.nsf/eng/h_wr02281.html">Canada</a> and <a href="http://www.copyright.org.nz/basics.php">New Zealand</a> where copyright lasts 50 years after death. </p>
<p>It also suspends the anti-circumvention provisions, which means the TPP11 won’t make avoiding access measures (for example, technology that locks your ebooks or movies to a particular device) a crime. Although there’s a sting in the tail for Australia here - the TPP text on anti-circumvention is less restrictive than <a href="http://dfat.gov.au/trade/agreements/ausfta/official-documents/Pages/official-documents.aspx">our free trade agreement with the US</a>, and so we lose the benefit of that extra flexibility.</p>
<p>The incredibly complex <a href="https://theconversation.com/dont-sue-us-for-search-googles-unnecessary-safe-harbour-appeal-24405">safe harbours</a> provisions are also suspended – this leaves members with more flexibility to adjust copyright in the digital environment (but also potentially means no protection for online service providers for the acts of their infringing customers). </p>
<p>Also suspended is a funny little footnote that might have given TPP11 authors a claim on payments from some cultural funds (such as Canada’s). However, a provision that encourages copyright to be balanced is not suspended, so that’s good news. </p>
<p>But there is still a cornucopia of enforcement procedures and remedies, and very broad criminal liability for infringing copyright – including liability for “aiding and abetting” others’ infringement. There are broad provisions that allow right holders to claim any equipment used to infringe copyright. </p>
<p>And, beyond copyright, the ministers haven’t suspended a controversial provision (a first of its kind internationally) on the theft of <a href="http://law.unimelb.edu.au/__data/assets/pdf_file/0006/1994145/Rimmer.pdf">trade secrets</a>, and they’ve retained some key provisions on geographical indications and trade marks that are going to complicate efforts by countries in the region to use geographical indications (such as “<a href="https://theconversation.com/the-manuka-honey-fight-is-one-we-have-to-have-78261">Manuka honey</a>”) to develop local artisan and agricultural communities. </p>
<p>So while I’m happy to celebrate some realisation that the intellectual property chapter of the original TPP had serious problems, there is still quite a lot to dislike about what remains. </p>
<hr>
<p><strong>Deborah Gleeson, Senior Lecturer in Public Health, La Trobe University,</strong><br>
<strong>Belinda Townsend, Research Fellow, Australian National University:</strong></p>
<p>The <a href="http://dfat.gov.au/trade/agreements/tpp/news/Documents/annex-2.pdf">list of 20 items ministers have agreed will be suspended</a> in the re-branded TPP includes several of the intellectual property rules for pharmaceuticals that were demanded by the US but deeply unpopular amongst the other TPP countries. These rules would have <a href="https://theconversation.com/time-for-costly-medicine-monopolies-to-go-from-tpp-trade-talks-87176">made medicines less affordable</a> in the Asia-Pacific region.</p>
<p>Importantly for Australia, the provisions specifically targeting biologic medicines were on the list of suspended items. <a href="http://www.publish.csiro.au/AH/AH17031">Our recent study</a> found that this expensive class of drugs cost Australian taxpayers more than A$2.2 billion in 2015-16. Suspending the biologics rules means fewer barriers to making lower-cost treatments for conditions like cancer and rheumatoid arthritis available – at least for now. </p>
<p>Also suspended were rules requiring countries to provide patents for new uses, methods and processes of using existing products; extensions to patent terms; and what is known as “data exclusivity” – monopolies on clinical trial data submitted to regulatory agencies like the Therapeutic Goods Administration. These provisions would have <a href="http://journals.sagepub.com/doi/full/10.1177/1468018117734153">primarily impacted developing countries</a>, delaying access to generic medicines. They would also have cemented existing monopolies on new medicines in developed countries, including Australia – making it more difficult to reform our patent laws in future.</p>
<p>There is no doubt that suspension of these rules is a positive development. But simply putting them on ice for later implementation if the US re-joins the accord could just mean delaying their effects until a later time.</p>
<p>Despite the suspension of these specific items, there remain other provisions in the intellectual property chapter that could reduce access to medicines in the region. A better option than freezing a limited list of selected provisions would be to remove, or at least suspend, the whole intellectual property chapter.</p>
<p>There are many other parts of the TPP that could affect health, which have not been suspended or renegotiated. One example is the TPP’s alcohol labelling rules, which remain unchanged. These may <a href="https://pursuit.unimelb.edu.au/articles/could-new-trade-rules-mean-a-lack-of-health-warnings-on-alcohol">create difficulties for countries wanting to mandate effective health warnings</a> or other types of health information on alcohol containers. </p>
<p>Worse, there only seems to be some minor tinkering around the edges of the investment chapter being considered. The changes don’t appear to affect the chances that claims could be brought by corporations against governments over health and medicines policies. It’s a shame the TPP11’s negotiators haven’t taken the opportunity to exempt all health policies from potential investor-state disputes - tobacco control measures remain <a href="http://www.phrp.com.au/issues/april-2016-volume-26-issue-2/to-what-extent-does-a-tobacco-carve-out-protect-public-health-in-the-trans-pacific-partnership-agreement/">the only health policies that countries can elect to explicitly exclude</a>.</p>
<p>There is still time for a more comprehensive reassessment of the TPP, including its likely impact on health and human rights: the agreement has not yet been finalised. </p>
<p>Suspending a small number of the worst provisions doesn’t mean an agreement that is good for health.</p><img src="https://counter.theconversation.com/content/87432/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Deborah Gleeson has received research funding in the past from the Australian Research Council. She has received funding from various national and international non-government (not-for-profit) organisations to attend speaking engagements related to trade agreements and health, including the TPP. She has represented the Public Health Association of Australia on matters related to trade agreements and public health.</span></em></p><p class="fine-print"><em><span>Belinda Townsend is a member of the People's Health Movement and the Public Health Association of Australia. She has been involved in the Public Health Association of Australia's advocacy on matters relating to trade agreements. </span></em></p><p class="fine-print"><em><span>Kimberlee Weatherall receives funding from the Australian Research Council, DP150104175, Process Matters: The new global law of intellectual property enforcement. She is an unpaid member of the board of the Australian Digital Alliance.</span></em></p><p class="fine-print"><em><span>Pat Ranald is the voluntary convener of the Australian Fair Trade and Investment Network, which advocates for fair trade base on human rights, labour rights and environmental sustainability.</span></em></p><p class="fine-print"><em><span>Peter Robertson receives funding from the Australian Research Council and The Department of Foreign Affairs.</span></em></p>Many provisions in the Trans-Pacific Partnership have been suspended after the United States pulled out. But there’s still much to debate about the regional free trade agreement.Deborah Gleeson, Senior Lecturer in Public Health, La Trobe UniversityBelinda Townsend, Research Fellow, NHMRC Centre for Research Excellence in the Social Determinants of Health Equity, School of Regulation and Global Governance, Australian National UniversityKimberlee Weatherall, Professor and Associate Dean (Research) The University of Sydney Law School, University of SydneyPatricia Ranald, Research Associate, University of SydneyPeter Robertson, Professor, The University of Western AustraliaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/843222017-09-20T10:49:23Z2017-09-20T10:49:23ZHow Greece’s gold mining trouble could derail CETA<figure><img src="https://images.theconversation.com/files/186771/original/file-20170920-935-1alq7sw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">shutterstock.com</span></span></figcaption></figure><p>The Greek government has been doing its best to present the country as a hotspot for investors. That includes investment from within the EU, but also abroad – with funds having arrived already from <a href="http://www.reuters.com/article/greece-privatisation-port/chinas-cosco-acquires-51-pct-stake-in-greeces-piraeus-port-idUSL8N1AR252">China</a>, <a href="https://www.theguardian.com/world/2013/mar/04/qatar-emir-buys-six-greek-islands">Qatar</a> and Canada.</p>
<p>So it was a blow when Canadian mining firm Eldorado Gold <a href="http://www.eldoradogold.com/news-and-media/news-releases/press-release-details/2017/Eldorado-Gold-Announces-Amended-Investment-Plans-in-Greece/default.aspx">recently announced</a> its intention to shutter its Greek operations, protesting government interference. Eldorado has already made an investment in excess of US$3 billion in Greece. But it is not only the loss of jobs and tax incomes that is at stake here. </p>
<p>The argument between the Canadian miner and Greece could endanger the ratification process of CETA, the EU-Canada Free Trade deal that is partially coming into effect on September 21. This is bad news for an agreement <a href="https://theconversation.com/who-are-the-walloons-and-why-are-they-blocking-europes-free-trade-deal-with-canada-67718">that has struggled</a> to get off the ground and continues to face significant resistance on both sides of the Atlantic. </p>
<h2>Eldorado vs Greece</h2>
<p>Eldorado’s potential withdrawal from Greece and the freezing of its operations announced on September 11 means that the miner is likely to sue the Greek government. Eldorado is <a href="http://www.tanea.gr/news/politics/article/5469285/diekdikoyn-apozhmiwsh-10-dis-eyrw/">rumoured</a> to be considering a claim of €10 billion in damages for time and money wasted on Greek mining projects. </p>
<p>Greece itself, after threatening to do so for a long time, <a href="http://www.eldoradogold.com/news-and-media/news-releases/press-release-details/2017/Eldorado-Gold-Receives-Arbitration-Notice-from-Greek-Government/default.aspx">initiated</a> arbitration proceedings against the miner on September 14. For years, the two sides have been unable to overcome differences regarding testing methods and how the mining project would comply with environmental regulations.</p>
<p>These arbitration proceedings will be focused on the contracts signed between the two parties. They will involve a tribunal with a multinational panel of judges who will consider whether either party is responsible for breaching the terms of the agreement between the miner and the Greek government, leading to potential remedial measures and compensation. </p>
<p>Taking jurisdiction for a dispute outside the domain of national courts is not unusual and most large investment projects make provision for this kind of arbitration. In these tribunals, the rights of each party are determined by the terms of their agreement and the national law selected to interpret those rights. Nothing controversial here.</p>
<p>But, if and when CETA comes fully into force, the game changes. CETA includes an important provision for investor protection – that of Investor-State Dispute Settlement (ISDS). This could skew things heavily in Eldorado’s favour.</p>
<h2>How CETA changes the game</h2>
<p>ISDS gives investors greater protection by allowing companies to sue states if they feel unfairly discriminated against. Determined by treaties between states, these rights are more broadly defined than contractual standards. This goes far beyond explicit commitments, as written out in contracts. </p>
<p>CETA <a href="http://ec.europa.eu/trade/policy/in-focus/ceta/ceta-chapter-by-chapter/">provides</a> for protection of investors and allows ISDS through its new arbitration mechanism. These protections will cover existing investments, such as Eldorado’s. Protections include the usual international law array of standards such as fair and equitable treatment, protection from discrimination, and security of investments. </p>
<p>CETA will offer to Canadian investors in Europe something that they lack at the moment (at least in the case of Greece): protection of their <a href="https://www.law.ox.ac.uk/business-law-blog/blog/2017/07/how-protest-brexit-investment-tribunal">“legitimate expectations”</a>. So even if the Greek government is not directly in breach of its contract with Eldorado Gold, and wins the current arbitration, it could yet face another suit, this time before an investment tribunal. So, regardless of whether Greece has breached any contractual agreement, it could still be violating Eldorado’s legally protected legitimate expectations as defined and secured by CETA. </p>
<p>Nothing changes yet. CETA’s <a href="http://www.cbc.ca/news/politics/ceta-september-provisionally-1.4196210">provisional application</a>, which starts on September 21, does not contain this chapter on investment issues. And before CETA fully comes into effect, it must be ratified <a href="http://www.europarl.europa.eu/RegData/etudes/ATAG/2017/607266/EPRS_ATA(2017)607266_EN.pdf">by each EU member state</a>.</p>
<p>This means that if Greece does not normalise relations with Eldorado, it has a vested interest in derailing CETA’s full progress. This would be easy enough: if the Greek parliament does not ratify the agreement, the EU cannot legally bring the trade deal into full force. Why would Greece give Eldorado better grounds to sue it for billions? </p>
<p>Greece could become the focal point for resistance to CETA, with a real case that shows how the ISDS feature of trade deals allows multinationals to interfere with national sovereignty. The Syriza government <a href="http://www.springer.com/us/book/9783319474786">failed</a> to spearhead a left-wing revolution in Europe, but it may yet become the pall-bearer of anti-globalisation.</p><img src="https://counter.theconversation.com/content/84322/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ioannis Glinavos does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Before CETA fully comes into effect, it must be ratified by each EU member state. Greece might have cause to stop it.Ioannis Glinavos, Senior Lecturer in Law, University of WestminsterLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/823942017-08-14T10:56:14Z2017-08-14T10:56:14ZThe big challenge of the NAFTA renegotiations: dispute settlement<p>When the US and Canada first signed a free trade agreement in 1987, the <a href="http://ipolitics.ca/2017/08/01/dispute-settlement-is-a-nafta-red-line-for-canada-and-for-good-reasons/">biggest sticking point</a> in forging a deal was the inclusion of a dispute settlement clause. The same is true today, with the North American Free Trade Agreement (NAFTA) between Canada, the US and Mexico up for renegotiation. </p>
<p>Like many other international agreements, NAFTA mandates standards of treatment for investors. In particular, it allows investors to sue governments if they introduce new laws or policies that might reduce profits. This is done through investor state dispute settlement (or ISDS). Lawsuits are brought before international arbitration panels that operate under rules similar to those used for the resolution of international commercial disputes. </p>
<p>While this mechanism is widely accepted in international business, it became hugely controversial when companies started to use it to <a href="https://ssrn.com/abstract=1622683">challenge measures</a> introduced by governments to protect the environment and public health. A major focus of concern is how NAFTA’s investor protections can inhibit regulation aimed to reduce pollution or carbon emissions, or preserve natural resources such as fresh water. The ISDS mechanism makes it possible for companies to attempt to declare any new environmental protections unlawful. Or there is <a href="http://www.ase.tufts.edu/gdae/Pubs/rp/PardeeNAFTACh4HartenFDINov09.pdf">“regulatory chill”</a>, where states avoid legislating in areas where they may face suits. </p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/181942/original/file-20170814-28418-1ebngqi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/181942/original/file-20170814-28418-1ebngqi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=840&fit=crop&dpr=1 600w, https://images.theconversation.com/files/181942/original/file-20170814-28418-1ebngqi.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=840&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/181942/original/file-20170814-28418-1ebngqi.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=840&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/181942/original/file-20170814-28418-1ebngqi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1055&fit=crop&dpr=1 754w, https://images.theconversation.com/files/181942/original/file-20170814-28418-1ebngqi.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1055&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/181942/original/file-20170814-28418-1ebngqi.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1055&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Former Canadian prime minister, Brian Mulroney, pushed for the inclusion of a dispute settlement mechanism in the first US-Canada trade deal.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File%3AMulroney.jpg">A1C Lynch via Wikimedia Commons</a></span>
</figcaption>
</figure>
<p>Canada has been on the receiving end of a <a href="https://www.italaw.com/cases/409">number of suits</a>, primarily from US investors. About <a href="http://www.huffingtonpost.ca/2015/01/14/canada-sued-investor-state-dispute-ccpa_n_6471460.html">63% of claims</a> against Canada involved challenges to environmental protection or resource management programmes that allegedly interfered with the rights of foreign investors. The US, meanwhile, has never lost a NAFTA investor-state case.</p>
<p>It is for precisely this reason that you would expect Canada to come out against the inclusion of a dispute settlement mechanism in NAFTA. Yet, such a mechanism is expected to be a <a href="http://www.bnn.ca/scrapping-dispute-mechanism-likely-a-red-line-in-nafta-talks-1.827921">red line issue for Canada</a> when renegotiating the treaty. Meanwhile, the US <a href="https://ustr.gov/sites/default/files/files/Press/Releases/NAFTAObjectives.pdf">wants to eliminate it</a>. </p>
<h2>A matter of protection</h2>
<p>The reason that Canada remains keen on maintaining NAFTA’s dispute settlement clauses is the need to protect itself against a revanchist US. Trump, obsessed with regaining power on all fronts, wants to repatriate dispute resolution into the domestic legal system and out of the hands of international tribunals. </p>
<p>For <a href="https://www.bloomberg.com/news/articles/2017-07-24/this-obscure-nafta-chapter-could-be-canada-s-deal-breaker-again">example</a>, the US wants to discard NAFTA’s Chapter 19, the dispute settlement mechanism that deals with competition. Chapter 19 prevents NAFTA countries from putting unfair duties on products from other NAFTA countries to protect their home industries. Disputes are settled by bi-national panels.</p>
<p>For Chapter 11, which deals with investment and dispute resolution, the American side aims to ensure that NAFTA country investors in the US are not accorded greater substantive rights than domestic investors. This has the potential to <a href="https://www.ictsd.org/bridges-news/bridges/news/nafta-parties-prepare-for-august-negotiations-launch-in-washington">undermine</a> the idea of concrete standards judged by an independent, international tribunal. While this may please long-term critics of ISDS, it risks damaging the appeal of the US to foreign investors with consequences on growth and jobs.</p>
<p>To Canada, the US is an unpredictable trade partner, a potentially rogue state which may violate agreements for political reasons, at will. Seen this way, the US is now a state whose sovereign reach needs to be curtailed, and the mechanism to do so is ISDS. This is not an unusual objective. When parties are unpredictable or considered a political risk, external constraints on their policy-making help stabilise the investment environment, providing an additional layer of protection for businesses. </p>
<p>Canada, by maintaining ISDS in NAFTA, should try and blow some of that regulatory chill back across its southern border, preventing Trump from legislating parts of his agenda that may hurt international investors who rely on borderless free trade.</p>
<p>Of course NAFTA is likely to outlive Trump and a nationalist, protectionist US may be nothing more than a historical blip. Nonetheless, Canada and Mexico will be well served to wrap themselves in as many layers of supranational legal protections as possible.</p>
<p>The above dynamic carries a lesson for Brexit as well. Ousting the jurisdiction of the <a href="https://theconversation.com/the-uk-plans-to-leave-the-european-court-of-justice-heres-what-it-means-for-you-71524">European Court of Justice</a> from the UK means that a gap develops in dispute resolution mechanisms. The EU is, understandably, concerned about leaving the rights of its citizens and businesses to the jurisdiction of domestic courts. Not because it does not trust the judges, but because it does not trust the government that controls the legal framework within which they make decisions. </p>
<p>An external adjudicator is needed if you want to constrain a potentially unpredictable sovereign. After years of campaigning against “foreign judges” many may come to rediscover the value of ISDS.</p><img src="https://counter.theconversation.com/content/82394/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ioannis Glinavos does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The US wants rid of NAFTA’s dispute settlement mechanism but for Canada it’s a red line issue.Ioannis Glinavos, Senior Lecturer in Law, University of WestminsterLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/783782017-06-26T00:15:46Z2017-06-26T00:15:46ZZombie Trans-Pacific Partnership agreement lurches on<figure><img src="https://images.theconversation.com/files/173660/original/file-20170613-30067-1xeuw1l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Did the TPP die - or is it now a zombie? </span> <span class="attribution"><a class="source" href="https://visualhunt.com/f/photo/10545775696/aa0cf53099/">(Visual Hunt/Killaee)</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span></figcaption></figure><p>When Donald Trump pulled the United States out of the Trans-Pacific Partnership (TPP) agreement, the treaty appeared to die. Critics breathed a sigh of relief. In Canada, attention turned to Trump’s promise to renegotiate the 1994 North American Free Trade Agreement (NAFTA).</p>
<p>But wait.</p>
<p>Did the TPP die? Or is it now a bloody zombie? Many of the 11 remaining member countries have ratified the agreement, or plan to. Chile and Canada have both hosted meetings to consider <a href="https://www.theglobeandmail.com/report-on-business/international-business/asian-pacific-business/tpp-members-to-decide-how-to-revive-pact-without-us/article35030576/?reqid=859df3ea-028a-43cd-a8ac-1b1089a81f7f">ways to resurrect it</a>. </p>
<p>NAFTA’s renegotiation also signals that the U.S. remains committed to new trade and investment treaties, so long as they are even more beneficial to American investors and export interests than they have been in the past. <a href="https://ustr.gov/sites/default/files/files/reports/2017/AnnualReport/Chapter%20I%20-%20The%20President%27s%20Trade%20Policy%20Agenda.pdf">New US trade objectives</a> are explicit on this point. The U.S. may never rejoin the TPP but will almost certainly export the provisions it likes into new bilateral trade deals.</p>
<p>Lurking in the shadows is the geopolitics at stake: the rising power of China and its role in another (very much alive) Asia-Pacific trade and investment negotiation, the Regional Comprehensive Economic Partnership (RCEP). The Obama administration’s adamant support for the TPP was based on a wish for American interests to forge a new Asia-Pacific agreement, not Chinese. Promises of increased growth, labour rights and environmental protection were window dressing for a wary public.</p>
<p>As Canada Research Chair in Globalization and Health Equity, and having spent four years studying the health impacts of the TPP, it’s worth recounting the zombie’s many weaknesses. </p>
<h2>Low economic growth, rising income inequality</h2>
<p>If, as claimed, the TPP really did boost economic growth that trickled down equitably, people’s health would likely benefit. But the most optimistic projections of the TPP’s impact on economic growth average only 0.5 per cent by 2025. The Canadian government estimates that the <a href="http://international.gc.ca/economist-economiste/analysis-analyse/tpp_ei-re_ptp.aspx?lang=eng">TPP would boost Canada’s growth by just 0.127%</a> (and not until 2040). The net dollar gains would be less than Canada’s losses on more expensive pharmaceuticals and adjustment subsidies to its dairy and auto sectors. </p>
<p>These projections all assume no changes to employment. They assume equal or rising incomes. In stark contrast, modelling that did not make these assumptions has estimated <a href="http://www.ase.tufts.edu/gdae/Pubs/wp/16-01Capaldo-IzurietaTPP.pdf">substantial employment losses</a>. A U.S. study further calculated that the TPP would <a href="http://cepr.net/documents/publications/TPP-2013-09.pdf">raise incomes for the 1% but drop those of everyone else</a>, an indication of who stands to gain with such treaties. </p>
<h2>Weak labour protection, silence on climate</h2>
<p>The labour chapter of the TPP only prevents countries from lowering existing standards if it affects trade or investment amongst member countries. It <a href="http://journals.sagepub.com/doi/10.1177/0020731416684325">does not guarantee health, safety or adequate pay for workers</a> whose share of economic product globally has plummeted since the 1980s. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/175511/original/file-20170626-13441-jv6eau.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/175511/original/file-20170626-13441-jv6eau.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=367&fit=crop&dpr=1 600w, https://images.theconversation.com/files/175511/original/file-20170626-13441-jv6eau.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=367&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/175511/original/file-20170626-13441-jv6eau.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=367&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/175511/original/file-20170626-13441-jv6eau.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=461&fit=crop&dpr=1 754w, https://images.theconversation.com/files/175511/original/file-20170626-13441-jv6eau.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=461&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/175511/original/file-20170626-13441-jv6eau.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=461&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A plane flies past the Peace Tower in Ottawa trailing a sign protesting the TPP agreement.</span>
<span class="attribution"><span class="source">(THE CANADIAN PRESS/Adrian Wyld)</span></span>
</figcaption>
</figure>
<p>The environment chapter similarly requires governments to uphold enforcement only if failure to do so affects trade or investment. It is silent on climate change and on greenhouse gas emissions from global trade driven by fossil fuels. </p>
<p>Trade treaty rules could work to reduce income inequalities and afford meaningful and enforceable protection of labour and environmental rights. The TPP zombie in present form does not.</p>
<h2>Unhealthy regulatory regime</h2>
<p>The TPP contains four especially troubling regulatory impacts:</p>
<p>– Tougher patent protection would <a href="http://www.ourcommons.ca/Content/Committee/421/CIIT/Brief/BR8384140/br-external/LexchinJoel-final-e.pdf">affect the price of drugs</a>, especially costly new “biologics” used in treating cancers and autoimmune disorders.</p>
<p>– Requirements to prove the necessity of, or scientific justification for, new <a href="http://dx.doi.org/10.15171/ijhpm.2016.41">health regulations</a> would be more stringent than those under the World Trade Organization (WTO) system. </p>
<p>– New obligations allowing “persons” (including private corporations) from any member country to participate in developing new technical regulations could potentially lead to <a href="http://www.investopedia.com/terms/r/regulatory-capture.asp">regulatory capture</a>. </p>
<p>– Contentious <a href="https://www.policyalternatives.ca/sites/default/files/uploads/publications/National%20Office/2016/06/Foreign_Investor_Protections_TPP.pdf">investor-state dispute settlement (ISDS) rules</a> would allow foreign investors to sue governments over new policies or regulations affecting the value of their investments. </p>
<p>The number and monetary value of ISDS disputes have exploded since the 1990s, with investors winning about 60 per cent of the cases.</p>
<h2>Time to reset the global trade agenda</h2>
<p>In the rush to prevent trade wars becoming world wars, <a href="https://www.wto.org/english/docs_e/legal_e/04-wto_e.htm">the initial intent of trade and investment liberalization</a> – to create full employment, raise living standards, and respect environmental sustainability – has been lost. The means have become the ends in themselves. It’s time to reset the global trade agenda.</p>
<p>To that end, may the TPP zombie rest in peace.</p><img src="https://counter.theconversation.com/content/78378/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ronald Labonte receives funding from Canadian Institutes of Health Research and the Canada Research Chair Secretariat. He is also a chief investigator on the Australian National Health and Medical Research Council funded Center for Research Excellence in the Social Determinants of Health Equity.</span></em></p>NAFTA renegotiations may see provisions from the Trans-Pacific Partnership revive like zombies. We must remember their failures - on income inequality, labour and environmental protection.Ronald Labonte, Professor and Canada Research Chair, L’Université d’Ottawa/University of OttawaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/781162017-05-22T15:35:41Z2017-05-22T15:35:41ZWhy the EU’s Singapore ruling does not lead to a smoother Brexit road for Britain<figure><img src="https://images.theconversation.com/files/170350/original/file-20170522-25020-11jm1pa.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The UK's future trade deals will be subject to EU member state approval. </span> <span class="attribution"><span class="source">shutterstock.com</span></span></figcaption></figure><p>The UK’s vote for Brexit was all about taking back control. Indeed, when the UK leaves the EU, control over a variety of policy areas is likely to change hands. The problem is that it will not necessarily be into the UK government’s hands. A <a href="https://www.euractiv.com/section/economy-jobs/news/singapore-trade-deal-cannot-be-concluded-by-eu-alone-ecj-rules/">recent decision</a> by the European Court of Justice (ECJ) regarding a key EU trade deal with Singapore shows yet again how control over post-Brexit trade might be subject to the whims of the EU’s member states and their regional governments.</p>
<p>Europe’s top court ruled that all member states and their regional parliaments must sign off on the trade deal being negotiated by the EU and Singapore. This has direct implications for Brexit as it could affect the path for acceptance of any future agreement between the UK and the EU post-Brexit. It dashes hopes that the EU institutions would have the final say in negotiating trade deals.</p>
<p>If the EU could conclude free trade agreements on its own, with ratification handled by EU institutions only, then any negotiated agreement would go through predictably and quickly. If, on the other hand, member states, or even member state regional authorities, are required to approve agreements, then the whole process of negotiating new agreements will be prolonged, and possibly held hostage by national and sub-national political interests. </p>
<p>This happened in 2016 when the small Belgian province of Wallonia delayed the ratification <a href="https://theconversation.com/who-are-the-walloons-and-why-are-they-blocking-europes-free-trade-deal-with-canada-67718">of the Canada-EU trade agreement</a>. The recent ECJ ruling was much anticipated, as a precedent for future trade deals. </p>
<p>A post-Brexit deal with the UK requiring ratification by the EU Commission, EU parliament, 27 national parliaments and endless regional entities (depending on the details of 27 different national constitutions) would take quite a while, with <a href="http://www.huffingtonpost.co.uk/dr-ioannis-glinavos/nodeal-brexit-and-fear_b_15422298.html">significant consequences</a> for cross-channel trade.</p>
<h2>Details, details …</h2>
<p>In the <a href="http://ec.europa.eu/trade/policy/countries-and-regions/countries/singapore/index_en.htm">recent Singapore case</a>, the ECJ ruled that the EU can have exclusive power under the Treaty of Lisbon to ratify a number of trade agreements (albeit not the one with Singapore). As a result the Wallonia incident should be seen as an unlikely event, rather than the norm. But it still does not bode well for Britain. </p>
<p>The court held that only those free trade agreements dealing with standard trade issues are the exclusive domain of EU institutions. Those that involve non-direct foreign investment and a system on dispute settlement between investors and governments (known as ISDS), however, need the approval of member states.</p>
<p>Some commentators <a href="https://www.ft.com/content/a5fc16e8-3a45-11e7-821a-6027b8a20f23?segmentid=acee4131-99c2-09d3-a635-873e61754ec6">have welcomed</a> the decision. They see it as an incentive, and even precursor, for the EU to drop ISDS elements from its trade deals altogether. The so-called Investor State Dispute Settlement element of trade deals allows companies to sue national governments if they pass laws that affect their bottom lines. It is considered by many as unnecessary encroachment on national sovereignty. In fact, it was resistance to ISDS that was the primary reason for Wallonian objection to the Canada trade deal, and it has been the number one reason campaigners <a href="https://theconversation.com/why-ttip-will-live-on-but-not-for-the-eu-61718">have raged against TTIP</a>, the US-EU trade treaty under negotiation. </p>
<h2>Taking back control</h2>
<p>But it is not possible to see the Singapore decision as a win-win, easing procedural steps to a Brexit deal, while at the same time, eliminating distasteful ISDS from EU trade agreements. This is because the EU will probably insist on them in any future UK-EU deal. It is all to do with control. </p>
<p>The EU is upfront about <a href="https://www.theguardian.com/politics/2017/apr/21/leaked-documents-eu-tough-line-brexit-negotiations">its desire to maintain</a> the jurisdiction of the ECJ over EU nationals and their businesses operating in the UK post-Brexit. Prime Minister Theresa May, on the other hand, has made “freedom from EU law” <a href="http://www.independent.co.uk/news/uk/politics/brexit-latest-theresa-may-european-court-eu-uk-jurisdiction-leave-council-citizens-talks-brussels-a7694361.html">one of the banners</a> of her electoral campaign. Indeed, the spurious claim of repatriating legal powers from the EU was a <a href="http://www.voteleavetakecontrol.org/briefing_control.html">central theme of the Leave campaign</a> during the UK referendum.</p>
<p>The reason why the Singapore decision does not make it easier for Brexit therefore is that (in the event of loss of jurisdiction by the ECJ over the UK) the EU is likely to insist upon some sort of supra-national mechanism for dispute resolution post-Brexit. ISDS will be the only tool available to the EU to ensure adequate standards of treatment for European business interests in the UK. And this will require the more cumbersome ratification process envisaged by the ECJ decision. </p>
<p>So, contrary to what <a href="http://www.telegraph.co.uk/news/2017/05/16/boost-brexit-free-trade-deal-chances-landmark-eu-court-ruling/">has been reported</a> in much of the financial press on this issue, things did not get any easier for the UK with the EU’s ruling on Singapore. Difficulties could arise in the ratification of a future EU-UK trade deal – not just its negotiation. Wallonia could yet end up taking control of the UK’s post-Brexit future.</p><img src="https://counter.theconversation.com/content/78116/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ioannis Glinavos does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>It’s likely that a future UK-EU trade deal will be subject to approval by all EU member states and their sub-national parliaments.Ioannis Glinavos, Senior Lecturer in Law, University of WestminsterLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/717962017-01-25T02:59:30Z2017-01-25T02:59:30ZThere’s no point to Australia’s push to ratify the TPP<p>With all the debates <a href="https://theconversation.com/why-china-could-never-sign-on-to-the-trans-pacific-partnership-56361">on whether China</a> will join the <a href="https://theconversation.com/au/topics/tpp-7972">Trans Pacific Partnership (TPP) Agreement </a> now that President Trump has officially rejected it, or if the TPP can exist as a 12 nations minus one agreement, you’d be forgiven for thinking it still could go ahead. It can’t.</p>
<p><a href="https://theconversation.com/trump-trade-and-the-tpp-seven-essential-reads-71845">The agreement itself</a> states that to come into effect, six of the 12 original signatories must ratify the treaty, and together these six must <a href="http://dfat.gov.au/trade/agreements/tpp/official-documents/Documents/30-final-provisions.pdf">represent 85% of the total GDP of all 12 original signatries</a>. The US alone accounts for a massive 60% of this combined GDP. So US rejection is indeed a deal breaker. </p>
<p>What is surprising, on the other hand, is Prime Minister Malcolm Turnbull’s declaration that he will push ahead with the TPP’s implementing legislation in Australia, despite America’s withdrawal. So what is the sense in such a move? </p>
<p>Not surprisingly, domestic politics goes someway towards explaining Turnbull’s actions. The Turnbull-led government – like the Abbot-led one before it – has put trade agreements at the centre of its otherwise sparse economic policy agenda. </p>
<p>Upon signing the deal, the Liberal-National Coalition heralded the TPP as a landmark win that would deliver enormous economic opportunities to Australia (just as it claimed the Japanese, South Korea and Chinese deals before it would). Never mind that modelling showed only modest gains would flow from the TPP (and other deals) to quite a narrow set of Australian constituents. <a href="http://pubdocs.worldbank.org/pubdocs/publicdoc/2016/1/847071452034669879/Global-Economic-Prospects-January-2016-Implications-Trans-Pacific-Partnership-Agreement.pdf">According to the World Bank</a>, the TPP was expected to increase Australia’s GDP by only 0.7% by 2030. </p>
<p>And never mind that the government’s “big win” narrative ignored the obvious costs associated with these deals for Australians more generally, thanks to intellectual property and investor state dispute provisions. Putting facts aside, the government’s messaging was that the TPP was a massive win for Australia. </p>
<p>To now simply let the deal go without some major public hand-wringing would contradict this narrative. So even if the continued pursuit of the TPP is futile, the government can’t be seen to be letting go of its “crowning economic achievement” without a fight. </p>
<p>Beyond domestic politics, Turnbull has publicly argued that a key reason to still pass the TPP legislation is to send a signal to the world of Australia’s ongoing commitment to – and the importance of - “free trade” in the face of growing American protectionism. But the logic of this argument is flawed. </p>
<p>It assumes that the TPP embodies free trade ideals. It does not. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/152959/original/image-20170117-9029-15xlq53.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/152959/original/image-20170117-9029-15xlq53.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=1222&fit=crop&dpr=1 600w, https://images.theconversation.com/files/152959/original/image-20170117-9029-15xlq53.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=1222&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/152959/original/image-20170117-9029-15xlq53.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=1222&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/152959/original/image-20170117-9029-15xlq53.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1536&fit=crop&dpr=1 754w, https://images.theconversation.com/files/152959/original/image-20170117-9029-15xlq53.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1536&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/152959/original/image-20170117-9029-15xlq53.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1536&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="attribution"><a class="source" href="http://dfat.gov.au/trade/agreements/Pages/status-of-fta-negotiations.aspx#negotiation">Department of Foreign Affairs and Trade/The Conversation</a>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
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</figure>
<p>Like most of the trade agreements signed by Australia over the past decade or so, the TPP is only marginally about the “conventional” trade issue of expanding exports and imports through the removal of tariff and other barriers to trade. This is why economic modelling has estimated that only very modest gains will accrue to Australia from TPP-related export expansion over the next decade – despite the government touting the deal as a huge economic win for Australia. </p>
<p>In fact, the most significant and most controversial aspects of the TPP embody the opposite of “free trade” principles. Take the deal’s <a href="https://theconversation.com/ip-trade-negotiations-a-prescription-for-harm-20141">intellectual property (IP) provisions</a>. These would further extend the monopoly rights (and rent-seeking behaviour) of large corporations through changes to patent and copyright laws, delaying competition and keeping the price of IP-protected goods (like pharmaceuticals) higher for longer. </p>
<p>Then there are the deal’s <a href="https://theconversation.com/au/topics/isds-16000">investor state dispute settlement (ISDS)</a> provisions. These would give foreign companies the right (not afforded to local firms) to sue the Australian government for regulatory changes aimed at advancing important health, environmental and other social and economic goals. </p>
<p>In this brave new world, regulations to prevent profit shifting by multinational corporations or to mitigate climate change could be subject to legal action – and hefty fines imposed on the Australian government (read: Australian taxpayers). This is<a href="http://cdn.getup.org.au/1931-Canary-in-the-Coal-Mine-Summary.pdf"> precisely the fate that befell the Canadian government</a> and its citizens after it agreed to ISDS provisions in its trade deal with the United States. </p>
<p>In sum, the TPP is not principally – or even largely - about “free trade”. This is precisely why so many people across Australia and around the globe are opposed to it, and precisely why it is so disingenuous of the PM to brand all of its detractors as “anti-free traders” or “protectionists”. </p>
<p>Indeed, if Turnbull’s aim is to signal to the world Australia’s commitment to liberal principles and freer trade, then abandoning the TPP would be a sound first step. </p>
<p>Of course, there may be another reason for Turnbull’s continued pursuit of the TPP: to establish Australia (and Turnbull himself) as a key trade policy maker (rather than taker) in the region; to demonstrate to our regional friends that Australia is capable of leading an ambitious and expansive trade agenda, even in the absence of US sponsorship. </p>
<p>But if this is the aim, then surely it won’t be achieved by continuing to flog a deal so clearly and so closely associated with US corporate and geo-strategic interests (at least as they were understood by the Obama Adminstration). </p>
<p>America’s rejection of the TPP presents a unique opportunity for the Turnbull government: to acknowledge in the face of overwhelming global and local opposition that the international trade agenda has gone off track. If the government’s aim is to become a trade policy maker, not taker, in the region, then an incredible opportunity now exists to do so: by rejecting the TPP and and returning the goal of freer trade to the centre of our nation’s trade policy agenda. </p>
<p>The first step in doing so would be to reject once and for all provisions like ISDS and IP extension that enjoy so little support in this country and elsewhere and that would cost more than benefit the Australian public (not to mention our developing country neighbours for whom such provisions are even more economically and socially damaging). This would also require Australia to take a strong new stance in <a href="https://theconversation.com/if-the-tpp-dies-australia-has-other-game-changing-trade-options-64291">the negotiations of the China led trade deal</a>, the Regional Comprehensive Economic Partnership, that like the TPP is also now pushing into areas like ISDS and IP extension. </p>
<p>The TPP was <a href="https://theconversation.com/why-trump-is-right-and-wrong-about-killing-off-the-tpp-69045">a bad deal for Australia (and the US)</a> before Trump was elected – and it remains a bad deal today. But its failure presents an unprecedented opportunity for Australian policymakers to rethink and redefine the national and regional trade policy agenda – as well as chart a new direction for our international involvement - if they are brave enough to take it.</p><img src="https://counter.theconversation.com/content/71796/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Elizabeth Thurbon has previously received funding from the Australian Research Council and the Korea Foundation. She is an academic advisor to the Jubilee Australia Research Centre. </span></em></p>The TPP can’t go ahead in any form, so its time the Australian government lets it go.Elizabeth Thurbon, Associate Professor in International Relations / International Political Economy, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/718452017-01-24T16:53:50Z2017-01-24T16:53:50ZTrump, trade and the TPP: Seven essential reads<p><em>Editor’s note: The following is a roundup of archival stories.</em></p>
<p>Donald Trump made his antipathy to current U.S. trade deals a key part of his campaign and launched his presidency by beginning to rip them up. </p>
<p>He said he plans to <a href="http://www.reuters.com/article/us-usa-trump-nafta-timing-idUSKBN1572NL">renegotiate</a> the 23-year-old North American Free Trade Agreement (NAFTA) – “at the appropriate time” – and on Jan. 23 <a href="https://www.washingtonpost.com/news/wonk/wp/2017/01/23/president-trump-signs-order-to-withdraw-from-transpacific-partnership/?utm_term=.2d09841eb7c1">formally pulled the U.S.</a> out of the Trans-Pacific Partnership (TPP). <a href="https://www.bloomberg.com/politics/articles/2017-01-23/trump-said-to-meet-with-dow-ceo-liveris-labor-leaders-on-monday">Trump also warned</a> he would impose a “very major border tax” on U.S. companies that ship jobs overseas. </p>
<p>What does all this mean? We plumbed our archive to offer some context on the complex topic of trade. </p>
<h2>TPP primer</h2>
<p>When people argue about trade deals, for and against, the reasons tend to be economic or about the threat to someone’s job. Marina v. N. Whitman, a professor of business administration and public policy at the University of Michigan, <a href="https://theconversation.com/how-the-tpps-demise-threatens-us-national-security-and-pax-americana-67514">argues the stakes are even higher</a>. The U.S. decision to exit the TPP weakens national security and even threatens the “Pax Americana” that helped maintain global stability since World War II, she writes. </p>
<blockquote>
<p>“At stake is a principle much broader than the struggle between China and the United States for the ‘soft power’ inherent in the competition over trade agreements… A U.S. failure to authorize the TPP could be the coup de grâce for the Pax Americana.” </p>
</blockquote>
<p>Rachel Rothschild, who researches the history of environmental science and diplomacy at NYU, sees it differently, arguing the TPP has too many “glaring deficiencies.” It also <a href="https://theconversation.com/heres-a-problem-with-the-tpp-that-hillary-clinton-ignores-at-her-peril-62818">departs from a half-century of progress</a> tying environment and human rights to major diplomatic agreements on nuclear weapons and Soviet influence. </p>
<blockquote>
<p>“We are facing the rise of another political and economic power with strikingly different values than our own, including support for democracy, the free market and environmental protections. The possibility that other countries could follow China’s example would hinder U.S. attempts to promote basic rights around the world, similar to the issue of containing Soviet communism at the outset of the Cold War.”</p>
</blockquote>
<p>As for the economic issues, Greg Wright of the University of California, Merced, and Emily Blanchard of Dartmouth <a href="https://theconversation.com/is-trump-right-that-the-tpp-will-destroy-millions-of-jobs-and-cede-us-sovereignty-62085">examined the evidence behind claims</a> that the TPP would lead to millions of job losses. The truth is more complex.</p>
<blockquote>
<p>“The simple truth is that trade agreements change the composition of jobs in the economy. Some workers will be happier with their new jobs, and others will not. Whatever the job losses from the TPP, a roughly equal number will be created.”</p>
</blockquote>
<h2>Helping the losers of trade</h2>
<p>Whether or not past trade deals have on balance created more jobs than they’ve lost, the focus lately has been on those who feel left behind and whether we’ve done enough to soften the blow. We haven’t, writes Michigan’s Whitman. That’s why the program designed to help them, often dubbed “burial insurance,” <a href="https://theconversation.com/want-to-help-free-trades-losers-make-adjustment-assistance-more-than-just-burial-insurance-67036">needs significant reform</a>. </p>
<blockquote>
<p>“Studies suggest that the American labor market is not as fluid and flexible as we thought. Job losers were not able to find new ones as quickly as expected nor command the same level of wages when they did. This finding is consistent with other research indicating that the in-country mobility of blue-collar American workers has been falling.”</p>
</blockquote>
<h2>Lessons from NAFTA</h2>
<p>Trump and others say NAFTA is the root of the problem. While it’s unclear when the president will begin renegotiating that massive trade agreement, Harley Shaiken of the University of California, Berkeley, explains <a href="https://theconversation.com/annals-of-free-trade-will-tpp-learn-from-our-nafta-past-or-are-we-condemned-to-repeat-it-42005">what we can learn from it</a>. </p>
<blockquote>
<p>“By strengthening investment protection and largely ignoring worker protections, real wages in Mexican manufacturing continued to slide in the wake of NAFTA, declining almost 20 percent from 1994 to 2011 while productivity grew almost 80 percent. This loss for Mexican workers also contributed to a sharp downward pressure on manufacturing wages in the U.S.”</p>
</blockquote>
<h2>Free trade in peril</h2>
<p>With the TPP and other international trade agreements in trouble and a protectionist American president in power, globalization and free trade seem to be in peril. But <a href="https://theconversation.com/does-tpps-slow-death-mean-the-world-is-now-unsafe-for-trade-deals-64577">it’s still important to fight for them</a>, writes Charles Hankla of Georgia State University.</p>
<blockquote>
<p>“The rejection of these important agreements could risk becoming merely the first step in a gradual erosion of support for the global economic architecture. This architecture, so carefully created and maintained by the United States after 1945, has contributed mightily to international prosperity and peace. Maintaining it is of critical importance.”</p>
</blockquote>
<p>Could Trump’s protectionist policies lead to a trade war? Marc-William Palen, a trade historian at the University of Exeter, reminds us of a few – and their <a href="https://theconversation.com/do-protectionist-policies-like-trumps-lead-to-trade-wars-56532">painful consequences</a>. One example:</p>
<blockquote>
<p>“When the Republicans passed the even more protectionist Dingley Tariff in 1897, Canada decided that the best response was a double dose of tariff retaliation and closer trade ties with the British Empire rather than the United States. It took nearly a century after this for free trade between the U.S. and Canada to develop.”</p>
</blockquote><img src="https://counter.theconversation.com/content/71845/count.gif" alt="The Conversation" width="1" height="1" />
Trump formally pulled out of the Trans-Pacific Partnership and signaled his intention to begin renegotiating NAFTA. Here’s some context.Bryan Keogh, Managing EditorLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/675142016-12-08T02:12:51Z2016-12-08T02:12:51ZHow the TPP’s demise threatens US national security and Pax Americana<p><a href="http://www.bbc.co.uk/news/world-us-canada-38059623">One of the casualties</a> of this year’s election will be the <a href="https://ustr.gov/tpp/">Trans-Pacific Partnership</a> (TPP), an important part of <a href="http://foreignpolicy.com/2011/12/21/the-american-pivot-to-asia/">President Barack Obama’s “pivot to Asia”</a> that he had hoped would be a <a href="http://foreignpolicy.com/2016/09/03/the-legacy-of-obamas-pivot-to-asia/">signature part</a> of his legacy. </p>
<p>While both Donald Trump and Hillary Clinton eventually came out against the agreement, the former made opposition to almost any U.S. trade deal a centerpiece of his campaign, turning his surprise victory last month into the TPP’s death knell. </p>
<p>With Obama’s <a href="http://www.politico.com/story/2016/11/obama-trade-tpp-lame-duck-231248">last-ditch hope</a> that Congress would approve the deal during a lame duck session dashed, the TPP is unlikely to be revived. The question then becomes, does it matter? </p>
<p>My short answer is yes, and the U.S. and its citizens will surely be worse off without it. Economists like me usually note that reducing trade restrictions benefit a country’s economy through faster growth, higher productivity, more competition and innovation, and lower prices for better goods. </p>
<p>But there’s another reason why we’ll be worse off: Its demise threatens to weaken our national security. </p>
<p>Let me explain, but first lets brush up on what the TPP actually is and a few of its key economic benefits.</p>
<h2>A trade deal for the 21st century</h2>
<p>Signed by 12 countries around the Pacific Rim, including the U.S., Japan and Australia, the TPP is a <a href="https://ustr.gov/trade-agreements/free-trade-agreements/trans-pacific-partnership/tpp-full-text">complex and comprehensive trade agreement</a> <a href="https://ustr.gov/trade-agreements/free-trade-agreements/trans-pacific-partnership">designed with the 21st century in mind</a>. Importantly, China, India and South Korea are not signatories, although they could join at a later date.</p>
<p>The deal, like most of the <a href="https://m.research.stlouisfed.org/publications/review/00/07/0007th.pdf">multilateral trade-liberalizing agreements</a> negotiated since World War II, specifies reductions in tariffs on manufactured goods and on agricultural products as well. But the TPP <a href="http://bookstore.piie.com/book-store/7137.html">goes much further</a>, entailing a global code of conduct for trade that takes into account its increasing complexity. </p>
<p>Recognizing the growing importance of <a href="https://ustr.gov/sites/default/files/TPP-Final-Text-Cross-Border-Trade-in-Services.pdf">services</a> and <a href="https://ustr.gov/sites/default/files/TPP-Final-Text-Electronic-Commerce.pdf">digital products</a>, it <a href="https://ustr.gov/tpp/Summary-of-US-objectives">aims to reduce</a> nontariff barriers in these areas too. It specifies rules for the <a href="https://ustr.gov/sites/default/files/TPP-Final-Text-Intellectual-Property.pdf">protection of intellectual property</a>. Going beyond previous agreements, it incorporates provisions for the protection of <a href="https://ustr.gov/sites/default/files/TPP-Final-Text-Labour.pdf">labor</a> and the <a href="https://ustr.gov/sites/default/files/TPP-Final-Text-Environment.pdf">environment</a>. </p>
<p>The provision of the TPP that has engendered the most controversy, even though it already exists in thousands of other treaties, is the <a href="https://theconversation.com/tpp-trade-pact-still-needs-improvements-to-protect-governments-from-foreign-suits-54078">Investor State Dispute Settlement provision</a>. This allows a corporation to take complaints that a foreign government has violated its property rights to a special international tribunal, whose decision cannot be appealed. </p>
<h2>Critics marshal a strong voice</h2>
<p>Such a complicated agreement naturally includes many targets for opponents to shoot at. </p>
<p>Until recently, though, the promised economic benefits seemed to enable Obama to <a href="https://theconversation.com/why-fight-over-free-trade-confounds-partisan-divide-44053">cobble together enough agreement</a> in Congress to push through TPP’s ratification. That is no longer the case, as workers hurt by past deals have marshaled a strong political voice in the recent election. </p>
<p>One of its mouthpieces was Bernie Sanders, who <a href="https://www.sanders.senate.gov/download/the-trans-pacific-trade-tpp-agreement-must-be-defeated?inline=file">characterized the TPP</a> as “part of a global race to the bottom to boost the profits of large corporations and Wall Street.” His <a href="http://www.npr.org/2016/07/03/484574128/sanders-centers-platform-fight-on-trans-pacific-trade-deal">fierce opposition</a>, together with the strong challenge he mounted in the Democratic primary, forced Clinton to <a href="http://www.huffingtonpost.com/dave-johnson/clinton-commits-no-tpp-fu_b_9887124.html">disavow the deal</a> after <a href="http://www.latimes.com/politics/la-na-pol-trade-tpp-20160926-snap-story.html">earlier labeling</a> it the “gold standard” of trade agreements. And Trump, who repeatedly insisted that the U.S. has been on the losing end of multilateral trade deals, <a href="http://www.politico.com/story/2016/11/donald-trump-trade-tpp-231212">promised to abandon the TPP</a> on day one.</p>
<p>While I do believe the deal’s economic benefits alone make it worthwhile, there’s an even more compelling reason to support the TPP: Its loss all but ensures that trade agreements initiated by China will fill the vacuum.</p>
<h2>National security and trade</h2>
<p>Framing a trade deal in terms of national security <a href="http://www.foreignaffairs.com/print/1118386">is not a new idea</a>. </p>
<p>That’s how President Eisenhower built bipartisan support for two rounds of tariff reductions in the late 1950s. He argued that trade liberalization among “Western” nations (stretched to include Japan) was a measure of America’s “soft power” and <a href="http://www.nber.org/chapters/c5828.pdf">would help contain the spread of Communism</a> during the Cold War. </p>
<p>Such thinking also <a href="https://www.amazon.co.uk/Clintons-World-Remaking-American-Foreign/dp/0275963969">undergirded support</a> for President Bill Clinton’s advancement of NAFTA and the <a href="http://www.iatp.org/files/Full_Text_of_Clintons_Speech_on_China_Trade_Bi.htm">normalization of trade with China in the 1990s</a>, which he argued would push China toward the rule of law and promote “a future of peace and security for Asia and the world.” </p>
<p>Today, China has replaced the Soviet Union as the major contender to supplant the U.S. as the world’s dominant power. Obama had hoped to make his pivot toward Asia one of his signature achievements, with the aim of undercutting or at least slowing China’s <a href="http://www.politico.com/magazine/story/2016/09/barack-obama-asia-pivot-214218">efforts to expand</a> its “soft” as well as its military power. Instead, now there is pressure in Asia for a pivot away from the U.S. </p>
<p>In the Philippines, once among the United States’ most reliable Asian allies, the populist new president, Rodrigo Duterte, has underlined with profanity his determination to move his country’s relationship <a href="http://www.reuters.com/article/us-china-philippines-idUSKCN12K0AS">away from the U.S.</a> and toward China, going so far as to <a href="http://www.reuters.com/article/us-philippines-usa-rifles-idUSKBN1320U7">cancel an order</a> for American police rifles. In a <a href="http://www.wsj.com/articles/philippines-duterte-threatens-to-follow-russia-in-quitting-international-criminal-court-1479383112">recent speech</a>, Duterte opined that if China and Russia were to create a new world order, he would be the first to join.</p>
<p>The prime minister of Malaysia, which has long tried to strike a balance in its relationships with the U.S. and China, <a href="https://www.theguardian.com/world/2016/nov/02/china-and-malaysia-agree-on-military-cooperation-in-the-south-china-sea">has been making similar noises</a> about moving its fulcrum in the direction of China. Both countries have eased their opposition to China’s incursions into the South China Sea.</p>
<p>China itself has been actively initiating programs directed at <a href="http://www.reuters.com/article/us-asia-aiib-investment-idUSKCN0UU03Y">enhancing its global role</a>, with major implications for the U.S. When China created the Asian Infrastructure Investment Bank in 2014, the <a href="https://www.ft.com/content/afd39842-6c18-11e4-b939-00144feabdc0">U.S. boycotted</a> the new institution and asked allies to do the same. Despite its pleas, some <a href="http://www.scmp.com/news/china/diplomacy-defence/article/1766970/57-nations-approved-founder-members-china-led-aiib">57 countries joined</a>, including all the major countries of the European Union, as well as Australia and South Korea. </p>
<p>Even more recently, China has announced multi-billion dollar financing for its belt-and-road initiative, a grand plan to finance infrastructure projects throughout Asia and better connect China with the rest of the world that has been termed a <a href="http://thediplomat.com/2016/01/the-belt-and-road-initiative-is-not-chinas-marshall-plan-why-not/">Chinese Marshall Plan</a>. </p>
<p>The Chinese challenge to American hegemony appears to be gathering steam.</p>
<h2>If the TPP dies…</h2>
<p>It is in this context that the reframing of TPP as a security issue becomes particularly relevant. </p>
<p>Only two of its 12 signatories, Japan and New Zealand, have so far ratified the TPP. If the U.S. does not ratify, the deal will probably wither on the vine – although <a href="piie.com/blogs/trade-investment-policy-watch/tpp-could-go-forward-without-united-states">there have been suggestions</a> that the other 11 members could ratify it and put it into force on a provisional basis.</p>
<p>The failure of the TPP would not leave a vacuum. China is spearheading a proposal for a <a href="https://aric.adb.org/fta/regional-comprehensive-economic-partnership">Comprehensive Regional Trade Partnership</a> (CREP), which includes the 10 members of the Association of South East Asian Nations plus China, Japan, South Korea, India, Australia and New Zealand. As such, it includes seven of the 12 TPP signatories. </p>
<p>While both agreements cover such issues as trade in goods and services, investment and dispute settlement mechanisms, the CREP does not incorporate the TPP’s protections for labor or the environment or restrictions on the activities of state-owned businesses, which dominate the Chinese economy. These provisions are of key importance to the many countries, the United States among them, for whom they represent strongly held values.</p>
<p>China is also hoping to advance its concept of a <a href="http://thediplomat.com/2014/10/chinas-push-for-an-asia-pacific-free-trade-agreement/">Free Trade Area of the Asia-Pacific</a> (FTAAP), which would have the narrower goal of overriding and integrating the various bilateral and regional free trade agreements that are currently in force or proposed. </p>
<p>But it would have a broader geographical reach than CREP; it could potentially incorporate all 21 member countries of the <a href="https://espresso.economist.com/e562cd9c0768d5464b64cf61da7fc6bb">Asia-Pacific Economic Cooperation forum</a>, including both China and the United States. Originally, the U.S. had hoped that the TPP would be the main building block of the FTAAP, but China has clearly beaten us to the punch.</p>
<h2>The end of Pax Americana?</h2>
<p>At stake is a principle much broader than the struggle between China and the United States for the “soft power” inherent in the competition over trade agreements. </p>
<p>A crucial aspect of the Pax Americana that underpinned global stability throughout most of the post-World War II period was U.S. leadership in establishing rules for across-the-border trade and financial transactions. </p>
<p>Initially, this involved the creation of international organizations like the International Monetary Fund, the World Bank and the GATT, the predecessor to the WTO. A succession of international agreements that liberalized international trade and finance followed.</p>
<p>These economic arrangements went hand in hand with U.S. leadership in stabilizing key regions of the world through a combination of our own military expenditures and strategic alliances. </p>
<p>A U.S. failure to authorize the TPP could be the coup de grâce for the Pax Americana. The ramifications of such a demise are material for many a sleepless night.</p><img src="https://counter.theconversation.com/content/67514/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Marina v. N. Whitman is affiliated with National Bureau of Economic Research (trustee); Peterson Institute for International Economics (trustee emerita); American Academy of Arts and Sciences; Institute for Advanced Study (trustee emerita).
</span></em></p>The main arguments in favor of the TPP were economic. But there’s another reason the Trump administration should rethink its promise to nix it: Its demise will weaken US national security.Marina v. N. Whitman, Professor of Business Administration and Public Policy, University of MichiganLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/601322016-06-07T13:47:25Z2016-06-07T13:47:25ZThe TTIP trade deal is lost at sea<figure><img src="https://images.theconversation.com/files/125156/original/image-20160603-11598-zeblkr.jpg?ixlib=rb-1.1.0&rect=2%2C43%2C1620%2C952&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Trading up?</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/oneeighteen/5885529695/in/photolist-9Y5SVV-e7nKJB-hTvC5N-58KevF-gibiAV-bCpAfz-duWhHs-qfhdRY-4f4abi-ntEmgy-5Xocue-qeN59x-9aVJja-4afocQ-gqp7md-nx5Chg-hD9cR2-Gwu3g8-pr55G4-fVjYzH-mDd9rD-8xhWxK-e6BJBL-knX6U2-jkuypv-nQZbo9-qw31RM-BB2VR-cKibz-cq6xCy-aDibxn-2hTLe-7BHtDb-i2bLd-pKc96h-ecyYta-kjfAHx-bqXNkj-brFVLd-qi6rnQ-4GkAh-5Fe22m-675AJ7-5LDsTX-pYP4Tt-aFSswr-59LgJa-raXuQm-direVC-qC7fMz">Louis Vest/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span></figcaption></figure><p>The future of the Transatlantic Trade and Investment Partnership (TTIP) between the US and European Union seems bleak. Beset by doubts and stumbling alongside the <a href="https://theconversation.com/uk/eu-referendum-2016">UK’s referendum on EU membership</a>, the TTIP is starting to look like an awful lot of effort for unremarkable gains. US president Barack Obama may have given the negotiation process <a href="http://www.independent.co.uk/news/business/news/ttip-obama-says-trade-deal-should-be-signed-by-the-end-of-the-year-a6999456.html">a shot in the arm</a> in recent weeks, but there is a good possibility that a deal will not be struck during his administration. After that, all bets are off.</p>
<p>So why has such a major piece of international deal-making found it so hard to make headway, and what are the chances of a deal ever being done?</p>
<p>Well, the first reason for the impasse is that no one can agree on what it should cover. It is deeply complex, but there are essentially two choices: should TTIP only apply to the tariffs that countries place on imports, or should it also address other barriers to business, mostly technical regulations on things like car safety, or the procedures for testing new chemicals?</p>
<p><a href="http://www.cesifo-group.de/portal/page/portal/DocBase_Content/ZS/ZS-%20CESifo_Forum/zs-for-%202014/zs-for-%202014-4/forum-%204-14-%20panel2.pdf">Estimates for the economic benefit</a> to the EU from a tariffs-only deal come out at just 0.3% of GDP for the EU as a whole. If we abolish all non-tariff barriers, then we get a 4% boost. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/125150/original/image-20160603-11605-16494gf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/125150/original/image-20160603-11605-16494gf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/125150/original/image-20160603-11605-16494gf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=396&fit=crop&dpr=1 600w, https://images.theconversation.com/files/125150/original/image-20160603-11605-16494gf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=396&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/125150/original/image-20160603-11605-16494gf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=396&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/125150/original/image-20160603-11605-16494gf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=497&fit=crop&dpr=1 754w, https://images.theconversation.com/files/125150/original/image-20160603-11605-16494gf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=497&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/125150/original/image-20160603-11605-16494gf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=497&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Hitting hard enough to ring the bell?</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/stevensnodgrass/8265087493/in/photolist-4MvEJX-aKR2AV-aCXpje-dAmJyv-ciuCsm-6Kmi2z-obmpn-4943kT-5mKNdR-6AkB6i-55BV23-aqBSz9-gp5Kw-bMxcX">Steve Snodgrass/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<h2>Race to the bottom</h2>
<p>That makes it seems like an easy decision from an economic point of view, but it’s highly contested. </p>
<p>The reason for the logjam is clear. Going far enough to make it economically valuable drags into play all sorts of political and social issues. Our reading of <a href="http://ec.europa.eu/trade/policy/in-focus/ttip/index_en.htm">the draft texts</a> is that it won’t, in fact, lead to significant harmonisation or even mutual recognition of existing rules. There are procedures to make sure future regulations are as compatible as possible, but there is nothing explicit to say that regulatory decision making powers will be transferred. Indeed, it is hard to see the US Congress accepting anything else. That might seem like an effective compromise, but of course, any weakening of the approach to non-tariff barriers may in turn dampen the economic advantages. </p>
<p>The less complicated route – a TTIP which only removes tariffs – would bring very limited gains. Both EU and US tariffs are generally very low, except for cars, chemicals and agriculture. Their removal would have only a small effect. </p>
<p>At its heart, the far more valuable non-tariff route drags up fears, founded or unfounded, of a regulatory race to the bottom on things like food safety, and objections from NGOs about the loss of domestic policy power on things like health or government procurement. Crucially, TTIP has also raised the (contested) possibility of <a href="https://theconversation.com/how-the-secret-ttip-trade-deal-could-enable-companies-to-sue-countries-50543">major corporations suing states</a>. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/125509/original/image-20160607-15038-n3wzoq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/125509/original/image-20160607-15038-n3wzoq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/125509/original/image-20160607-15038-n3wzoq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/125509/original/image-20160607-15038-n3wzoq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/125509/original/image-20160607-15038-n3wzoq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/125509/original/image-20160607-15038-n3wzoq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/125509/original/image-20160607-15038-n3wzoq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/125509/original/image-20160607-15038-n3wzoq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">TTIP for the chop? NHS fears have sparked protest.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/wdm/14473847638/in/photolist-oksS9N-o41fDd-o42aDa-okdf7e-onfMq2-okdf8B-okdfdB-o42aMX-o42aND-GAU9rC-GDf4rz-GAU9Ky">Global Justice Now/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<h2>Healthy debate</h2>
<p>So on the one hand, the European Commission claimed that TTIP could not be used to undermine the <a href="http://trade.ec.europa.eu/doclib/docs/2016/june/tradoc_154617.pdf">UK’s National Health Service</a> yet the barrister hired by the Unite union <a href="http://www.unitetheunion.org/uploaded/documents/MBTTIPAdvice20111511-25674.pdf">concluded that</a>: “TTIP poses a real and serious risk to future [UK government] decision-making in respect of the NHS.”</p>
<p><a href="http://ccsi.columbia.edu/2015/05/19/investor-state-dispute-settlement-public-interest-and-u-s-domestic-law/">It is generally agreed</a> that past provisions to settle disputes between companies and countries were abused by arbitrators answerable to no one. EU member states have also signed many bilateral investment agreements which do allow firms to sue governments. For example, the state-owned Swedish energy firm Vattenfall has twice demanded compensation for German environmental policy changes under an <a href="http://www.iisd.org/sites/default/files/publications/state-of-play-vattenfall-vs-germany-II-leaving-german-public-dark-en.pdf">old investment treaty</a>.</p>
<p>To avoid this, the EU’s latest proposals on so-called Investor State Dispute Settlement (ISDS) – tabled as part of the the TTIP talks – are intended to allow firms to demand compensation in very limited circumstances, for example where “<a href="http://europa.eu/rapid/press-release_MEMO-15-5652_en.htm">fair and equitable treatment</a> has been denied or contracts broken”. </p>
<p>But critics still question such guarantees because no one knows how an ISDS tribunal, even if it was a properly constituted court, would interpret any legal text intended to protect public policy objectives. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/125159/original/image-20160603-11598-bnkcj6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/125159/original/image-20160603-11598-bnkcj6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/125159/original/image-20160603-11598-bnkcj6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/125159/original/image-20160603-11598-bnkcj6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/125159/original/image-20160603-11598-bnkcj6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/125159/original/image-20160603-11598-bnkcj6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/125159/original/image-20160603-11598-bnkcj6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/125159/original/image-20160603-11598-bnkcj6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Blue sky thinking? State dispute settlements divide opinion.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/stevec77/107868154/in/photolist-awRrL-n6pBSa-ahY38n-5Y1vbY-df4Dik-df4vu5-5hRM84-cK7i35-5QY9bH-61qvMQ-h13vDR-fvHbD4-4xBsjc-pS9WnQ-u2VRQM-fvH5Yk-bE824i-dwbZdf-afaBTj-bVX5dF-4xFCqN-49HGS-saq3Nm-ncLsog-5asRCj-pij2jm-8hie83-ot7y2w-6N9E3e-9483JD-CRCDz-afTasu-a8obRR-t2pj4-5fd29H-7Fix7n-85JcNK-egcpLi-7FhpsV-4aZii7-5Y1viS-85Jfhi-85Mq8j-eFwZ3Q-39vDPu-afaC1J-9SPCGS-ajjxMq-bAKFRm-etjK2">Steve Calcott/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span>
</figcaption>
</figure>
<p>And why is ISDS needed at all if there are already legal remedies in place (as used by Vattenfall)? Two arguments have been given. First, small EU firms may have problems with individual US states and ISDS is an effective form of redress. Second, and somewhat paradoxically, the EU sees the flaws in the existing ISDS system, where the “judges” are private commercial lawyers often meeting in secret and costs that <a href="http://www.parliament.uk/briefing-papers/SN06777.pdf">average $4m per party per case</a>. The EU trade commissioner, Cecilia Malmström, proposed a formal system of courts that enshrined the <a href="http://europa.eu/rapid/press-release_MEMO-15-5652_en.htm">“right to regulate”</a>, but critics, and campaigners, are still dubious.</p>
<h2>Access points</h2>
<p>There is another obstacle. In short, governments love handing out contracts for public works to domestic companies; it keeps local industries happy, and maybe a few political donors too. No huge surprise then that after 13 rounds of negotiations the TTIP impasse on public procurement remains.</p>
<p>Both the EU and US are parties to the World Trade Organisation’s plurilateral <a href="https://www.wto.org/english/tratop_e/gproc_e/memobs_e.htm">agreement on government procurement</a> but the EU’s big picture was for TTIP to trade access to European state agriculture spending for inroads into highly protected US procurement markets, particularly at the state level. But the US steadfastly refuses to concede to market access demands, due to its traditional and entrenched domestic lobby groups – the steel industry, small and medium-sized firms, and disadvantaged communities. </p>
<p>It’s a missed opportunity. We could have increased transparency with a standardised e-procurement system and tender forms. Much more could be gained through harmonising definitions of integrity and conflict of interest concepts, along with strengthening corruption control measures. It’s a win-win for improving the governance of public procurement markets – but negotiations have been dominated by intractable trade issues and the fears of ISDS.</p>
<p>In such a confrontational atmosphere, it is doubtful that a meaningful TTIP can be concluded. Sceptics’ doubts may be exaggerated, but they still reflect genuine public alarm. The general confusion is highlighted by supporters of a <a href="https://www.foe.co.uk/blog/eu-s-pursuit-ttip-reason-enough-leave">UK exit from the EU</a>, who argue both that the UK could sign a TTIP deal very quickly after Brexit, <em>and</em> that that leaving the EU is the only way to stop it. In any case, unless a deal is rushed through before the end of 2016, prospects for a deal are bleak. Of the likely presidential candidates, neither Hillary Clinton nor Donald Trump are likely to make TTIP a top priority in a future US administration. Meanwhile, public opinion – and crucially the German government – move closer to outright opposition.</p><img src="https://counter.theconversation.com/content/60132/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A landmark trade deal between the US and Europe has been left floundering. So what has killed progress?Peter Holmes, Reader in Economics, University of Sussex Business School, University of SussexKamala Dawar, Lecturer in Commercial Law, University of SussexLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/540782016-02-15T10:45:23Z2016-02-15T10:45:23ZTPP trade pact still needs improvements to protect governments from foreign suits<p>Earlier this month, a dozen Asia Pacific countries including Australia, Canada, Japan and the U.S. <a href="http://www.bbc.com/news/business-35480600">signed</a> the Trans-Pacific Partnership (TPP) Agreement in Auckland, New Zealand. </p>
<p>Despite the fanfare, the agreement will actually not take effect until at least six countries have ratified it. The U.S., for one, is <a href="http://www.politico.com/tipsheets/morning-trade/2016/01/tpp-facing-rough-year-ahead-finance-staff-goes-to-asia-the-national-security-debate-on-tpp-212302">unlikely</a> to do so until at least after the November elections.</p>
<p>The run-up to the congressional vote will give us time to think more deeply about the controversy surrounding <a href="http://www.nytimes.com/2015/03/26/business/trans-pacific-partnership-seen-as-door-for-foreign-suits-against-us.html?_r=0">investor-state dispute settlement</a> (ISDS). This mechanism allows foreign investors to sue governments over discriminatory and abusive practices, such as unreasonable government seizure of assets.</p>
<p>Why is ISDS so controversial? What safeguards has the TPP installed to address the wide public concerns? Can further improvements still be made? </p>
<h2>How ISDS works</h2>
<p>Thus far, ISDS has attracted criticisms from policymakers, <a href="http://www.afj.org/wp-content/uploads/2015/03/ISDS-Letter-3.11.pdf">law professors</a> and <a href="http://www.ohchr.org/EN/NewsEvents/Pages/DisplayNews.aspx?NewsID=17005&LangID=E">human rights experts</a>.</p>
<p>Senator Elizabeth Warren is among the most vociferous critics of ISDS. As she <a href="http://www.commondreams.org/news/2016/02/03/countries-line-sign-toxic-deal-warren-leads-call-reject-tpp">laments</a>, the mechanism gives large corporations “the right to challenge laws they don’t like – not in court, but in front of industry-friendly arbitration panels that sit outside any court system.” </p>
<p>To make things worse, ISDS allows these corporations to redo their legal matches in more friendly turfs. A case in point is Eli Lilly’s US$500 million <a href="http://www.cbc.ca/news/business/eli-lilly-files-500m-nafta-suit-against-canada-over-drug-patents-1.1829854">complaint</a> against Canada, which was filed after Canadian courts invalidated two of its patents.</p>
<p>The drug manufacturer claimed that such invalidations violated the North American Free Trade Agreement by indirectly expropriating its investments. Yet, critics <a href="http://canadians.org/blog/ceta-changes-make-investor-state-provisions-worse">lambast</a> Eli Lilly for using ISDS as “an oversized public insurance scheme.”</p>
<h2>Four major criticisms of ISDS</h2>
<p>More specifically, ISDS has been criticized in four general directions. </p>
<p>First, it erodes national sovereignty and regulatory space by allowing private investors to challenge legitimate regulations, such as those concerning labor and the environment. An oft-cited example is tobacco giant Philip Morris’ recent <a href="http://www.theguardian.com/australia-news/2015/dec/18/australia-wins-international-legal-battle-with-philip-morris-over-plain-packaging">failed</a> attempt to use ISDS to <a href="http://www.theguardian.com/australia-news/2015/dec/18/australia-wins-international-legal-battle-with-philip-morris-over-plain-packaging">challenge</a> Australian plain packaging regulations, which severely limit the display of cigarette brands.</p>
<p>Second, ISDS can impose heavy burdens on governments, especially those in the developing world. Arbitral awards can be significantly large. For example, the compensation for Russia’s wrongful expropriation of the now-defunct Yukos Oil was over <a href="http://www.bloomberg.com/news/articles/2015-07-24/russia-faces-50-billion-fight-in-u-s-u-k-for-yukos-damages">$50 billion</a>; Russia is currently <a href="http://www.reuters.com/article/russia-yukos-appeal-netherlands-idUSL8N15O1P2">appealing</a> the ruling in the Netherlands. Because private investors initiate the arbitration, they may also file more complaints than governments would have under the WTO.</p>
<p>Third, ISDS arbitrations are costly and procedurally flawed. <a href="http://www.oecd.org/daf/inv/investment-policy/ISDSconsultationcomments_web.pdf">OECD</a> estimated the costs to average over $8 million and to be as high as $30 million. In addition, arbitration tribunals may be filled with biased lawyers who have strong ties to major corporations. Critics of ISDS have also complained about a lack of transparent proceedings and a potential for frivolous claims. </p>
<p>Fourth, ISDS arbitrators may have tunnel vision. They may focus narrowly on only one side of the investment bargain – for instance, intellectual property protection instead of land grants or tax breaks. They may also ignore the important safeguards and flexibility provided by international agreements. </p>
<p>Even worse, unlike court cases, ISDS arbitrations are not subject to appeal within the dispute settlement process. They also do not follow precedents, as in common law jurisdictions. As a result, arbitration rulings can vary according to party, tribunal or subject matter.</p>
<h2>Improvements in the TPP</h2>
<p>To respond to these criticisms, the TPP has built some new substantive and procedural safeguards into its investment and related chapters.</p>
<p>Regarding sovereignty and regulatory space, the agreement reserves to each country the ability to regulate in the public interest, such as to ensure financial stability and to achieve “environmental, health or other regulatory objectives.” The agreement also <a href="https://medium.com/the-trans-pacific-partnership/exceptions-1299fbf34b76">explicitly recognizes</a> the health authorities’ ability to introduce tobacco control measures.</p>
<p>To address the ISDS’ procedural flaws, arbitration tribunals are now empowered to review and dismiss frivolous claims and to award costs and attorneys’ fees. The TPP also imposes on investors the burden to prove all elements of their claims. The agreement further limits claims to those that occurred within three and a half years and that involve more than mere expectations of profits.</p>
<p>Concerning transparency, arbitral proceedings under the TPP will be open and publicly accessible. According to the <a href="https://medium.com/the-trans-pacific-partnership/investment-c76dbd892f3a#.28dsiel7o">Office of the U.S. Trade Representative</a>, the State Department’s website will contain all submissions, hearing transcripts and other key documents regarding TPP-based investment cases against the U.S.</p>
<p>In addition, TPP countries will establish a code of conduct for ISDS arbitrators to ensure impartiality. Before any final rulings, disputing parties will also have the opportunity to review and comment on proposed arbitral awards. TPP parties can further agree on interpretations that will bind arbitration tribunals.</p>
<p>Finally, to avoid tunnel vision, civil society organizations, environmental groups, labor unions and other interested stakeholders can file “friend of the court” briefs. Nondisputing parties, such as the investors’ home governments, will also be able to make submissions to arbitration tribunals.</p>
<h2>Need for further improvements</h2>
<p>Notwithstanding the improvements in the TPP, additional efforts will still be needed to address the remaining public concerns about ISDS. Fortunately, many of these efforts can be taken without amending the agreement.</p>
<p>To begin with, arbitration tribunals should avoid automatically equating legal rights with investments. For example, commentators have <a href="http://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=1879&context=jil">questioned</a> whether intellectual property rights constitute investments when copyrighted materials have been merely circulated on the Internet or when patents have been reregistered. After all, in both situations, the investments involved were made outside the host countries.</p>
<p>Arbitration tribunals should also consider taking into account the relationship between the TPP and other international agreements, such as those within the WTO. Such consideration would greatly allay the concern about how ISDS cases could rewrite the hard-earned bargains made through the WTO negotiations.</p>
<p>Furthermore, TPP countries may want to establish an advisory center to support small and medium-sized enterprises (SMEs) and developing country governments. A potential model is the <a href="http://www.acwl.ch/">Advisory Centre on WTO Law</a>, which trains government officials and provides legal advice and support on WTO matters.</p>
<p>If TPP countries are open to amending the agreement – as allowed in its <a href="https://medium.com/the-trans-pacific-partnership/final-provisions-29a2af5df02f#.38cgnvyv9">amendment process</a> – two additional changes can be considered.</p>
<p>First, these countries could institute a small claims procedure that would drastically lower arbitration costs. With ISDS costs averaging over $8 million, many SMEs will simply be unable to afford ISDS.</p>
<p>Second, TPP countries could develop an appellate process or tribunal that would feature individuals with expertise in relevant international agreements. One such process could involve WTO panelists and Appellate Body members.</p>
<h2>Only the beginning</h2>
<p>The ISDS mechanism in the TPP contains many new and constructive safeguards. Yet, these safeguards should only be the beginning.</p>
<p>If the wide public concerns about ISDS are to be alleviated, policymakers should consider additional complementary reforms.</p><img src="https://counter.theconversation.com/content/54078/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter K. Yu does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Countries in the Trans-Pacific Partnership signed the deal earlier this month, but changes can still be made to improve the mechanism that allows investors to sue states.Peter K. Yu, Professor of Law and Co-Director of the Center for Law and Intellectual Property, Texas A&M UniversityLicensed as Creative Commons – attribution, no derivatives.