tag:theconversation.com,2011:/fr/topics/investor-state-dispute-settlement-7850/articlesinvestor-State Dispute Settlement – The Conversation2022-07-06T17:28:05Ztag:theconversation.com,2011:article/1857532022-07-06T17:28:05Z2022-07-06T17:28:05ZEnergy charter treaty makes climate action nearly illegal in 52 countries – so how can we leave it?<figure><img src="https://images.theconversation.com/files/472830/original/file-20220706-26-9i1i2w.jpg?ixlib=rb-1.1.0&rect=5%2C0%2C3876%2C2590&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/oil-worker-check-pump-100283720">ZoranOrcik/Shutterstock</a></span></figcaption></figure><p>Five young people whose resolve was hardened by floods and wildfires recently took their governments to the European Court of Human Rights (ECHR). Their claim concerns each country’s membership of an obscure treaty they argue makes climate action impossible by protecting fossil fuel investors.</p>
<p>The <a href="https://www.energycharter.org/process/energy-charter-treaty-1994/energy-charter-treaty/">energy charter treaty</a> has 52 signatory countries which are mostly EU states but include the UK and Japan. The claimants are suing 12 of them including France, Germany and the UK – all countries in which energy companies are using the treaty to sue governments over policies that interfere with fossil fuel extraction. For example, the German company RWE is <a href="https://icsid.worldbank.org/cases/case-database/case-detail?CaseNo=ARB/21/4">suing</a> the Netherlands for €1.4 billion (£1.2 billion) because it plans to phase out coal.</p>
<p>The claimants aim to force their countries to exit the treaty and are <a href="https://www.cloisters.com/news/josh-jackson-acts-in-european-court-of-human-rights-case-regarding-the-energy-charter-treaty/">supported</a> by the Global Legal Action Network, a campaign group with an ongoing case <a href="https://youth4climatejustice.org/the-case/">against 33 European countries</a> they accuse of delaying action on climate change. The prospects for the current application going to a hearing at the ECHR look good. But how simple is it to prise countries from the influence of this treaty?</p>
<p>The energy charter treaty started as <a href="https://www.energychartertreaty.org/provisions/final-act-of-the-european-energy-charter-conference/">an EU agreement</a> in 1991 which guaranteed legal safeguards for companies invested in energy projects such as offshore oil rigs. Under Article 10 (1) of the treaty, these investments must “enjoy the most constant protection and security”. If government policies change in order to curtail these projects, such as Italy’s 2019 decision to <a href="https://www.politico.eu/article/italian-clampdown-on-oil-and-gas-exploration-is-a-5star-win/">ban drilling for oil and gas</a> within 12 miles of its coast, the government is obliged to compensate the relevant company for its lost future earnings.</p>
<p>The legal mechanism which allows this is known as an investor-state dispute settlement. A letter to EU leaders <a href="https://endfossilprotection.org/sites/default/files/2022-06/2022-06-21%20Letter%20from%20climate%20scientists%20to%20EU%20leaders.pdf">signed by 76 climate scientists</a> argues this could keep coal power plants open or force governments into paying punishing fees for shutting them down, at a time when deep and rapid cuts to emissions are desperately needed.</p>
<p>Money spent compensating fossil fuel investors will deprive investment in renewable energy and other things vital to the green transition, <a href="https://theconversation.com/electric-cars-arent-enough-to-hit-climate-targets-we-need-to-develop-better-public-transport-too-171330">such as public transport</a>. While withdrawing from the energy charter treaty is possible for any country to do, losing the benefits of membership – such as fewer duties and taxes on imports of oil and gas – will make it a difficult decision.</p>
<p>Furthermore, the obligations of countries that have been signatories to the treaty are not nullified upon exiting it, but instead <a href="https://www.energychartertreaty.org/provisions/part-viii-final-provisions/article-47-withdrawal/473/">linger for 20 years</a> thereafter. Investors can still bring disputes against former members and, if successful, must be compensated by the state in question. Russia and Italy withdrew from the energy charter treaty in <a href="https://www.energycharter.org/what-we-do/knowledge-centre/occasional-papers/russia-and-the-energy-charter-treaty/">2009</a> and <a href="https://www.energycharter.org/who-we-are/members-observers/countries/italy/">2016</a> respectively, and continue to face <a href="https://investmentpolicy.unctad.org/investment-dispute-settlement/cases/800/rockhopper-v-italy">multiple claims</a>.</p>
<h2>Leaving the treaty</h2>
<p>Meanwhile, the European Commission is poised to expand the influence of the energy charter treaty into countries in Africa and Latin America, potentially embroiling these states in the same investor-state dispute settlements that have hindered climate action in Europe.</p>
<p>The political declaration for a new <a href="https://www.energycharter.org/process/international-energy-charter-2015/overview/">international energy charter</a>, based on the principles of the original European treaty, was signed by 87 countries in 2015. Negotiations <a href="https://www.energycharter.org/fileadmin/DocumentsMedia/Legal/IEC_EN.pdf">continue</a>, but the <a href="https://www.energycharter.org/fileadmin/DocumentsMedia/CCDECS/2018/CCDEC201818_-_STR_Modernisation_of_the_Energy_Charter_Treaty.pdf">25-point list</a> setting out the priorities of the signatories only includes one reference to “sustainable development”.</p>
<p>An <a href="https://www.energycharter.org/fileadmin/DocumentsMedia/CCDECS/2022/CCDEC202210.pdf">update</a> on negotiations mentioned that existing fossil fuel investments are due to be protected until 2033, meaning governments will be liable for compensation if they close a coal plant prematurely. The UK and EU reached a deal to exempt new fossil fuel projects from protection as of mid-August 2023.</p>
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<img alt="A striped chimney belching sooty smoke." src="https://images.theconversation.com/files/472833/original/file-20220706-15-9g4fd9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/472833/original/file-20220706-15-9g4fd9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/472833/original/file-20220706-15-9g4fd9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/472833/original/file-20220706-15-9g4fd9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/472833/original/file-20220706-15-9g4fd9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/472833/original/file-20220706-15-9g4fd9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/472833/original/file-20220706-15-9g4fd9.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">Investment earmarked for renewable energy could go up in smoke.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/production-pipe-smokes-black-smoke-against-1922026637">Savva_25/Shutterstock</a></span>
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<p>Drastic action is urgently needed to meet the goals of the Paris Agreement and reduce greenhouse gas emissions in line with limiting warming to 1.5°C at best and 2°C at worst. Countries will need to regulate and close emission sources – yet at the same time, fossil fuel investors, including oil and companies and energy utilities, are asking for more time and money in order to <a href="https://www.theguardian.com/environment/2022/jun/21/young-people-go-to-european-court-to-stop-treaty-that-aids-fossil-fuel-investors">adapt to the transition</a>. </p>
<p><a href="https://icsid.worldbank.org/cases/case-database/case-detail?CaseNo=ARB/21/4">The claim</a> filed by RWE against the Dutch government in February 2021 argued the latter had failed to give enough time for the company to transition from coal to biomass. But this is something the Dutch government cannot afford to do – it was found to be acting unlawfully by its own supreme court in <a href="http://climatecasechart.com/non-us-case/urgenda-foundation-v-kingdom-of-the-netherlands/">2019</a> in taking too long to implement emissions cuts. </p>
<p>One way to address this problem is for parties contracted to the energy charter treaty to withdraw from it en masse, and so escape the sunset clause which holds them liable two decades after leaving. These countries could also enter into a separate agreement to exclude investor-state dispute cases against each other. </p>
<p>Sustained public pressure – and a favourable ruling in the ECHR for the five claimants – could encourage enough governments to act decisively, fatally weakening the treaty and its grip on international climate action.</p>
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<p class="fine-print"><em><span>Chamu Kuppuswamy is affiliated with the European Society of International Law.</span></em></p>A case brought to the European Court of Human Rights could pressure countries to leave.Chamu Kuppuswamy, Senior Lecturer, School of Law, University of HertfordshireLicensed 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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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>
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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/1075122018-12-18T22:00:14Z2018-12-18T22:00:14ZThe fossil fuel era is coming to an end, but the lawsuits are just beginning<figure><img src="https://images.theconversation.com/files/250691/original/file-20181214-185268-ullhip.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A coal mine near the mountains in Alberta.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>“Coal is dead.” </p>
<p>These are not the words of a Greenpeace activist or left-wing politician, but of Jim Barry, the global head of the infrastructure investment group at Blackrock — the world’s largest asset manager. Barry <a href="https://www.afr.com/business/mining/coal/blackrock-says-coal-is-dead-as-it-eyes-renewable-power-splurge-20170524-gwbuu6">made this statement in 2017</a>, but <a href="https://www.theguardian.com/environment/2015/aug/19/coal-mining-sector-running-out-of-time-says-citigroup">the writing has been on the wall</a> for longer than that. </p>
<p><a href="https://www.sc.com/en/explore-our-world/here-for-good-means-saying-no-to-coal/">Banks know it</a>, which is why they are increasingly unwilling to underwrite new coal mines and power plants. Unions and coal workers know it, which is why they are demanding a <a href="https://www.ituc-csi.org/just-transition-centre">just transition</a> and new employment opportunities in the clean economy. Even <a href="https://www.abc.net.au/news/2018-03-28/rio-tinto-sells-last-coal-mine-kestrel/9597352">large diversified mining companies</a> are getting out of the business of coal. </p>
<p>The only ones who seem to have remained in denial are <a href="https://www.cnbc.com/2018/08/23/trump-says-the-coal-industry-is-back-the-data-say-otherwise.html">President Donald Trump</a> and non-diversified mining companies like <a href="http://ieefa.org/wp-content/uploads/2018/02/Westmoreland-Coal-Is-in-Trouble_February-2018.pdf">Westmoreland Coal</a>. The Denver-based firm made a bad bet in 2013 when it purchased five coal mines in Alberta. Now it wants Canadian taxpayers to pay for its mistake.</p>
<h2>Alberta’s coal phaseout</h2>
<p>Three years ago, Alberta’s New Democratic Party (NDP) committed to what some have described as “<a href="https://www.iisd.org/sites/default/files/publications/alberta-coal-phase-out.pdf">the most ambitious climate plan in North America to date</a>.” In addition to the development of an economy-wide carbon price, the province is <a href="https://www.alberta.ca/climate-coal-electricity.aspx">phasing out coal-fired power by 2030</a>. Without the infrastructure to export coal, the climate plan has also resulted in a de facto phaseout of local thermal coal mining. </p>
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<img alt="" src="https://images.theconversation.com/files/250698/original/file-20181214-185258-10h0kri.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/250698/original/file-20181214-185258-10h0kri.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/250698/original/file-20181214-185258-10h0kri.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/250698/original/file-20181214-185258-10h0kri.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/250698/original/file-20181214-185258-10h0kri.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/250698/original/file-20181214-185258-10h0kri.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/250698/original/file-20181214-185258-10h0kri.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">Premier Rachel Notley unveils Alberta’s climate strategy in Edmonton on Nov. 22, 2015.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Amber Bracken</span></span>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/do-climate-policies-kill-jobs-an-economist-on-why-they-dont-cause-massive-unemployment-106928">Do climate policies ‘kill jobs’? An economist on why they don’t cause massive unemployment</a>
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<p>To ensure support for the plan, major utility companies in the province were provided with “<a href="https://www.alberta.ca/release.cfm?xID=44889F421601C-0FF7-A694-74BB243C058EE588">transition payments</a>” to facilitate the switch to gas and renewable energy. Westmoreland did not receive a government handout, because coal mining companies have no role to play in the energy transition. The company, which <a href="https://www.huffingtonpost.ca/entry/westmoreland-coal-bankruptcy_us_5bbd9907e4b01470d056cd3d">filed for bankruptcy</a> protection for its investments in the United States in October, doesn’t think this is fair. </p>
<h2>NAFTA’s investment chapter</h2>
<p>Because Westmoreland is an American company, it can rely on the North American Free Trade Agreement (NAFTA) for protection from <a href="http://ccsi.columbia.edu/files/2018/09/Rethinking-Investment-Governance-September-2018.pdf">“unfair” treatment</a>. NAFTA allows a foreign investor to use a process known as “Investor-State Dispute Settlement” (ISDS) when government action harms its business in some way. </p>
<p>ISDS allows foreign investors to bypass local courts and bring claims for monetary compensation to an international tribunal. The system is not unique to NAFTA; it is found in other trade agreements like the <a href="https://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> and thousands of <a href="https://investmentpolicyhub.unctad.org/IIA">bilateral investment treaties</a> (known as <a href="https://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/index.aspx?lang=eng">Foreign Investment Promotion and Protection Agreements</a> in Canada). </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-big-challenge-of-the-nafta-renegotiations-dispute-settlement-82394">The big challenge of the NAFTA renegotiations: dispute settlement</a>
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<p>ISDS is hugely controversial. Concerns have been raised by a wide range of actors about both the <a href="https://www.cigionline.org/articles/it-time-redesign-or-terminate-investor-state-arbitration">process of ISDS</a>, and the way the system can infringe on the <a href="https://www.ohchr.org/EN/NewsEvents/Pages/DisplayNews.aspx?NewsID=19839&LangID=E">sovereign right of states to regulate to protect public health, human rights and the environment</a>. </p>
<p>More than <a href="https://investmentpolicyhub.unctad.org/ISDS">900 ISDS cases</a> have been launched by investors since the early 1990s, including <a href="http://www.international.gc.ca/trade-agreements-accords-commerciaux/topics-domaines/disp-diff/gov.aspx?lang=eng">27 against Canada</a> that have so far cost Canadian taxpayers <a href="https://www.policyalternatives.ca/sites/default/files/uploads/publications/National%20Office/2018/01/NAFTA%20Dispute%20Table%20Report%202018.pdf">at least $315 million</a>. There is one <a href="http://www.international.gc.ca/trade-agreements-accords-commerciaux/topics-domaines/disp-diff/lone.aspx?lang=eng">ongoing dispute</a> that concerns a ban on gas fracking in Québec, but the Westmoreland claim is the first brought in relation to a policy explicitly designed to combat climate change.</p>
<p><a href="https://www.theglobeandmail.com/business/article-westmoreland-coal-launches-nafta-suit-against-alberta-over-coal-phase/">Westmoreland argues</a> that part of the reason it invested in Canada in 2013 was to diversify its holdings in response to regulatory risk. At the time, the Obama Administration was <a href="https://www.theguardian.com/environment/2015/aug/03/obamas-clean-power-plan-hailed-as-strongest-ever-climate-action-by-a-us-president">taking action under the Clean Power Plan</a> to reduce the reliance of American utilities on coal. The company’s failure to anticipate similar regulatory action by its northern neighbour is remarkable. </p>
<h2>A key battleground</h2>
<p>If governments respond appropriately to the <a href="http://www.ipcc.ch/report/sr15/">urgent warning issued by the Intergovernmental Panel on Climate Change (IPCC)</a> in October, efforts to phase out fossil fuels will have to ramp up considerably — and quickly. We should expect the industry to fight these efforts through a variety of means. ISDS may become a key battleground.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/250701/original/file-20181214-185258-otlt29.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/250701/original/file-20181214-185258-otlt29.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/250701/original/file-20181214-185258-otlt29.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/250701/original/file-20181214-185258-otlt29.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/250701/original/file-20181214-185258-otlt29.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/250701/original/file-20181214-185258-otlt29.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/250701/original/file-20181214-185258-otlt29.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">President Donald Trump, Prime Minister Justin Trudeau, right, and President Enrique Pena Nieto, left, participate in the USMCA signing ceremony, Nov. 30, 2018 in Buenos Aires, Argentina.</span>
<span class="attribution"><span class="source">(AP Photo/Pablo Martinez Monsivais)</span></span>
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<p>The <a href="http://international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/usmca-aeumc/summary-sommaire.aspx?lang=eng">U.S.-Mexico-Canada Agreement</a> (USMCA or CUSMA, <a href="https://www.thestar.com/news/world/2018/11/30/usmca-cusma-what-the-new-nafta-is-called-depends-on-whos-talking.html">depending on who is talking about it</a>), which may replace NAFTA (it has been signed, but has not been ratified), <a href="https://www.iisd.org/library/usmca-investors">does not retain the process of ISDS between Canada and the U.S.</a></p>
<p>While this is good news in the long run, some have suggested that there will be a “<a href="https://worldtradelaw.typepad.com/ielpblog/2018/10/the-us-mexico-and-maybe-nafta-trade-deal-investment-protectionisds.html">rush of filings</a>” before access to ISDS for already established investors expires (three years after USMCA comes into force). Canada will also be exposed to claims from investors under other agreements such as the CPTPP and <a href="https://international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/ceta-aecg/index.aspx?lang=eng">Canada-European Union Comprehensive Economic and Trade Agreement (CETA)</a>.</p>
<p>Other countries, particularly poorer nations, face an even higher risk of ISDS claims and have far <a href="https://www.iisd.org/sites/default/files/publications/stakes-are-high-review-financial-costs-investment-treaty-arbitration.pdf">less resources available to fight them</a>. It is notable that <a href="https://www.sierraclub.org/trade/trump-s-nafta-deal-threatens-our-air-water-and-climate">big oil companies have retained some access to ISDS against Mexico</a> in USMCA, after <a href="https://www.washingtonpost.com/news/powerpost/paloma/the-energy-202/2018/10/03/the-energy-202-big-oil-and-gas-companies-are-winners-in-trump-s-new-trade-deal/5bb39b531b326b7c8a8d17cc">lobbying hard for it</a>. </p>
<h2>A climate of fear?</h2>
<p>If Westmoreland’s case proceeds to arbitration, it will not have direct implications for Alberta’s climate policy. An investment tribunal cannot require the provincial government to reverse the coal phaseout; it can only award the company damages. Westmoreland is asking for US$470 million. It is <a href="https://scholarlycommons.law.case.edu/cuslj/vol37/iss1/22/">the federal government, rather than Alberta, that would have to pay</a> compensation to Westmoreland if the company’s claim was successful. However, <a href="https://globalnews.ca/news/3378321/ontario-pays-28-million-awarded-to-wind-company-over-offshore-wind-moratorium/">Ontario did agree to pay the award</a> in a recent NAFTA case.</p>
<p>What is more concerning than any potential payout is that Westmoreland’s suit could hinder efforts to implement similar plans to combat climate change in other jurisdictions. </p>
<p>“<a href="https://doi.org/10.1017/S2047102517000309">Regulatory chill</a>” is a phenomenon that has been observed in several jurisdictions around the world. A notable example is the decision of the <a href="https://www.nzma.org.nz/journal/read-the-journal/all-issues/2010-2019/2018/vol-131-no-1473-13-april-2018/7540">New Zealand government to delay the introduction of legislation to require plain packaging of tobacco products</a> until Australia won its <a href="https://www.theguardian.com/business/2018/jul/02/revealed-39m-cost-of-defending-australias-tobacco-plain-packaging-laws">ISDS case against the tobacco company Philip Morris International</a>. This delay of regulatory action — out of fear of expensive litigation — may have cost lives. </p>
<p>As recent <a href="https://www.huffingtonpost.com/entry/camp-fire-death-toll-88_us_5bfcd3f0e4b0771fb6bd6ba1">forest fires</a> and <a href="https://www.theatlantic.com/photo/2018/08/devastating-monsoon-floods-in-kerala-india/568171/">floods</a> have demonstrated, delays in action to combat climate change can also be deadly.</p><img src="https://counter.theconversation.com/content/107512/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kyla Tienhaara receives funding from the Government of Canada under the Canada Research Chairs Program.</span></em></p>An American coal company is suing the Canadian government over Alberta’s plan to combat climate change.Kyla Tienhaara, Canada Research Chair in Economy and Environment, Queen's University, OntarioLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/704512016-12-15T12:29:39Z2016-12-15T12:29:39ZHow Eastern Europe is best placed to hit the ground running after a hard Brexit<figure><img src="https://images.theconversation.com/files/150296/original/image-20161215-13648-n8po5a.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>One of the biggest unknowns when it comes to Brexit is how it will effect the rights of EU citizens and businesses based in the UK. Many fear that a hard Brexit will result in a legal <a href="http://www.telegraph.co.uk/news/2016/11/21/theresa-may-cbi-corporation-tax-brexit-live/">cliff-edge</a>, leaving many without the legal protections of the European Union – whether it’s remaining resident or having free access to the single market.</p>
<p>Who’s in control of the Brexit process – <a href="https://theconversation.com/brexit-in-the-supreme-court-heres-what-it-all-means-69738">whether it’s government or parliament</a> – and <a href="https://theconversation.com/never-mind-article-50-heres-why-article-127-could-be-crucial-to-keeping-britain-in-the-single-market-70304">whether it will be “hard” or “soft”</a> are therefore questions that increasingly are the subjects of legal battles. </p>
<p>And when it comes to the intricacies of international law, there are other deals at play that could leave some unexpected EU member state nationals (and businesses) in a better position than others in the event of a hard Brexit. There are a few Eastern European countries, in particular, which have <a href="http://investmentpolicyhub.unctad.org/IIA/CountryBits/221#iiaInnerMenu">treaties with the UK</a> that were signed after the fall of communism, but before their accession to the EU. </p>
<p>This means that nationals from Poland, Romania, Bulgaria and other European states from the Baltics to the Balkans are protected by deals that are separate from their EU membership. They will therefore have greater rights in the event of a hard Brexit than those from, say, France or Germany – something that may come as a surprise to many a Leave voter, whose stance on the EU was motivated by <a href="https://theconversation.com/the-huge-political-cost-of-blairs-decision-to-allow-eastern-european-migrants-unfettered-access-to-britain-66077">concerns about immigration</a> from Eastern Europe.</p>
<h2>Treaties already in place</h2>
<p>The agreements in question are known as Bilateral Investment Treaties. Ironically, they operate under the same logic of national sovereignty and independence in trade and investment matters that the Leave campaign was partially based upon. </p>
<p>While the EU has exclusive <a href="https://www.iisd.org/itn/2016/08/10/can-eu-member-states-still-negotiate-bits-with-third-countries-stefanie-schacherer/">rights</a> in these areas now, these old treaties are still in operation. They have created a series of problems for nations which concurrently need to satisfy expectations arising from EU and international law. </p>
<p>Greece, for example, has been the victim of this, being <a href="http://kluwerarbitrationblog.com/2015/10/20/digging-up-the-past-can-greece-handle-another-psi-challenge/">repeatedly sued</a> in investment tribunals in recent years by those who suffered losses in the country’s debt relief arrangements. The claimants in these cases have been EU nationals trying to enforce rights arising from BITs, and not EU law.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/150306/original/image-20161215-26045-3hknm3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/150306/original/image-20161215-26045-3hknm3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/150306/original/image-20161215-26045-3hknm3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/150306/original/image-20161215-26045-3hknm3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/150306/original/image-20161215-26045-3hknm3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/150306/original/image-20161215-26045-3hknm3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/150306/original/image-20161215-26045-3hknm3.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">The law’s the law.</span>
<span class="attribution"><span class="source">shutterstock.com</span></span>
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<p>These treaties offer rights, protections and standards to investors that are in some ways superior to those enjoyed under EU law. And these rights will survive Brexit. <a href="http://investmentpolicyhub.unctad.org/Download/TreatyFile/2218">Romania’s BIT with the UK</a> is an example of the types of rights treaties give. Signed in the summer of 1995, it promises to create favourable conditions for investment, reciprocally. </p>
<p>These conditions include the fair and equitable treatment of Romanian businesses investing in the UK, freedom from discrimination, full protection and security. Crucially, the treaty guarantees treatment of Romanian investors that is no less favourable than that afforded to UK nationals. This is enhanced by a commitment to match potential superior treatment offered to any other nation’s investors. </p>
<p>Not only, therefore, are Romanian investors to be treated equally to domestic ones, but if anyone else obtains a better deal (for example, the US when it agrees its post-Brexit deal), their protections will increase. Those who fall within the treaty definition of “investor” therefore enjoy a lasting privileged position.</p>
<h2>Domino effect</h2>
<p>To top it all, any dispute between an investor and the host government is not a matter for domestic courts, but is destined for an international investment tribunal. These are the same tribunals that <a href="http://jids.oxfordjournals.org/content/5/3/475">Greece and Argentina</a> have faced, battling claims for compensation by investors who lost out from the countries’ debt defaults. And these are the same tribunals that some Leave campaigners vowed to protect Britain from, by promising that Brexit would <a href="https://theconversation.com/why-ttip-will-live-on-but-not-for-the-eu-61718">save the country from the TTIP trade deal</a>. </p>
<p>The presence and nature of investor-state dispute settlement clauses – whereby businesses can sue governments – in post-Brexit trade agreements is likely to be a major issue for British negotiators in the years to come. As the recent <a href="https://theconversation.com/ceta-was-brexit-rather-than-the-walloons-behind-trade-deal-stutter-67800">debacle over the CETA trade deal between the EU and Canada</a>, and resistance to TTIP demonstrate, ceding authority to private arbitration panels to adjudicate disputes is not easy to square with protestations of sovereignty and democratic legitimacy.</p>
<p>A hard-Brexit is the dream of many on the Leave side of the referendum. It allows them to imagine a situation where the UK, free from any encumbrances, launches into a world of free trade and investment deals. </p>
<p>Such a world, however, is likely to see Eastern European companies given better treatment than major commercial partners in the West, a swap of the supposed dominion of European Courts for that of investment tribunals, and a labyrinth of interlocking agreements that rapidly raise protections for foreign companies above those available to local ones. An interesting prize for leaving the EU indeed.</p><img src="https://counter.theconversation.com/content/70451/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>Britain has a number of bilateral treaties with Eastern European countries that will remain after Brexit.Ioannis Glinavos, Senior Lecturer in Law, University of WestminsterLicensed 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.tag:theconversation.com,2011:article/509792015-11-20T05:44:31Z2015-11-20T05:44:31ZAs Asia embraces the Trans-Pacific Partnership, ISDS opposition fluctuates<p>Alongside this week’s APEC leaders’ summit in Manila, US President Obama met counterparts and trade ministers from 11 other Asia-Pacific states that agreed in October to the expanded <a href="http://dfat.gov.au/trade/agreements/tpp/Pages/trans-pacific-partnership-agreement-tpp.aspx">Trans-Pacific Partnership (TPP)</a>.</p>
<p>These states, covering around 40% of world GDP, cannot sign the free trade deal before February 3, when the US Congress finishes its 90-day review. But Obama and others in Manila <a href="http://www.freemalaysiatoday.com/category/nation/2015/11/18/tpp-may-be-sealed-in-nz-in-february-says-najib/">reiterated</a> the importance of the TPP for regional and global economic integration.</p>
<p>There are, however, ongoing concerns in <a href="http://www.smh.com.au/federal-politics/political-news/australia-could-be-sued-for-billions-by-foreign-companies-for-new-laws-under-tpp-20151106-gksbjx.html">Australia</a> and <a href="http://ccsi.columbia.edu/2015/11/18/the-tpps-investment-chapter-entrenching-rather-than-reforming-a-flawed-system/">the US</a> about the TPP’s investment chapter, including its investor-state dispute settlement (ISDS) provisions. </p>
<p>The ISDS provisions grant foreign investors the right to use dispute settlement proceedings against a foreign government when they are unable to persuade their home country to do so. If the host state discriminates, seizes a foreign investment or renders it largely worthless without paying adequate compensation, or denies justice in local courts, the investor can use ISDS to bring a direct claim. ISDS helps depoliticise disputes and encourages a rules-based framework for investment, especially in <a href="http://ssrn.com/abstract=2401504">developing countries</a>. </p>
<p>Yet ISDS has become a lightning rod for those in Australia who are unhappy about entering into free trade agreements aimed at promoting cross-border trade and investment beyond the WTO system. Polarised media coverage <a href="http://ssrn.com/abstract=2685941">has escalated</a> particularly since 2011.</p>
<p>Part of the criticism comes from <a href="http://www.smh.com.au/business/the-economy/tpp-will-the-transpacific-partnership-really-benefit-australia-20151006-gk24so.html">some economists</a>, including the <a href="http://www.pc.gov.au/inquiries/completed/trade-agreements/report">Productivity Commission</a> in 2010. It favoured greater economic liberalisation, but prefered unilateral moves, or at least multilateral treaties. Although accompanied by a vigorous dissent, the commission’s main report also adopts a laissez-faire approach to investment: firms should make their own decisions about whether to invest locally or abroad, and do not need treaties to set baseline legal standards of protection.</p>
<p>However, most criticism of ISDS in Australia comes from the political left, which is generally opposed to economic liberalisation. Treaty-based protections for investors are seen as <a href="http://aftinet.org.au/cms/node/962">undermining national sovereignty</a>, altough others <a href="http://ssrn.com/abstract=2033167">point out</a> this is inherent whenever one state commits to an international agreement. </p>
<p>Critics are also very concerned about <a href="http://theconversation.com/leaked-tpp-investment-chapter-shows-risks-to-australias-health-39799">“regulatory chill”</a>. They often <a href="http://ssrn.com/abstract=2041680">highlight</a> the first (and only) arbitration brought against Australia by Philip Morris Asia, regarding tobacco plain packaging. Yet a careful <a href="http://etheses.lse.ac.uk/897/">empirical study</a> recently found no significant extra regulatory chill even in a country like Canada, which has lost a few ISDS claims under the North American FTA in effect since 1994.</p>
<p>These two lines of critique came together in the Trade Policy Statement the <a href="http://ssrn.com/abstract=1860505">Gillard government issued</a> in 2011. <a href="http://ssrn.com/abstract=2152752">Controversially</a>, Australia declared it would never agree to any form of ISDS in future investment treaties. The stance complicated negotiations for major bilateral FTAs as well as the TPP.</p>
<p>In 2013, the Abbott government <a href="http://dfat.gov.au/trade/agreements/chafta/fact-sheets/Pages/fact-sheet-investor-state-dispute-settlement.aspx">reverted</a> to including ISDS on a case-by-case assessment. This helped Australia to reach agreement on major FTAs, but the political left continues its opposition through <a href="http://ssrn.com/abstract=2561147">multiple parliamentary inquiries</a>, especially in the Senate.</p>
<p>The Greens began by proposing an <a href="http://ssrn.com/abstract=2483610">“Anti-ISDS Bill”</a>, which would have legislated the 2011 Trade Policy Statement stance. Even the Labor members on that Senate committee disagreed, mindful of setting a dangerous precedent that might constrain a future Labor government from negotiating and signing treaties in other fields. </p>
<p>However, Labor parliamentarians did <a href="http://ssrn.com/abstract=2643926">initially side with Greens members</a> on inquiries into the Korea and then China FTAs, objecting in part to their ISDS provisions. Yet these are very limited regarding <a href="http://blogs.usyd.edu.au/japaneselaw/2015/06/compromised_isds_china.html">China</a>, and eventually Labor voted with the Coalition parliamentarians to allow tariff implementation legislation and therefore ratification to bring both FTAs into force.</p>
<p>The big question now is what approach Labor will take to the TPP, given its inclusion of ISDS (albeit with <a href="http://dfat.gov.au/trade/agreements/tpp/official-documents/Documents/australia-new-zealand-investor-state-dispute-settlement-trade-remedies-and-transport-services.PDF">side letters</a> proposing a carve-out between Australia and New Zealand), with Australia’s general election scheduled for 2016. </p>
<p>Labor may well fudge its stance. After all, if elected but again only in coalition with Greens, a new Labor government may want to revive the Gillard government Trade Policy Statement to eschew ISDS provisions. If elected outright, Labor may instead be willing to accept them at least for the TPP. It may negotiate some further side letters or take the lead on a code of conduct already envisaged for ISDS arbitrators. </p>
<p>Overall, the TPP’s ISDS-backed commitments are quite similar to those in Australia’s FTAs since 2003. These, in turn, are largely modelled on <a href="http://blogs.usyd.edu.au/japaneselaw/2015/11/tpp_investment.html">treaties between third parties and the US</a>, which has never been subject to a successful ISDS claim.</p>
<p>Labor will also have to bear in mind that other TPP partners are generally comfortable with ISDS (as are large economies like <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2643926">Korea</a> and <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2244634">China</a> that may <a href="http://m.lowyinstitute.org/node/46209">accede later</a>). These include capital exporters like <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1724999">Japan</a>, but also foreign direct investment (FDI) hosts like <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2643926">New Zealand</a> and <a href="http://www.transnational-dispute-management.com/article.asp?key=2041">Vietnam</a> – after subjecting ISDS to closer scrutiny recently.</p>
<p>Ironically, apart from Australia, it is mainly therefore the US – typically a strong proponent of ISDS – where some recent opposition <a href="http://www.eastasiaforum.org/2015/10/29/the-tpp-isnt-a-done-deal-yet/">may complicate TPP ratification</a>, especially in light of its own elections next year.</p><img src="https://counter.theconversation.com/content/50979/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Luke Nottage receives funding from the Australian Research Council for a project on international investment dispute management (DP140102526) and Canada's Centre for International Governance Innovation (CIGI) for a research project comparing investor-state arbitration policy and practice particularly in advanced democratic economies (<a href="https://www.cigionline.org/articles/investor-state-arbitration">https://www.cigionline.org/articles/investor-state-arbitration</a>).
He has or had executive functions on the International Law Association's committee for the International Committee of Consumers, the Law Council of Australia's international law section and ADR committee, ACICA's rules drafting committee, and the Asia-Pacific Forum for International Arbitration.</span></em></p><p class="fine-print"><em><span>Leon Trakman receives funding from the Australian Research Council for a project on international investment dispute management (DP140102526).</span></em></p>Opposition against Investor-State Dispute Settlement clauses seems likely to fall away as Asian economies flock to the TPP.Luke Nottage, Professor, Sydney Law School, University of SydneyLeon Trakman, Professor, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/487572015-10-08T19:23:39Z2015-10-08T19:23:39ZCanada has an ISDS clause with the US. It has faced 35 challenges. Is this Australia’s future?<p>Australia and Canada have a great deal in common - a British colonial past; large and sparsely populated territories; and resource-intensive economies.</p>
<p>Two other similarities also bear mentioning: the economies of both countries are dominated by US investors (<a href="http://www.abs.gov.au/ausstats/abs@.nsf/mf/5352.0">27% of foreign investment in Australia</a> and <a href="http://www.international.gc.ca/economist-economiste/assets/pdfs/Data/investments-investissements/FDI_by_Country/FDIC_stocks_by_Country-ENG.pdf">nearly half in Canada</a>); and both countries were involved in the negotiations in the Trans-Pacific Partnership (TPP) finalised on Monday.</p>
<p>But there is a one major difference: up until now, <a href="http://www.iisd.org/itn/2011/07/12/australias-rejection-of-investor-state-dispute-settlement-four-potential-contributing-factors/">Australia has never agreed to provide American investors with access to Investor-State Dispute Settlement</a> (ISDS), whereas Canada has. Why is this significant? Trade minister Andrew Robb likes to point out that Australia already has ISDS in 29 existing treaties 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">“the sun has still come up”</a>. </p>
<p>But comparing investment treaties with countries like Papua New Guinea (PNG) and one with the US is comparing apples and oranges. Aside from the obvious differences in levels of investment (PNG investors that don’t exist can’t sue the government), there is the fact that American corporations are <a href="http://unctad.org/en/PublicationsLibrary/webdiaepcb2015d1_en.pdf">more litigious than investors from any other country</a>.</p>
<p>It is true that creative lawyers <a href="http://toddntucker.com/2015/08/07/integrate-u/">can already find ways</a> to bring suits against Australia on behalf of their American clients (such as tobacco giant, <a href="https://www.ag.gov.au/tobaccoplainpackaging">Philip Morris</a>). But in providing direct access to ISDS the TPP will make it much easier for American investors to launch cases and possibly also to win them. For example, Philip Morris might very well lose its ISDS case in the jurisdictional stage for <a href="http://www.mccabecentre.org/focus-areas/tobacco/philip-morris-asia-challenge">technical reasons</a> related to the timing of its investment restructuring (which was done to access an Australia-Hong Kong investment treaty). </p>
<p>So how has this difference between Australia and Canada played out? In In total Canada has faced 35 challenges, 23 of these in the last ten years. Australia has been subjected to only one ISDS case.</p>
<p>Canada has been sued more times than Mexico under the North American Free Trade Agreement (NAFTA) and at a global level it has been involved in <a href="http://www.huffingtonpost.ca/2015/01/14/canada-sued-investor-state-dispute-ccpa_n_6471460.html">more ISDS cases than any other developed country</a>. Canada has already lost or settled seven claims, paid out damages <a href="https://www.policyalternatives.ca/publications/reports/nafta-chapter-11-investor-state-disputes-january-1-2015">totalling over CA$170 million</a> and incurred untold millions more in legal costs.</p>
<p>At the same time, Canadian companies have been <a href="https://www.policyalternatives.ca/sites/default/files/uploads/publications/National%20Office/2015/08/Losing_Proposition.pdf">rather unsuccessful in ISDS</a>. In general, the claim that ISDS will primarily benefit the “little guy” isn’t borne out by the statistics. According to an extensive (as yet unpublished) study by <a href="https://gusvanharten.wordpress.com/?s=van+ha">Gus Van Harten</a>, the largest multinationals (those with over US$10 billion in annual revenue) have the highest level of success in ISDS (89% at the jurisdictional stage, 83% on the merits, and 71% overall). <a href="http://www.scribd.com/doc/234775950/position-paper-of-German-small-and-medium-sized-Businesses-on-on-ISDS-in-TTIP#scribd">Small and medium-sized enterprises</a>, on the other hand, don’t fare as well. </p>
<p>Nevertheless, Van Harten’s data indicates that investors on the whole have a high degree of success with the system (80% on jurisdiction, 64% on the merits and 49% overall). Others have come to <a href="http://www.iisd.org/itn/wp-content/uploads/2015/06/itn-breaking-news-june-2015-isds-who-wins-more-investors-or-state.pdf?utm_source=lists.iisd.ca&utm_medium=email&utm_campaign=ITN+Breaking+News+Analysis+-+ISDS:+Who+Wins+More,+Investors+or+States?">similar conclusions</a>. When <a href="https://theconversation.com/ratifying-the-tpp-may-be-tough-but-australia-needs-it-48663">lower success rates are reported</a> there is often a clear methodological error (for example, erroneously counting pending cases as “losses” for investors).</p>
<p>What kinds of policies are being challenged in ISDS? While much attention in Australia has rightly been given to Philip Morris’ challenge of the plain packaging legislation, many cases around the world actually focus on environmental protection and resource management. </p>
<p>Such cases account for <a href="https://www.policyalternatives.ca/newsroom/news-releases/nafta-investor-state-claims-against-canada-are-out-control-study">63% of disputes involving Canada</a>. So <a href="http://www.theage.com.au/comment/tobacco-carveout-highlights-risks-of-tpp-20151007-gk38os.html">carving out tobacco from ISDS</a>, as has reportedly been done in the TPP, is like putting a Band-Aid on a bullet wound. If anything, it signals that the “<a href="http://dfat.gov.au/trade/agreements/tpp/outcomes-documents/Pages/outcomes-investment.aspx">safeguards</a>” in place in the agreement are, on their own, <a href="http://www.newyorker.com/news/daily-comment/the-corporate-friendly-world-of-the-t-p-p?mbid=social_twitter">insufficient to protect public policy</a>.</p>
<p>Australia is opening a can of (<a href="http://www.crikey.com.au/2015/07/28/abbotts-new-treaty-a-win-for-lawyers-corporations-but-a-loss-for-australia/?wpmp_switcher=mobile">really expensive</a>) worms with the TPP. And significantly, it isn’t a can that can easily be closed again. Agreeing to the TPP means locking Australia into the current flawed system of ISDS long into the future, at the very time when countries (including <a href="http://www.euractiv.com/sections/trade-society/france-and-germany-form-united-front-against-isds-311267">France, Germany</a>, <a href="http://www.project-syndicate.org/commentary/joseph-e--stiglitz-on-the-dangers-of-bilateral-investment-agreements">South Africa</a> and <a href="http://hsfnotes.com/publicinternationallaw/2015/04/02/indian-government-seeks-comments-on-a-proposed-draft-model-text-for-the-indian-bilateral-investment-treaty/">India</a>) are considering abandoning it or at least introducing <a href="http://www.ft.com/intl/cms/s/0/c1f2c4b2-f34a-11e4-8141-00144feab7de.html#axzz3nsTyrRsP">more significant reforms</a> than those expected to be found in the TPP. </p>
<p>The bilateral investment treaties that Australia is already party to are relatively easy to get rid of – most have provisions allowing for unilateral termination after an initial period of around ten years. Its bilateral trade deals (like the recent ones signed with Korea and China) are a lot more difficult to amend because there are other issues covered that Australia might not want to open up for renegotiation. Pluri-lateral trade deals like the TPP are all the more complex and nearly impossible to change once ratified. </p>
<p>Despite huge problems with NAFTA, and a great deal of rhetoric from US president <a href="https://www.citizen.org/documents/ObamaTradeCampaignStatementsFINAL.pdf">Barack Obama</a> and <a href="https://en.wikipedia.org/wiki/Hillary_Clinton_presidential_primary_campaign,_2008#NAFTA_position">Hillary Clinton</a> (who has, incidentally, just <a href="http://www.nytimes.com/politics/first-draft/2015/10/07/hillary-clinton-opposes-obamas-trans-pacific-trade-deal/?emc=edit_tnt_20151007&nlid=46745373&tntemail0=y&_r=1">come out against the TPP</a>) about amending it on the campaign trail in 2008, the treaty has not been touched in over 20 years. We should expect that the same will be true for the <a href="http://business-humanrights.org/en/robert-reich-on-trans-pacific-partnership-as-nafta-on-steroids">“NAFTA on steroids”</a>.</p><img src="https://counter.theconversation.com/content/48757/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kyla Tienhaara receives funding from the Australian Research Council. </span></em></p>The experience of Canada, which agreed to an ISDS clause in its North American Free Trade agreement, should give pause to Australia.Kyla Tienhaara, Research Fellow Regulatory Institutions Network (RegNet), Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/400042015-04-15T20:37:41Z2015-04-15T20:37:41ZInvestor rights to sue governments pose real dangers<p>Tomas Fitzgerald’s article <a href="https://theconversation.com/sovereign-risk-fears-around-tpp-are-overblown-39865">“Sovereign risk fears around TPP are overblown”</a> claims that critics of the investor-state dispute settlement clause in the latest leaked chapter of the Transpacific Partnership (TPP) have not read the detail “in the sober light of day.” </p>
<p>As one who has <a href="http://media.wix.com/ugd/b629ee_5a919f41c20e47f5aa4e16e34f21024e.pdf">published</a> on ISDS and read the leaked chapter I found that the article makes some key omissions in its description of ISDS and about the information in that chapter.</p>
<p>ISDS enables foreign investors to sue governments for compensation in an international tribunal if they can claim that a change in law or policy has “harmed” their investment. No-one has claimed that ISDS provisions mean, as Fitzgerald claims, that national governments “are unable to legislate in the public interest”. </p>
<p><a href="http://www.abc.net.au/news/2015-03-26/tianhaara-these-tpp-safeguards-wont-protect-us-from-isds/6350358">Critics</a> do present evidence that, despite claimed safeguards, there are many recent examples of ISDS cases against health, environment and other public interest legislation. The US <a href="http://www.theglobeandmail.com/report-on-business/industry-news/the-law-page/eli-lilly-fights-canadas-move-to-strip-drug-patent/article6082557/">Eli Lilly</a> pharmaceutical company is claiming hundreds of millions of dollars from the Canadian Government because of a Canadian court refusal to grant a medicine patent. The US <a href="http://www.pca-cpa.org/showpage.asp?pag_id=1341">Clayton/ Bilcon company </a>has in March 2015 won a case for compensation yet to be decided from Canada because it was refused a mining license for environmental reasons.</p>
<p>The article’s description of ISDS omits the following facts:</p>
<ul>
<li><p>ISDS has no independent judiciary. Arbitrators are drawn from a pool of investment law experts who can continue to practice as investment law act advocates. In Australia, and most national legal systems, judges cannot continue to be practising lawyers.</p></li>
<li><p>ISDS has no system of precedents or appeals, so the decisions of arbitrators are final and can be inconsistent. In Australia, and most national legal systems, there is a system of precedents which judges must consider and appeal mechanisms to ensure consistency of decisions.</p></li>
</ul>
<p>This lack of an independent judiciary, precedents and appeals is not a matter of individual bias. It is a structural flaw in the ISDS system itself which has been acknowledged by many <a href="http://www.curtis.com/siteFiles/Publications/8TH%20Annual%20Juris%20Investment%20Treaty%20Arbitration%20Conf.%20-%20March%2028%202014.pdf">legal experts</a> including Australia’s High Court <a href="http://www.hcourt.gov.au/assets/publications/speeches/current-justices/frenchcj/frenchcj09jul14.pdf">Chief Justice French</a>.</p>
<p>Fitzgerald’s claim that ISDS provisions “only allow an investor to sue a state for expropriation”, meaning seizure of assets, is not accurate. ISDS indeed began with claims for compensation for direct expropriation. But ISDS tribunals have developed the concept of “indirect expropriation” which can result from a change in law or policy. </p>
<p>This concept is not recognised in most national legal systems, including Australia, as our High Court found when it threw out the tobacco companies’ claim for compensation for indirect expropriation of trademark use through plain packaging legislation. But the Philip Morris tobacco company is using <a href="http://www.mccabecentre.org/focus-areas/tobacco/philip-morris-asia-challenge">ISDS in an obscure Australia-Hong Kong investment agreement</a> to sue our government for billions of dollars. Fitzgerald’s only reference to this case is that “the recouping of money would be reasonable” as compensation for loss of trademarks.</p>
<p>Fitzgerald quotes “safeguards” from ISDS claims in the leaked TPP chapter for “legitimate public welfare objectives, such as public health, safety and the environment”</p>
<p>However he fails to mention that the leaked chapter also contains a proposal from the Australian government (page55) which seeks to exempt from ISDS cases specific institutions like the Pharmaceutical Benefits Scheme, Medicare Benefits Scheme, the Therapeutic Goods Administration and the Office of the Gene Technology Regulator. These exemptions are in brackets in the text, which shows that the proposal has not been agreed.</p>
<p>This proposal reveals that the Australian government does not believe that the general safeguards will protect these specific institutions. They also beg the question of what other Australian institutions need to be listed in order to protect them. What about institutions dealing with food regulation, in the wake of the contaminated berries scandal, or with environmental protection?</p>
<p>Fitzgerald claims that “merely because someone sues does not mean they are going to win.” The only evidence cited for this is that there has never been a successful claim against the US government. </p>
<p>However far more comprehensive figures from the <a href="http://unctad.org/en/PublicationsLibrary/webdiaepcb2015d1_en.pdf">United Nations Committee on Trade and Development</a> indicate that of 356 known cases, 53% have been either been won by investors or settled. Settlement indicates that the state had to either pay some compensation and/ or withdraw the law or policy which was the basis of the case. US companies are the most frequent users of ISDS. The Howard Coalition government did not agree to ISDS in the Australia-US FTA. The TPP, which includes the US, would expose Australia to more examples like the Philip Morris case.</p>
<p>ISDS gives already powerful global corporations additional rights to sue governments over democratically decided public interest law and policy. The <a href="http://www.who.int/dg/speeches/2012/tobacco_20120320/en/">President</a> of the World Health Organisation has documented how tobacco companies developed a strategy of using ISDS cases to discourage tobacco regulation. TPP governments would be foolish to expose themselves to more such cases by agreeing to ISDS in the TPP.</p><img src="https://counter.theconversation.com/content/40004/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Pat Ranald is the Coordinator of the AustralianFair Trade and Investment Network and is a Research Associate at the University of Sydney.</span></em></p>Despite arguments that a controversial clause in the Transpacific Partnership will not affect sovereignty, governments would be foolish to agreeing to it.Patricia Ranald, Research Associate , University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/397992015-04-09T20:40:50Z2015-04-09T20:40:50ZLeaked TPP investment chapter shows risks to Australia’s health<p>Amid ongoing speculation about the prospects for the Trans Pacific Partnership Agreement (TPP), Wikileaks published another confidential chapter last week, this time on investment. And like almost everything we know about the secretive negotiations for the agreement, the leaked chapter provides plenty of cause for concern.</p>
<p>The leaked <a href="https://wikileaks.org/tpp-investment/">late-stage draft of the investment chapter</a> contains information about the agreement’s investor-state dispute settlement (ISDS) clause. Clauses like this give investors direct access to international arbitration, where they can bring claims against a government over regulatory measures they think may damage their bottom line. </p>
<p>The chapter has a footnote saying Australia is exempt from ISDS, but that may change “subject to certain conditions”. The leaked draft doesn’t indicate the exact nature of these conditions, and the footnote remains in brackets, indicating the issue has not yet been settled.</p>
<p>The Minister for Trade and Investment, Andrew Robb, has repeatedly said the TPP will not adversely affect health policy. In a <a href="http://www.abc.net.au/news/2015-03-17/trans-pacific-partnership-details-will-be/6327068">recent interview</a> with ABC TV, he said the government had insisted on carveouts for health and environmental public policy decisions from investor-state dispute settlement clauses. </p>
<p>But the leaked draft shows these carveouts (which are still under negotiation) are limited to specific areas such as the Pharmaceutical Benefits Scheme, Medicare Benefits Scheme, Therapeutic Goods Administration and the Office of the Gene Technology Regulator. </p>
<h2>ISDS health concerns</h2>
<p>An independent <a href="http://hiaconnect.edu.au/research-and-publications/tpp_hia/">health impact assessment</a> of the TPP negotiations conducted by Australian academics and non-government organisations published in February 2015 found the ISDS clause presents a significant threat to health policy. </p>
<p>Part of the problem is that the TPP defines investments very broadly to include intangible assets and intellectual property, such as trademarks and patents. These kinds of assets are at the heart of current ISDS cases contesting <a href="http://www.italaw.com/cases/851">Australia’s plain packaging laws</a> and <a href="http://www.italaw.com/cases/1625">Canada’s decisions about what medicines can be patented</a>.</p>
<p>Such claims can result in large-scale costs for taxpayers. Not only do the awards for investor-state cases often amount to hundreds of millions of dollars, <a href="http://www.italaw.com/cases/1625">according to the OECD</a> the average cost of fighting a claim is US$8 million. </p>
<p>Another issue that has health advocates worried is the potential “chilling effect” of investor-state dispute settlement mechanisms; the prospect that governments may be deterred from implementing innovative health policies and laws that may be contested by corporations using ISDS clauses. </p>
<p>Director-General of the World Health Organization, Margaret Chan <a href="http://www.who.int/dg/speeches/2012/tobacco_20120320/en/">noted in 2012</a> that legal actions against Uruguay, Norway and Australia were “deliberately designed to instill fear” in countries trying to reduce smoking. <a href="http://www.nytimes.com/2013/12/13/health/tobacco-industry-tactics-limit-poorer-nations-smoking-laws.html?pagewanted=all&_r=3&">Uruguay has publicly acknowledged</a> that it would have had to drop its tobacco control law and settle with Philip Morris if it didn’t have financial support from a foundation set up by Michael Bloomberg.</p>
<h2>Protecting health?</h2>
<p>In addition to the carveouts for specific health programs, the TPP contains purported “safeguards” to protect health and the environment. But these safeguards have also drawn strong criticism, in particular, from eight health and community organisations who wrote to the trade minister last week to <a href="http://www.phaa.net.au/documents/150401%20Letter%20to%20Minister%20Robb%20re%20proposed%20investment%20chapter%20of%20the%20TPP.pdf">outline their concerns</a>.</p>
<p>One of the main concerns centres on the safeguard related to “indirect expropriation”. While Australian law protects against direct expropriation – the seizure of assets by government – the TPP goes further to include instances where a government’s actions have a negative impact on an investment, but do not result in a transfer of property to the state. </p>
<p>The broader scope of expropriation under ISDS in the <a href="http://www.legislation.gov.hk/IPPAAustraliae.PDF">Hong Kong - Australia bilateral investment treaty</a>, for instance, has enabled Philip Morris to contest Australia’s tobacco plain packaging through international arbitration even though <a href="http://www.hcourt.gov.au/assets/publications/judgment-summaries/2012/hca43-2012-10-05.pdf">the High Court determined</a> that there had been no acquisition of property by the state under Australian law.</p>
<p>To safeguard against abuse of this provision, the TPP includes an annex that appears to exempt “non-discriminatory regulatory actions by a Party that are designed and applied to protect legitimate public welfare objectives, such as public health, safety and the environment…”. But any protective effect intended by this clause may be undermined by the added phrase “…except in rare circumstances.”</p>
<p>This loophole, which invites corporations to argue that their circumstances are rare, is being used in a <a href="http://www.italaw.com/cases/2110">case against Costa Rica</a> over a national park established to protect the nesting grounds of the endangered giant leatherback sea turtle. Nine US investors lodged a dispute, seeking over US$36.5 million in compensation, when Costa Rica suspended development permits for beachfront land within the national park boundaries. The case has yet to be decided.</p>
<p>Another proposed exemption – this time for compulsory licenses – is also <a href="https://www.citizen.org/documents/tpp-investment-chapter-and-access-to-medicines.pdf">highly problematic</a>. Compulsory licences are important mechanisms for ensuring access to medicines, as they allow patents to be bypassed in circumstances such as public health emergencies. But the wording of the exemption in the TPP would allow corporations to argue a compulsory license is not compliant with World Trade Organization rules. Or with the intellectual property chapter of the TPP, which actually provides more expansive rights for corporations. This could create a situation where WTO rules could be interpreted and enforced outside the more flexible and accountable state-state dispute settlement mechanism of the WTO itself.</p>
<p>Other safeguards, such as the explicit link drawn between a clause promising investors “fair and equitable treatment” and customary international law (international obligations that arise from established state practice), <a href="https://www.iisd.org/itn/2013/03/22/a-distinction-without-a-difference-the-interpretation-of-fair-and-equitable-treatment-under-customary-international-law-by-investment-tribunals/">may also prove insufficient</a>. Such a safeguard was <a href="http://www.sice.oas.org/tpd/nafta/Commission/CH11understanding_e.asp">introduced by the parties to the North American Free Trade Agreement in 2001</a> but this did not prevent the tribunal in the recent <a href="http://www.international.gc.ca/trade-agreements-accords-commerciaux/assets/pdfs/disp-diff/clayton-12.pdf">Clayton/Bilcon case</a> from finding that customary international law in this area has evolved over time in a manner that is more in line with the investor’s interpretation, than with that of Canada’s government. The tribunal has yet to make a decision on damages, but the company is seeking US$300 million. </p>
<p>The problems and loopholes characterising the latest leaked TPP draft throw doubt on the government’s claims that it’s taking the concerns of health stakeholders as seriously as the interests of big transnationals. And they highlight exactly why it’s vital for the draft text to be made public and subjected to independent scrutiny before it is signed. Indeed, it would be safer to exclude ISDS from the TPP altogether. </p>
<p>Minister Robb asks us to trust his assurances that Australian health policy will not be negatively affected by this trade agreement. But this latest leaked draft does little to inspire such trust.</p><img src="https://counter.theconversation.com/content/39799/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Deborah Gleeson receives funding from the Australian Research Council. She has received funding from various national and international non-government 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 the TPP.</span></em></p><p class="fine-print"><em><span>Kyla Tienhaara receives funding from the Australian Research Council.</span></em></p><p class="fine-print"><em><span>Sharon Friel receives funding from the Australian Research Council and the National Health and Medical Research Council.</span></em></p>The latest part of the TPP to be leaked is its investment chapter. And like almost everything we know about the secretive negotiations for the agreement, it provides plenty of cause for concern.Deborah Gleeson, Lecturer in Public Health, La Trobe UniversityKyla Tienhaara, Research Fellow Regulatory Institutions Network (RegNet), Australian National UniversitySharon Friel, Director and Professor of Health Equity, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/398652015-04-09T20:40:21Z2015-04-09T20:40:21ZSovereign risk fears around TPP are overblown<p>Two aspects in the ongoing negotiations for the multi-lateral trade deal, the Trans Pacific Partnership, have caused some consternation in the media.
The <a href="http://www.smh.com.au/national/secrecy-surrounds-transpacific-partnership-talks-20131208-2yzea.html">first</a> is the secrecy with which the negotiations have been conducted. <a href="http://www.abc.net.au/news/2015-03-26/trans-pacific-partnership-leaked-chapter-raises-regulatory-conc/6350584">The second</a> is the possible inclusion of a mechanism for resolving disputes under the TPP known as investor-state dispute settlement, or ISDS. </p>
<p><a href="http://www.crikey.com.au/2015/04/01/new-tpp-leak-reveals-how-were-trading-our-sovereignty-for-cheap-tariffs/?wpmp_switcher=mobile">It has been suggested</a> that the secrecy around ISDS inclusion is to avoid revealing that ISDS provisions might dramatically erode national sovereignty and hand more power to multinational corporations, at the expense of governments. </p>
<p>It’s also been claimed that the ISDS provision would effectively neuter state sovereignty and render national governments <a href="https://www.choice.com.au/shopping/consumer-rights-and-advice/your-rights/articles/tpp-secretly-trading-away-your-rights">unable to legislate in the public interest</a>, particularly on health and environmental issues, without opening themselves up to massive suits by multinational corporations.</p>
<p>Yet a sober analysis of the actual terms of the TPP, as recently leaked by WikiLeaks, suggests these fears are significantly overblown.</p>
<h2>What is ISDS?</h2>
<p>Investor state dispute settlement is used to settle disputes between states and private companies who invest in various states and is largely modelled on international commercial arbitration, which resolves disputes between private trading entities. </p>
<p>International commercial arbitration allows parties to appoint their own arbitrators, rather than relying on the judges of a national court. It also has a robust framework that enforces any award (analogous to a judgement of a court) made by that arbitral tribunal. </p>
<p>Awards are enforced through the widespread adoption of <a href="http://www.uncitral.org/pdf/english/texts/general/12-57491-Guide-to-UNCITRAL-e.pdf">UN laws</a> known as the UNCITRAL model law. This is given force of law in Australia by the <a href="http://www.allens.com.au/pubs/arb/foarb1jul10.htm">International Arbitration Act 1974</a> (Cwth).</p>
<p>Additionally, arbitral awards are enforced by the widely adopted <a href="http://www.newyorkconvention.org/">New York Convention on Recognition and Enforcement of Arbitral Awards</a>. This means parties to an international dispute can confidently expect any award made by an arbitral tribunal will be enforceable in the courts of the jurisdiction in which the other party holds their assets.</p>
<p>It is important to recognise that the same does not necessarily hold for determinations made by national courts. That is, in the absence of an express bilateral or multilateral agreement between nations to recognise each other’s courts judgements, the enforcement of a foreign judgement is often a vexed affair. </p>
<p>For example, the UK courts recently <a href="http://hsfnotes.com/litigation/2012/11/01/uk-supreme-court-refuses-to-enforce-us-judgment-made-in-insolvency-proceedings-against-english-resident-defendants/">refused to enforce a US judgment relating to insolvency</a> and have made <a href="http://www.corrs.com.au/publications/tgif/uk-supreme-court-makes-it-harder-to-enforce-australian-insolvency-judgments-in-the-uk/">enforcement of Australian judgements</a> in their courts more difficult.</p>
<p>In the early days of international trade, ISDS agreements reflected a concern that some of the states involved in trade agreements did not have particularly sophisticated courts, or lacked judicial independence. A good example is Thai courts which have routinely <a href="http://hsfnotes.com/arbitration/2014/01/08/thailand-towards-an-arbitration-friendlier-jurisdiction/">refused to enforce awards</a> made against their national government.</p>
<p>This concern is still warranted. However even if all of the parties to the TPP possessed sufficiently sophisticated and independent domestic courts, allowing private investors access to those courts would essentially be reinventing the wheel. </p>
<p>Instead of this, the ISDS provision in the TPP largely piggybacks on the existing system for the enforcement of foreign arbitral awards, principally by adopting the New York Convention.</p>
<p><a href="https://www.getup.org.au/campaigns/tpp/email-your-mp/the-most-important-trade-agreement-youve-never-heard-of">Some commentators</a> have suggested the fact that ISDS determinations might be confidential - as are many international commercial arbitration - is a problem. I agree that there is no good policy rationale for confidentiality when it comes to disputes with a state, as opposed to disputes between private entities. Fortunately, the TPP deals with this issue specifically by requiring hearings and awards by ISDS tribunals to be made public.</p>
<p><a href="https://www.techdirt.com/articles/20150325/17151130431/corporate-sovereignty-provisions-tpp-agreement-leaked-via-wikileaks-would-massively-undermine-government-sovereignty.shtml">Other commentators</a> have suggested the mere existence of these “private judges” raises the possibility of bias or corruption. But the whole purpose of an ISDS is to avoid the perception of bias on behalf of national courts which might be hearing suits against their own national government. </p>
<p>Additionally, any ISDS tribunals awards are ultimately enforceable by the national courts in the place where the assets of the losing party are held. The New York Convention provides robust mechanisms to enforce the award so that courts cannot decline to enforce an award merely because they disagree with it. </p>
<p>Article V of the Convention allows a court to decline to enforce an award where perception of bias exists, as was the issue in <a href="http://unctad.org/en/docs/edmmisc232add37_en.pdf">Excelsior Film TV srl v UGC-PH</a>. In that case the French Supreme Court refused to enforce the award on grounds of bias relating to one of the arbitrators.</p>
<h2>What about national sovereignty?</h2>
<p>The broader question still remains: to what extent will the ISDS undermine the nation’s capacity to legislate in its national interest? The ISDS provisions only allow an investor to sue a state for expropriation. Expropriation only occurs where the state effectively seizes the assets of a private corporation, without compensation. The Australian government already lacks capacity to expropriate without compensation - made famous by Australian film, ‘The Castle’.</p>
<p>Some have suggested that the <a href="https://www.eff.org/deeplinks/2013/10/another-reason-hate-tpp-it-gives-big-content-new-tools-undermine-sane-digital">loss of future profits might constitute expropriation</a>. Yet current provisions of the TPP explicitly excludes this interpretation:</p>
<blockquote>
<p>“The economic impact of the government action, although the fact that an action or series of actions by a Party has an adverse effect on the economic value of an investment, standing alone, does not establish that an indirect expropriation has occurred.”</p>
</blockquote>
<p>Additionally, the TPP carves out a broad capacity for governments to legislate without fear of suits:</p>
<blockquote>
<p>“Non-discriminatory regulatory actions by a Party that are designed and applied to protect legitimate public welfare objectives, such as public health, safety, and the environment, do not constitute indirect expropriations, except in rare circumstances.</p>
</blockquote>
<p>Much has been made of the tobacco companies’ suits against Australia’s <a href="https://theconversation.com/au/topics/plain-packaging">plain packaging regime</a>, using ISDS provisions in the Australia Hong Kong free-trade agreement. </p>
<p>But merely because someone sues does not mean they are going to win. The US has been sued under the ISDS of the North America Free Trade Agreement (NAFTA) dozens of times; <a href="http://www.abc.net.au/radionational/programs/backgroundbriefing/isds-the-devil-in-the-trade-deal/5734490">not one of those suits has been successful</a>. </p>
<p>Secondly, and without wishing to appear sympathetic towards the merchants of death in the tobacco industry, the Australian government accepted money to register trademarks, then refused to allow those trademarks to be used; so the recouping of money would be reasonable. </p>
<p>Further damages for consequential loss or loss of profits are simply beyond the scope of the expropriation power, and are unlikely to succeed. This approach is more reflective of the state of the tobacco industry than objective legal fact. The TPP discourages inappropriate suits, by proposing to award all costs against those who bring a frivolous claim.</p>
<h2>Secrecy - sinister or practical?</h2>
<p>Lastly, on the question of secrecy. The TPP has taken years to negotiate and despite <a href="http://www.washingtonpost.com/politics/obama-says-he-willing-to-defy-democrats-on-his-support-of-trans-pacific-partnership/2014/12/03/25edcaf4-7b30-11e4-84d4-7c896b90abdc_story.html">President Barack Obama’s bullish predictions</a> will probably drag on for a while yet. Discussing early drafts is less useful, given much of it may change. </p>
<p>Additionally, Australians are acutely aware of the lobbying capacity of vocal industries - as exemplified by the truly extraordinary campaigns waged by the mining industry against the carbon and mining taxes. Multiply the potential media blitz by all potentially affected industries across 12 countries and add in years of negotiation and you get some indication as to why open negotiations are functionally impossible.</p>
<p>Indeed, multilateral trade agreements are <a href="http://www.iied.org/rethinking-investment-treaties-laws-contracts">frequently negotiated in closed sessions</a> and ultimately Parliament will debate whether Australia agrees to be bound by the terms of the TPP.</p>
<p>This is not to suggest that there are no potential pitfalls in the TPP. I remain acutely concerned about the intellectual property provisions, <a href="http://www.ip-watch.org/2014/10/17/leaked-tpp-draft-reveals-extreme-rights-holder-position-of-us-japan-outraged-observers-say/">particularly for biotech, pharmaceutical and genetic patents</a>. </p>
<p>These risks need to be weighed against the potential advantages of the TPP; an exercise rendered all the more difficult by the government’s tendency to significantly overstate the economic benefits of free trade agreements,<a href="http://www.theguardian.com/business/grogonomics/2014/nov/20/why-isnt-the-government-being-held-to-account-on-the-china-free-trade-deal">as noted by economist Greg Jericho</a>.</p>
<p>Nevertheless, much of the commentary surrounding the ISDS provisions misunderstands how and why they were adopted. Those who are critically concerned about risks to Australia’s sovereignty could read the actual provisions of the agreement in the sober light of day.</p><img src="https://counter.theconversation.com/content/39865/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tomas Fitzgerald is affiliated with WA Labor and the NTEU.</span></em></p>The secrecy around negotiations of the Transpacific Partnership have been painted as sinister. But could the reasons be about practicality?Tomas Fitzgerald, Senior Lecturer, Law, University of Notre Dame AustraliaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/211682013-12-06T05:07:48Z2013-12-06T05:07:48ZWhat you need to know about the Trans Pacific Partnership<figure><img src="https://images.theconversation.com/files/37108/original/r39grdwp-1386300019.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Representatives from Japan, New Zealand, and the United States at the start of the Trans-Pacific Partnership summit on the sidelines of the Asia-Pacific Economic Cooperation Summit in Bali, on October 8, 2013. </span> <span class="attribution"><span class="source">EPA/BARBARA WALTON</span></span></figcaption></figure><p>Expect to hear a lot about the <a href="https://www.dfat.gov.au/fta/tpp/">Trans Pacific Partnership</a> in the next few days. As it moves into final stages of negotiations, outrage over some of its more onerous provisions is ramping up around the world.</p>
<p>From tomorrow, trade ministers from 12 countries will meet in Singapore to hammer out some difficult issues that have plagued the controversial agreement’s negotiations for the last three years. I will be providing updates to this article as the meeting progresses.</p>
<p>The controversy surrounding the negotiations stems from widespread concern about the lack of transparency in the negotiations, as well as the number of highly politically sensitive issues on the table.</p>
<p>These concerns came to a head in Australia this week when the Senate <a href="http://peter-whish-wilson.greensmps.org.au/content/media-releases/greens-win-greater-transparency-secret-trade-deal">issued an order</a> for the release of the agreement’s text before it’s signed by Cabinet.</p>
<p>The Australian consumer organisation Choice has launched a <a href="https://choice.good.do/dont-trade-it-away/release-the-tpp-text/">petition</a> seeking the public release of the text. And the Australian Fair Trade and Investment Network has also <a href="http://aftinet.org.au/cms/node/668">raised</a> an alarm.</p>
<p>As things heat up over in Singapore and the Senate prepares for a political stoush over the order for disclosure, here’s what you need to know to make sense of it all.</p>
<h2>How it’s going</h2>
<p>The Trans Pacific Partnership has its origins in a relatively insignificant free trade agreement between Brunei, New Zealand, Chile and Singapore, known as the <a href="http://www.bilaterals.org/?-TPP-">Pacific 4</a> or simply P4. This pact suddenly assumed greater significance in 2008, when the United States and several other countries <a href="http://www.sice.oas.org/TPD/TPP/TPP_e.ASP">expressed an interest</a> in joining. </p>
<p>In March 2010, negotiations for the Trans Pacific Partnership <a href="http://www.dfat.gov.au/fta/tpp/100326-tpp-stakeholder-update-1.html">began</a> with the United States, Australia, Peru and Vietnam joining the original P4 members. Over time, these eight countries were also joined by <a href="http://tppdigest.org/index.php?option=com_content&view=article&id=233:malaysia-officially-joins-tpp-talks&catid=1:latest-news">Malaysia</a>, <a href="http://www.international.gc.ca/media_commerce/comm/news-communiques/2012/10/09a.aspx">Canada</a>, <a href="http://www.economia.gob.mx/news-and-events/press-room/headlines/8957-boletin234-12-en">Mexico</a> and most recently, <a href="http://japandailypress.com/japan-becomes-12th-nation-to-join-tpp-free-trade-talks-2432843/">Japan</a>.</p>
<p>The pact will <a href="https://www.dfat.gov.au/fta/tpp/">cover</a> almost 40% of global GDP and over 25% of world trade. Like most free trade agreements, the negotiations take place under conditions of confidentiality. But this agreement has been <a href="http://www.theguardian.com/commentisfree/2013/oct/30/trans-pacific-partnership-tpp-dfat?CMP=twt_guAs">heavily criticised</a> for unprecedented levels of secrecy.</p>
<p>What we do know is that it consists of around <a href="http://wikileaks.org/tpp/static/pdf/Wikileaks-secret-TPP-treaty-IP-chapter.pdf">29 chapters</a> or negotiating areas. Some chapters have annexes that relate to specific goods such as pharmaceuticals, or wine and spirits. Amazingly, there is no complete publicly available list of chapters and annexes.</p>
<p>It includes not only traditional trade issues, such as the movement of goods and services, but also many policy areas that previously have been matters for domestic policy making rather than trade negotiations. It touches on many issues with a public interest dimension, such as drug and other patents, copyright and the internet. </p>
<p>But the public has no access to its draft text, and little opportunity for input. Most of what we know about it comes from leaks of negotiating documents, most recently a consolidated draft of <a href="http://wikileaks.org/tpp/static/pdf/Wikileaks-secret-TPP-treaty-IP-chapter.pdf">the intellectual property chapter</a>, leaked by Wikileaks on 13 November. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/37105/original/p4dncg64-1386299869.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/37105/original/p4dncg64-1386299869.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/37105/original/p4dncg64-1386299869.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/37105/original/p4dncg64-1386299869.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/37105/original/p4dncg64-1386299869.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/37105/original/p4dncg64-1386299869.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/37105/original/p4dncg64-1386299869.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">
<figcaption>
<span class="caption">Activists carry placards during a protest against the proposed Trans-Pacific Partnership agreement in Kuala Lumpur, Malaysia, 19 July 2013.</span>
<span class="attribution"><span class="source">EPA/AZHAR RAHIM</span></span>
</figcaption>
</figure>
<p>The documents show deep rifts among the negotiating countries, with the United States pushing provisions that, in many areas, are not in the interests of other countries.</p>
<p>The bulk of the legal text of the agreement has been negotiated over 19 formal rounds. The last was held in Brunei in <a href="http://www.japantimes.co.jp/news/2013/08/30/business/brunei-tpp-round-ends-in-success/">August</a>. </p>
<p>The countries involved have <a href="http://www.mfat.govt.nz/Trade-and-Economic-Relations/2-Trade-Relationships-and-Agreements/Trans-Pacific/1-TPP-Talk/0-TPP-talk-29-Nov-2011.php">signed an agreement</a> to keep the text confidential until after negotiations have concluded and the agreement has been signed. And to keep negotiating documents secret until four years after the agreement is concluded or the negotiations are abandoned.</p>
<p>There are some opportunities for stakeholders, such as health and consumer representatives to put their views to the trade negotiators through <a href="http://www.ustr.gov/trade-agreements/free-trade-agreements/trans-pacific-partnership/direct-stakholder-engagement">official stakeholder events</a> at negotiating rounds. Or through domestic consultation processes, such as <a href="http://www.dfat.gov.au/fta/tpp/">briefings</a> held by Australia’s Department of Foreign Affairs and Trade. </p>
<p>But since those being consulted don’t have much information about what’s in the agreement and aren’t permitted to view the text, meaningful input is difficult. Indeed, it’s farcical to be consulted about the details of text you haven’t seen!</p>
<h2>Why there’s cause for concern</h2>
<p>Many of the issues being negotiated have long-term ramifications for health, the environment, and other areas of public policy. But it’s very difficult for even those who have been closely following the negotiations to work out what the likely outcomes on these issues will be because the process is so secret.</p>
<p>Some of the key concerns centre on <a href="http://www.theguardian.com/commentisfree/2013/dec/06/the-tpp-negotiations-could-be-a-bitter-pill-to-swallow-for-australians">health and medicines</a>. The humanitarian organisation <a href="http://www.doctorswithoutborders.org/publications/reports/2013/Access_Briefing_TPP_ENG_2013.pdf">Medecins Sans Frontieres has warned</a> that the Trans Pacific Partnership could become: </p>
<blockquote>
<p>the most harmful trade pact ever for access to medicines in developing countries.</p>
</blockquote>
<p>Another area of concern is the inclusion of an investor-state dispute settlement clause in the agreement. The Australian government recently <a href="http://www.theage.com.au/business/korean-trade-deal-sorted-now-andrew-robb-faces-trans-pacific-partnership-challenge-20131205-2yttu.html">indicated</a> it is prepared to accept this, even though such clauses allow foreign corporations to sue a government if its policies and laws are deemed to affect corporate investments. </p>
<p>Philip Morris Asia is currently <a href="http://www.pmi.com/eng/media_center/press_releases/documents/20111121_australia_plain_packaging_lawsuit.pdf">suing</a> the Australian government over the tobacco plain packaging laws, using this very mechanism from a treaty between Hong Kong and Australia. </p>
<p><a href="http://www.phaa.net.au/documents/131009Letter%20to%20Tony%20Abbott%20TPPA.pdf">Public health</a> and consumer organisations worry that including an investor-state dispute settlement clause in the Trans Pacific Partnership will open the gates to more such lawsuits over public health measures.</p>
<p>At the (probably) final meeting for the Trans Pacific Partnership negotiations this weekend, trade ministers are expected to make difficult political compromises to meet their self-imposed deadline to conclude talks before the end of the year.</p>
<p>We don’t know what compromises the governments are considering, but there’s clearly reason to be concerned.</p><img src="https://counter.theconversation.com/content/21168/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Deborah Gleeson receives funding from the Australian Research Council. She is a member of the Public Health Association of Australia and active in the People's Health Movement.
</span></em></p>Expect to hear a lot about the Trans Pacific Partnership in the next few days. As it moves into final stages of negotiations, outrage over some of its more onerous provisions is ramping up around the world…Deborah Gleeson, Lecturer in Public Health, La Trobe UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/184192013-11-14T19:45:42Z2013-11-14T19:45:42ZWhen trade agreements threaten sovereignty: Australia beware<figure><img src="https://images.theconversation.com/files/34771/original/dj7zg75j-1383888550.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">By allowing ISDS clauses in the Trans-Pacific Partnership Agreement Australia could be opening the door to more legal challenges from corporations.</span> <span class="attribution"><span class="source">mattyp_/Flickr</span></span></figcaption></figure><p>The leaking of a key Trans-Pacific Partnership document by Wikileaks this week suggests Australia may <a href="https://theconversation.com/regional-trade-pact-puts-australia-in-absurd-position-say-experts-20299">side</a> with the US on some key issues including the insertion of an Investor-State Dispute Settlement (ISDS) clause into the agreement, despite Andrew Robb having previously indicated <a href="http://www.smh.com.au/business/trade-treaty-stance-the-same-despite-promise-20130922-2u7wm.html">some ambivalence</a> on the issue. </p>
<p>The inclusion of an ISDS provision is significant because the clause gives authority to major corporations to challenge laws made by those elected to do so in the nation’s best interest in international courts of arbitration.</p>
<p>What is wrong with that? Well, <a href="http://democracyctr.org/wp/wp-content/uploads/2013/05/Under_The_Radar_English_Final.pdf">the Democracy Centre</a> has called such international arbitration “a privatised justice system for global corporations”.</p>
<p>ISDS processes were introduced into trade agreements decades ago to protect investors and their investments in countries lacking a strong system of law. </p>
<p>For example, if investments were expropriated or nationalised by a rogue state or dictatorship, the ISDS authorised foreign state investors to bypass domestic legal systems and have their case heard by an <a href="http://www.pca-cpa.org/showpage.asp?pag_id=1494">external party</a>. The external arbitrators could order the upholding of investor rights and state duties contained in an international trade agreement.</p>
<p>But over the past ten years the number of disputes taken to international arbitration has risen dramatically, and disputes have been lodged by corporations against countries with robust domestic legal systems. </p>
<h2>Plain packaging challenge</h2>
<p>When the Australian government introduced plain packaging laws in Australia <a href="http://www.comlaw.gov.au/Details/C2011A00148/Html/Text#_Toc309642352">“to improve public health”</a>, Philip Morris tobacco and others launched <a href="http://www.hcourt.gov.au/cases/case-s389/2011">a challenge</a> to the laws in the Australian High Court. When they were unsuccessful there, they <a href="http://www.italaw.com/cases/851">lodged a claim</a> at an international arbitration via an ISDS clause contained in a trade agreement with Hong Kong. This claim was made despite the fact that this law was made by a democratically elected Parliament and had been deemed legitimate by the nation’s highest court.</p>
<p>This clause is only available to corporations and not to citizens of the nations who are party to the agreement. One <a href="http://www.theguardian.com/commentisfree/2013/nov/04/us-trade-deal-full-frontal-assault-on-democracy">tribunal judge reportedly said</a>, with regard to the clause:</p>
<blockquote>
<p>When I wake up at night and think about arbitration, it never ceases to amaze me that sovereign states have agreed to investment arbitration at all … Three private individuals are entrusted with the power to review, without any restriction or appeal procedure, all actions of the government, all decisions of the courts, and all laws and regulations emanating from parliament.</p>
</blockquote>
<p>The Phillip Morris case exemplifies the way corporations are now arguably abusing the original purpose of the ISDS clauses. In the past year the number of cases being brought for international arbitration <a href="http://unctad.org/en/PublicationsLibrary/webdiaepcb2013d3_en.pdf">has increased</a>, with 58 cases being lodged - the highest ever brought in one year. More than a third (36%) of those came from developed nations with a rule of law.</p>
<p>Laws protecting public health are not the only laws able to be challenged. The inclusion of an ISDS clause in the TPPA could, for example, allow a corporation like <a href="http://www.metgasco.com.au/">Metgasco</a> to sue the state at international arbitration. Metgasco is currently challenging NSW laws protecting human and environmental health from risks associated with Coal Seam Gas drilling.</p>
<p>Metgasco chief executive Peter Henderson has attacked the state government’s laws for being ambiguous, resulting in losses to the company that it may seek [compensation for](http://www.theaustralian.com.au/national-affairs/coal-seam-gas-group-metgasco-wants-compo-for-lost-drilling-income/story-fnaxx2sv-1226752389167?sv=2feda0409b5f06b93154f88178bbab1f](http://www.theaustralian.com.au/national-affairs/coal-seam-gas-group-metgasco-wants-compo-for-lost-drilling-income/story-fnaxx2sv-1226752389167?sv=2feda0409b5f06b93154f88178bbab1f). </p>
<p>If a case like this were to go to international arbitration, the state government would likely be required to provide evidence that the laws would protect human and environmental health from the risks posed by CSG mining (difficult to prove). If unsuccessful, there is a possibility that the government would have to provide compensation to Metgasco and/or allow it to mine as it wished. </p>
<h2>Public interest test</h2>
<p>The NSW government has a right and duty to make such laws in the public interest, particularly when little evidence about the potential harms of new technologies and industries like CSG mining on human and environmental health is known. The ISDS mechanism arguably limits the legitimate role of government and preferences private over public interest in a way previously unseen.</p>
<p>The threat of ISDS can act as a <a href="http://www.abc.net.au/am/content/2013/s3802421.htm">disincentive to governments</a> to make laws protecting public and environmental health. This threat acts as a ‘hidden’ cost of the inclusion of the clause. The threat of having the dispute dealt with at international arbitration, for which large sums of compensation might be awarded, is just one cost, but <em>not</em> implementing those laws is arguably an even greater cost (ie costs associated with smoking). </p>
<p>It imposes other costs in the form of, for example, limiting access to affordable medicines via the imposition of increased intellectual property privileges sought by pharmaceutical companies and the potential for disputes over matters including pharmaceutical <a href="http://www.international.gc.ca/trade-agreements-accords-commerciaux/assets/pdfs/disp-diff/eli-01.pdf">patents</a> and other property disputes, which should be resolved by our domestic courts. </p>
<p>And this perhaps highlights the greatest “hidden” cost of all - the potential cost of a limit to or loss of state sovereignty, democracy and the right for the government of a state to make and apply laws in the nation’s interest and not just in the interest of wealthy and powerful corporations. </p>
<p>In order to protect against this, Australia should continue to stand firm and reject the inclusion of an ISDS in the TPPA. </p>
<hr>
<p><em>This is the first piece in our series on the Trans-Pacific Partnership.</em></p>
<p><em>Read the other pieces:</em></p>
<p><a href="https://theconversation.com/multilateral-regional-bilateral-which-agreement-is-best-19664">Multilateral, regional, bilateral: which agreement is best?</a></p>
<p><a href="https://theconversation.com/the-trans-pacific-partnership-and-australias-right-to-know-20334">The Trans-Pacific Partnership and Australia’s right to know</a></p>
<p><a href="https://theconversation.com/trade-pact-would-make-internet-services-more-expensive-20441">Trade pact would make internet services more expensive</a></p>
<p><a href="https://theconversation.com/ip-trade-negotiations-a-prescription-for-harm-20141">IP trade negotiations a prescription for harm</a></p><img src="https://counter.theconversation.com/content/18419/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dr Ruth Townsend 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 leaking of a key Trans-Pacific Partnership document by Wikileaks this week suggests Australia may side with the US on some key issues including the insertion of an Investor-State Dispute Settlement…Dr Ruth Townsend, Lecturer health law, ethics and human rights, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.