International jurisprudence, great powers and the UN – Andrew Blackie

On 7 July 2016, during a visit to Beijing, United Nations (“UN”) the then Secretary-General Ban Ki-moon met with Chinese President Xi Jinping and Foreign Minister Wang Yi. The timing was unfortunate, owing to the imminent ruling of the United Nations Convention on the Law of the Sea (“UNCLOS”) Arbitral Tribunal on the South China Sea, handed down less than a week later. 

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The Trumping of the Trans-Pacific Partnership – Matthew Rimmer

With the victory of Donald Trump, the Trans-Pacific Partnership (“TPP”) has literally been trumped.

As a Presidential candidate, Barack Obama came to power promising to renegotiate the North American Free Trade Agreement (“NAFTA”). As a President, a centrepiece of his administration was the proposal for the TPP, a trade agreement spanning the Pacific Rim. He argued that the trade agreement was essential for the economic and political power of the USA.

The TPP was also ambitious in terms of its membership. The agreement included NAFTA countries such as the USA, Canada, and Mexico. The deal involved Australasian nations, like Australia and New Zealand. The TPP also included South-East Asian countries, such as Singapore, Malaysia, Brunei, Vietnam, and Japan, as well as a couple of Latin American countries such as Chile and Peru. Notably, the TPP excluded members of the BASIC/ BRICS group — such as China, India, Brazil, South Africa, and Russia. Despite its name, the TPP also ignored Pacific Island states. The political geography of the TPP was largely determined by alliances with the USA.

The TPP was sweeping in terms of its subject matter. As well as traditional matters of trade, the agreement also contained extensive prescriptive obligations in respect of intellectual property and investment. The agreement included an extensive Intellectual Property chapter, with provisions on copyright law, trademark law, patent law, and biologics. The TPP also enshrined a controversial Investor-State Dispute Settlement regime (“ISDS”). Such a regime would enable corporations to challenge government decision-making in investment arbitration tribunals. The agreement also contained weak protections in respect of public health, the environment, and labour rights.

As a result of its breadth of membership, and the scope of its subject matter, the TPP was highly unstable. The agreement collapsed in the wake of the 2016 United States elections. With the collapse of the TPP, the debate over trade amongst Pacific Rim nations will shift to other arenas and fora.

The United States of America

The TPP was a key focal point in the Presidential Race.

After initially supporting the TPP, Hillary Clinton shifted her position, first to one expressing reservations about the TPP, and then to opposition to the TPP. Such a repositioning by Clinton was the result of a vigorous challenge from Bernie Sanders, and the deep opposition of the Labour Movement to the TPP.

For his part, Donald Trump promised to renegotiate the NAFTA on more favourable terms to the United States. He vowed to “withdraw from the TPP, which has not yet been ratified.” Donald Trump promised his supporters to negotiate “fair trade deals that create American jobs, increase American wages, and reduce America’s trade deficit”.

Clinton attacked Trump’s credentials, arguing that his trademarked, personalised products were manufactured outside the United States.

For his part, Donald Trump argued that Clinton would pass the TPP, if she won the election.

In the wake of the Trump victory, the White House has conceded that the TPP is doomed. Barack Obama was previously tempted to push ahead with a TPP vote in the US Congress in the lame-duck session. Now, it seems that he has conceded neither the Republicans nor the Democrats will support the TPP in the US Congress.

In retrospect, it seems a grand folly that the Obama Administration should have pushed for the TPP, in the middle of a Presidential race between Donald Trump and Hillary Clinton. Lori Wallach of Public Citizen observed:

“The TPP did not elect Trump per se. But with no small thanks to President Obama’s relentless, high-profile campaign throughout the primaries and general election to pass the pact, the TPP pact readily served as a potent symbol of business-as-usual in Washington and its facilitation of growing corporate power over every facet of our lives”.

Presciently, the documentary film-maker Michael Moore warned of a Rust-Belt Brexit against Hillary Clinton in the mid-west states of the United States. He observed that “Clintons’ support of NAFTA helped to destroy the industrial states of the Upper Midwest” and “Trump is going to hammer Clinton on this and her support of TPP and other trade policies.”

Former Clinton Labor Secretary Robert Reich has lamented that trade deals, declining unionization and market concentration created an opening for Donald Trump’s presidency. He observed that “Americans have rebelled by supporting someone who wants to fortify America against foreigners as well as foreign-made goods.” Reich acknowledged that such protectionist sentiments had created unease amongst the political and economic establishment: “The power structure understandably fears that Trump’s isolationism will stymie economic growth.”

For their part, Progressive Leaders have denied that Trump should claim credit for the demise of the TPP. Evan Geer of Fight for the Future commented:

“Let’s make one thing clear: Donald Trump didn’t kill the TPP. We did. An unprecedented grassroots movement of people and organizations from across the political spectrum came together to spark an uprising that stopped what would have been nothing less than an outright corporate takeover of our democratic process. Together we sounded the alarm, and made the TPP so politically toxic that no presidential candidate who wanted to be elected could support it.”

Arthur Stamoulis, executive director of Citizens Trade Campaign, agreed, saying:

“With peoples’ movements united across borders and across sectors, we were able to stop a power grab by some of the most powerful economic and political interests in human history.”

Digital rights defenders, the Labour Movement, and environmental and climate activists have said that the TPP collapsed in the face of concerted community action and civil society pressure.

Australia

In Australia, the Joint Standing Committee on Treaties has held hearings in respect of the TPP. This report was published by the Federal Parliament on November 30, 2016.

The Senate Foreign Affairs, Defence and Trade Committee is also investigating the TPP. There have been concerns expressed about copyright law, trade mark law, patent law, and biologics in the hearings.

Moreover, the Productivity Commission has had an inquiry into Australia’s Intellectual Property Arrangements — including those related to trade.

In the wake of the Trump triumph, the Australian Prime Minister Malcolm Turnbull has warned that protectionism will result in poverty. He has extolled the virtues of free trade agreements. Turnbull has emphasized that the Australian economy needs to be ‘flexible’ and ‘competitive’, but ‘fair.’

Foreign Minister Julie Bishop and Trade Minister Steven Ciobo have sought to defend the Australia-United States Free Trade Agreement (“AUSFTA”), saying that it is running a surplus in favour of the United States. The Ministers have conceded that the TPP’s future is under threat. Bishop and Ciobo have noted, though, Australia could otherwise pursue bilateral agreements with countries such as India, Indonesia, and the European Union, and regional agreements — such as the Regional Comprehensive Economic Partnership.

The Australian Labor Party will no doubt be relieved that the Turnbull Government cannot wedge the party with the TPP. With the Trump victory, Leader of the Opposition Bill Shorten MP has shifted policy tack. He has argued that “Labor’s approach to the Australian economy is buy Australian, build Australian, employ Australians.” Shadow Minister for Finance Jim Chalmers has emphasized the need for the party to address the concerns of voters who feel trampled by the forces of globalisation and technological change. The Shadow Trade Minister Jason Clare has stressed the need for “policies that increase real wages, improve living standards, reduce under employment and reverse the rise in inequality.”

Senator Sarah Hanson-Young of the Australian Greens has said:

“It would be extremely foolish to continue down the path towards any form of enabling legislation or ratification of the TPP in Australia, considering the circumstances.”

Senator Nick Xenophon feels vindicated over his criticism of the TPP.

There have been few mourners for the end of the TPP in Australia. By and large, the agreement seemed unloved by the larger public.

It has been striking that legislators in the Parliament of Australia, civil society, and business have been deeply concerned about how the Department of Foreign Affairs and Trade has been conducting trade negotiations. The defeat of the secretive TPP has highlighted the need for transparency, accountability, and public participation in future trade negotiations.

New Zealand

Even though the TPP has collapsed, there remains debate about whether a number of Pacific Rim states will implement TPP legislation, anyway. Jeremy Malcolm of the Electronic Frontier Foundation observed: “The death of the TPP in the United States does not necessarily mean that these implementation plans will be scrapped.” The TPP legislative process has been well-advanced in New Zealand, Japan, and Malaysia.

In the New Zealand Parliament, there has been debate over the implementing legislation for the TPP. New Zealand’s then Prime Minister John Key wondered whether the TPP could be passed at a later date, with cosmetic changes. Key has joked that such an agreement could be dubbed the ‘Trump Pacific Partnership’.

The Trade Minister Todd McClay maintained that the TPP would benefit New Zealand: “Trade is essential to the New Zealand way of life, our standard of living, and our potential to become a more prosperous country.”

Key has since resigned as Prime Minister, and been replaced by Bill English.

Rino Tirikatene of the New Zealand Labour Party mocked the Key Government’s enthusiasm for the TPP:

“In the great scheme of things it was a bad deal, an incredibly bad deal, and that is evidenced today by us passing a piece of legislation that will mean absolutely nothing — absolutely nothing.”

Reflecting on the impact of Trump’s victory on the TPP, he observed that:

“It is a dead deal, dead rubber, a dead duck, thanks to, I guess, the Don, the great Don, who has come in, over in the US… the TPP is dead, it is over; finito. Kia ora tātou.”

Clare Curran of the New Zealand Labour Party supported genuine intellectual property law reforms — such as the introduction of a defence of fair use in copyright law.

Gareth Hughes of the New Zealand Greens commented that the TPP was a terrible failure:

“All you can do is facepalm. Surely this is the definition of futility. The day after Trump is elected, National is passing the Trans-Pacific Partnership Agreement Amendment Bill. You could not write this stuff. It encapsulates what a failure and a farce this entire 7-year process has been”.

He argued that New Zealand needed to reform and modernise its intellectual property regime — particularly through the introduction of a defence of fair use in copyright law.

Professor Jane Kelsey of the University of Auckland paid tribute to the community campaign against the TPP in New Zealand:

“An unprecedented campaign against the TPP brought together Kiwis from every walk of life — doctors, musicians, local governments, Maori, the Internet community, unionists and politicians, and many tens of thousands of ordinary Kiwis who took to the streets all over the country. As we celebrate this victory, for now, we call on all our governments to abandon the failed model they continue to push in other equally toxic negotiations. We will continue to work with international allies to develop a progressive and just alternative based on the people’s needs for the 21st century, not those of the corporations”.

Professor Jane Kelsey has observed that the TPP is dead, and New Zealand needs to rethink its approach to negotiating trade agreements in the future.

Canada

In Canada, the Trudeau Government seemed quite ambivalent about the TPP — which it had inherited from the former Harper Government. Trudeau expressed a willingness to renegotiate NAFTA with the new Trump administration.

Maude Barlow, National Chairperson of the Council of Canadians, commented:

“The TPP is in full-blown cardiac arrest, thanks to years of international campaigning against this toxic deal, including turning Senate and House elections into contests over rejecting the TPP. But the one thing I know from watching trade agreements is that free trade proponents always try to resuscitate these deals under different names — CETA, TiSA and others. We need to put a ‘do not resuscitate’ order on these corporate deals once and for all”.

She warned that there would be potential for policy laundering — with the text from the TPP copied and pasted to future trade agreements.

Professor Michael Geist of the University of Ottawa has recommended that there is a need for the Canadian Government to reconsider its approach to trade negotiations:

“The public backlash against trade deals points to a process that leaves many feeling excluded and to terms that are presented publicly for the first time as final. The real opportunity for Ottawa is not just to explore new trade partners but to challenge some of the long-standing assumptions about such deals in order to foster greater public confidence in the outcome”.

Geist noted: “Mr. Trudeau’s government inherited a trade policy marked by secrecy, encroachment onto domestic regulation and little ambition to see Canadian policies reflected in the final texts”. He suggested: “The TPP’s demise offers the chance for real change by pursuing trade agreements that offer economic gains and remain true to the commitment for an open and transparent government.”

China

There has been much disquiet about the potential of a trade war between the United States and China over topics such as currency manipulation, domestic subsidies, and intellectual property. Former Australian Foreign Minister Bob Carr, for instance, has been particularly fearful of a conflict.

In his trade policy, Donald Trump promised to use:

[E]very lawful presidential power to remedy trade disputes if China does not stop its illegal activities, including its theft of American trade secrets — including the application of tariffs consistent with Section 201 and 301 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962.”

President-Elect Donald Trump could learn from the past fights between the United States and China over intellectual property. President George W. Bush brought a trade action against China over intellectual property in the World Trade Organization. By and large, China was successful in this trade dispute. President Barack Obama has sought to deploy the Department of Justice to tackle cases of trade secret violations.

For its part, China has proven to be an adroit counterpuncher in disputes over intellectual property and trade. First, China has become an intellectual property superpower. The country’s leading companies have acquired and invested in patents, trademarks, designs, and copyright across an array of high tech sectors. Second, China will scrutinise Donald Trump’s protectionist policies, and challenge anything that falls foul of the WTO rules. Finally, China will pursue its own network of trade deals in the Pacific Rim. China has already forged a bilateral trade agreement with Australia, and is pursuing the Regional Comprehensive Economic Partnership (“RCEP”). Australia has shown enthusiasm for participating in RCEP.

It remains to be seen whether Donald Trump will be able to realise his grand vision in respect of intellectual property and trade.

Dr Matthew Rimmer is a Professor in Intellectual Property and Innovation Law at the Faculty of Law in the Queensland University of Technology (QUT). He is a leader of the QUT Intellectual Property and Innovation Law research program, and a member of the QUT Digital Media Research Centre (QUT DMRC), the QUT Australian Centre for Health Law Research (QUT ACHLR), and the QUT International Law and Global Governance Research Program (QUT IL GG). Rimmer has published widely on copyright law and information technology, patent law and biotechnology, access to medicines, plain packaging of tobacco products, intellectual property and climate change, and Indigenous Intellectual Property. He is currently working on research on intellectual property, the creative industries, and 3D printing; intellectual property and public health; and intellectual property and trade, looking at the Trans-Pacific Partnership, the Trans-Atlantic Trade and Investment Partnership, and the Trade in Services Agreement. His work is archived at SSRN Abstracts and Bepress Selected Works

This article was first published on Medium and is republished here with permission.

UK-Australia Trade and Investment Relations Following Brexit – Reyna Ge

The referendum held in the United Kingdom (‘UK’) on 23 June 2016, in which Britain elected to leave the European Union (‘EU’), led to an earthquake response. The pound slumped to decade lows against the US dollar, the yield on UK bonds feel to record lows, and the Financial Times Stock Exchange 100 share index sank. Not only were the UK markets hit, but the Eurozone also felt the shockwaves, experiencing dropping share prices and market volatility.

It is likely that the aftershocks will be numerous and unpredictable. Much will depend on the relationship that the UK and EU are able to negotiate in the coming years, particularly with regard to the UK’s future access to the EU Single Market. However, this is subject to great uncertainty, as trade negotiations will take place in an environment of political and economic flux due to upcoming elections in a number of key European governments, such as Germany and France. Such changes will likely play a key role in the outcome of Brexit negotiations.

Other than UK’s negotiations with the EU concerning their future relationship, high on the UK’s agenda is its future trade and investment relationships with extra-EU countries. Concerning this, UK Prime Minister, Theresa May, and Australian Prime Minister, Malcolm Turnbull, have already flagged their interest in negotiating – and indeed, fast-tracking – a UK-Australia trade agreement. This article examines the legal framework and issues underlying future trade negotiations and the likely implications for Australia.

UK’s current position on trade and investment matters

As a Member State of the EU, the UK is subject to two main trade and investment restrictions arising from the EU’s exclusive competence over commercial policy matters pursuant to Article 207 of the Treaty on the Functioning of the European Union (‘TFEU’). First, its ‘intra-EU bilateral investment treaties’ (‘intra-EU BITs’), which are trade agreements between the UK and current EU Member States, were to be phased out of operation. It had been argued for some time that intra-EU BITs could be incompatible with EU law.

Second, given Article 207 of the TFEU, extra-EU relationships are exclusively within the competence of the EU, as reflected by the process of negotiations followed for the Transatlantic Trade and Investment Partnership (‘TTIP’) and the recently concluded Comprehensive Economic Trade Agreement (‘CETA’). For the UK’s trade agreements that were concluded before 1 December 2009, the Regulation (EU) 1219/2012 of the European Parliament and the Council of 12 December 2012 establishes transitional arrangements.

Future treaties concerning trade and investment matters

The second restriction raised above poses significant ramifications for the UK concerning recently negotiated treaties and future treaties pertaining trade and investment.

Regarding recently negotiated treaties such as CETA, it is likely that these treaties would apply provisionally to the UK so long as the UK remains a Member State of the EU (Burgstaller and Zarowna, Possible Ramifications of the UK’s EU Referendum on Intra- and Extra-EU BITs (October 2016), p 572). However, the part that the UK would be able to play in current negotiations for deals such as TTIP is ambiguous.

As for negotiations with extra-EU countries, while the UK has expressed great interest in commencing trade talks with countries such as Australia and USA as soon as possible, Article 207 of the TFEU presents a significant fetter. As highlighted by Burgstaller and Zarowna (p 573), it is unlikely that the UK can commence negotiations with States with which the EU has already completed investment agreements, or are currently negotiating an investment agreement. This position has been recently flagged by Australia’s Minister for Trade, Tourism and Investment, Steven Ciobo, who ruled out negotiating a trade agreement with the UK government until the UK’s departure from the EU has been formally completed (Payne, Australia Has Just Dealt a Massive Blow to the UK Government’s Brexit Plans (25 October 2016)). Ciobo made the statement on the basis that he had received advice telling him that entering formal talks before the completion of Brexit would be illegal.

UK-Australia Relations: Future Challenges and Opportunities

Given that the UK is an important trade and investment partner of Australia, a future trade and investment agreement is well on the cards. According to statements released by May’s government, the aim was – prior to the roadblock identified by Ciobo – to draft a UK-Australia deal for signature by 2019 (Khan, Australia Rules Out Starting Trade Negotiations (26 October 2016)). This would likely increase the trade between the two countries, which is already substantial with Australian government trade figures indicating that in 2014, Australia exported A$8.3bn to the UK and imported A$12.4bn. Further, the UK is the third largest source of foreign direct investment in Australia, and the second most popular destination for Australian foreign direct investment flows abroad (Austrade Economics, Beyond Brexit: Potential Implications for Australian Trade and Investment (July 2016), p 17).

However, despite the valuable opportunity that Australia has to strengthen ties and the positive attitudes that both governments have voiced to a potential agreement, the Australian government will need to be keenly monitoring and responsive to the continued uncertainty and shifting goal posts that the UK faces. These include:

  • uncertainty concerning the relationship that the UK and the EU would adopt, and most relevantly the level of access that the UK would have to the EU’s Single Market;
  • continued challenge and uncertainty over the operation of Article 50 of the Treaty on the European Union (‘TEU’), which designates the process for a Member State to leave the EU, and thus severe lack of clarity as to when the UK would formally commence Brexit negotiations, let alone finish these negotiations; and
  • political challenges relating to striking trade deals in the EU, as reflected in the recent issues with the finalisation of the CETA negotiations.

Though, as identified by Austrade Economics, Australia is not considered to be one of the economies most exposed to Brexit fallout, it would be prudent of Australia to keep abreast of these developments, if only to know how best to forge a future relationship with both the UK and the EU.

Russia’s failed bid for a seat on the Human Rights Council and what it means for Australia’s campaign for 2018 – Harry Aitken

Australia is campaigning for a three-year term on the United Nations Human Rights Council (HRC), commencing in 2018. While Australia’s candidacy will not be considered until next year, the Government will be looking closely at the outcome of this year’s ballot, in which States were elected for the 2017 – 2019 term. On 28 October 2016, the General Assembly nominated 15 States to the HRC by secret ballot. In a first for a permanent member of the Security Council, Russia’s bid for re-election was unsuccessful. Russia’s failure has been attributed to its conduct in Syria, with one diplomat commenting ‘[t]hey bomb a hospital one day, they run for the Human Rights Council the next. And they wonder why they missed the cut’. The issue for Australia, which is facing ongoing criticism of its treatment of asylum seekers on Manus Island and in Nauru, is the extent to which a State’s human rights record can frustrate its chances of election to the HRC.

This post will first consider the voting procedures of the HRC, followed by commentary on what Russia’s failed bid might mean for Australia’s 2018 campaign.

 

The Human Rights Council

The HRC is of fairly recent origin. It was brought to life in 2006 by General Assembly Resolution 60/251 and was given responsibility for ‘promoting universal respect for the protection of all human rights and fundamental freedoms for all, without distinction of any kind and in a fair and equal manner’. The HRC is the successor to the United Nations’ Commission on Human Rights and has new functions, including responsibility for a universal periodic review of each State’s compliance with its human rights obligations. There are 47 seats on the HRC, which are divided between the five official UN regions in the following way: Africa (13 seats); Asia (13 seats); Latin America and the Caribbean (8 seats); Western Europe and Other (7 seats); Eastern Europe (6 seats). Australia is part of the Western Europe and Other group, which also inlcudes the US, Canada and Israel. Russia is part of the Eastern Europe group. One third of the HRC is up for election each year and members serve three-year terms.

An outside observer would be forgiven for assuming that only States with unblemished human rights records would be fit to sit on the HRC. Most legal systems abide by the idea that one criminal is not fit to judge another, and so individuals convicted of serious crimes are precluded from appointment to judicial office. However, this logic does not apply to the HRC. States that have failed to meet their own human rights obligations are appointed to judge the compliance of other States with the same obligations. This is ironic, but it is also a realpolitik of the institution. There are no 47 States with perfect human rights records. There are also no absolute rules on membership.

Resolution 60/251 requires members of the General Assembly to ‘take into account the contribution of candidates to the promotion and protection of human rights’ when voting for HRC candidates. Yet it does not preclude members from voting in favour of States that have violated their human rights obligations. The Resolution requires members of the HRC to ‘uphold the highest standards in the promotion and protection of human rights’. But this does not prevent a member from abusing a human right. The words ‘highest standards’ suggest that conduct is to be measured against the practice of other States rather than the rules in human rights treaties. The Resolution empowers the General Assembly by a two-thirds majority to suspend the rights of membership of a member of the HRC if the member ‘commits gross and systematic violations of human rights’. Yet this measure is hard to deploy, because it requires a super majority. It also has a high threshold: the word ‘and’ dictates that it cannot be triggered by a single gross abuse or systemic minor abuses. Finally, it has a suspensive rather than a terminative effect on membership. The gaps in the rules leave room for a General Assembly member to elect a candidate by reference to political as well as legal standards. This means that strategic alliances, political favours and diplomatic clout all play some part in the election of candidates.

Does Russia’s failure in this year’s election suggest there is a limit to this? Does it reveal that there might be a point at which a State’s conduct is so egregious that the idea of nominating it to the HRC becomes untenable, even if there are political circumstances that would otherwise sway the General Assembly to vote for it? Before answering these questions, it is necessary to consider the 2016 vote in more detail.

 

Russia’s bid

The General Assembly nominated Hungary and Croatia to the HRC as the two representatives of the Eastern European group for the 2017 – 2019 term. They received 144 and 114 votes respectively. Russia narrowly missed out, receiving 112 votes. This may still seem like a lot of votes, but it represents a significant reduction from the previous election in 2013 in which Russia received 176 votes. The previous vote was held on 12 November 2013, which was before Russia invaded parts of Ukraine and annexed Crimea in 2014, and intervened in the Syrian Civil War in 2015. It also follows a significant lobbying effort against Russia’s candidacy by human rights groups. This included a letter to the General Assembly, signed by 87 prominent individuals and NGOs, urging members to ‘carefully consider whether Russia’s Syria abuses are compatible with the principles and aims of the world’s principal inter-governmental human rights body’. It is worth observing that Saudi Arabia, despite drawing wide criticism for its intervention in Yemen, was elected to the HRC. But that is likely due to the fact that it ran uncontested in the Asia-Pacific group; there were four seats available and only four contenders.

Russia is not the first State whose position on a human rights body has been jeopardised by its failure to adhere to international rules. In 2011, the General Assembly suspended Libya’s membership of the HRC over concerns about Muammar Al-Qadhafi’s violent crackdown on anti-Government protestors. And in 2001, the US was voted off the Commission for Human Rights (including by some of its allies) over its failure to support UN institutions and various international rules.

Diplomats have labelled the rejection of Russia’s bid for the HRC ‘historic’, as it suggests that candidates’ human rights records play an important role in General Assembly voting behaviour. Thus, powerful States, routinely elected to international bodies, are not immune from this. Notwithstanding this, the success of Saudi Arabia shows that other factors, like the extent of competition with other candidates for the HRC, will play a role. Moreover, the continued appointment of China and the US, who by no means have unblemished human rights records, suggests that the threshold for preclusion is high.

Australia’s campaign

Australia’s nomination to the HRC is far from assured. It will not be in the same position as Saudi Arabia as there are more contenders than there are places. Spain and France will also be campaigning for a seat for the Western European and Others group, but only two spots are open for the 2018 – 2020 term. Those States are likely to garner strong support from fellow EU members.

Russia’s failure suggests that Australia’s human rights record will be an important factor in the election. Australia’s treatment of asylum seekers has attracted significant global attention, including in Australia’s own universal periodic review in 2015. Australia has also been recently accused of breaching its international obligations with respect to offshore detention centers by the UN Special Rapporteur on Torture and Amnesty International. Australia’s campaign focuses on its human rights successes in other areas – like abolition of the death penalty – but these may not mitigate its high profile failures in other spaces. Moreover, its new plan to prevent boat arrivals from ever obtaining any type of Australian visa is unlikely to improve its image.

As recent history has shown, States with poor human rights records are habitually voted onto the HRC. But Russia’s failure is a heartening reminder that, at least to some extent, a State’s compliance with its human rights obligations is a factor in how General Assembly members will vote. This fact, along with strong competition for seats, should give Australia cause for concern for next year’s election. If Australia is unsuccessful, it would be a set-back in the short term. But it would also create a new pressure point for reform by demonstrating that the way that we treat those at home will affect our influence abroad.

 

Harry Aitken is the former Editor-in-Chief of the ILA Reporter. The views expressed in this article are solely his own.

Does ISDS Promote FDI? Asia-Pacific Insights from and for Australia and India – Luke Nottage & Jaivir Singh

Treaty-based Investor-State Dispute Settlement (ISDS) keeps attracting media attention. An example is a social media campaign by the ‘GetUp!’ group, which aims generally ‘to build a progressive Australia and bring participation back into our democracy’, objecting to ratification of the Trans-Pacific Partnership (TPP). This free trade agreement (FTA), signed in February 2016, encompasses Australia and 11 other Asia-Pacific economies generating around 40% of world GDP. Whether and how the TPP will be ratified and come into force has become very uncertain anyway, after the unexpected victory of Donald Trump in US presidential elections. Although Trump seems already to be backtracking on some of his pre-election positions, he had been opposed to the US ratifying the TPP and indeed favoured renegotiation of the longstanding North American FTA with Canada and Mexico. Both FTAs include the option of ISDS, allowing foreign investors to bring direct claims against host states for violating substantive commitments such as non-discrimination or adequate compensation for expropriation.

Nonetheless, taking advantage of the extra uncertainty now surrounding the TPP, China is already trying to get Australia’s support to progress negotiations for a broader FTA, establishing a “Free Trade Area of the Asia-Pacific” (FTAAP). China had been pressing for a FTAAP as it had not been included in TPP negotiations. After the TPP was signed, China had also tried to accelerate negotiations for the Regional Comprehensive Economic Partnership (RCEP or ASEAN+6) FTA, underway since late 2012 and involving ten Southeast Asian states along with China, Japan, Korea, India, Australia and New Zealand. Ministerial statements and a leaked draft Investment Chapter indicate that ISDS provisions remain on the negotiating agenda for RCEP (Kawharu, Amokura and Nottage, Luke R., Models for Investment Treaties in the Asian Region: An Underview, 2016).

Public opposition to ISDS therefore remains an important issue, particularly in the Asia-Pacific region. Legal professionals need to engage with this debate and understand the pros and cons of this dispute resolution procedure, especially the investor-state arbitration mechanism. On the one hand, the GetUp! Campaign against the TPP had focused on the risk of Australia being subject to ISDS claims especially from US investors, in light of their claims against Canada under the North American FTA. Yet damages awarded by arbitrators or through settlements amount to only 0.05% of US FDI in Canada, and the latter’s investors bring more ISDS claims per capita than US investors.

On the other hand, the GetUp! campaign did not adequately explain or consider why and how ISDS commitments are made. Host states have increasingly offered such protection to foreign investors in investment treaties since the 1970s. Bilateral investment treaties (BITs) proliferated especially as communist states began to open up their economies from the 1990s. Bilateral and regional FTAs, usually with investment chapters also containing ISDS protections, were concluded after the collapse of efforts to develop a multilateral investment agreement through the World Trade Organization (WTO) and Organisation for Economic Co-operation and Development (OECD).

The extra option of treaty-based ISDS was seen as a more direct and less politicized procedure compared to inter-state dispute settlement. The latter is still typically provided in investment treaties (but hardly ever used), as well as for trade disputes under the WTO (where, for example, Australia has only been complainant in seven cases – last in 2003). Credible commitments through ISDS-backed treaties were seen as particularly important for developing countries where domestic courts and legal protections did not meet international standards.

Yet ISDS has recently become a lightning rod for public opposition to FTAs (and economic globalization more generally), often after host states are subjected to their investment treaty claims (Nottage, Luke R., Rebalancing Investment Treaties and Investor-State Arbitration: Two Approaches,, 2016). For example, major debate emerged in India after Australia’s White Industries won a claim in 2011 under UNCITRAL Arbitration Rules as provided by the BIT with India (signed with Australia in 1999). The tribunal found that India had not satisfied the promised “effective means” for the investor to enforce a commercial arbitration award (against an Indian SOE). This and subsequent claims prompted the Indian government to finalise a revised (less pro-investor) Model BIT in December 2015 It is now being used in negotiating new BITs (eg that signed with Cambodia in 2016) and indeed when proposing to terminate older-generation treaties (including with Australia).

Similarly, Philip Morris Asia’s much larger claim initiated in 2011 under a BIT signed in 1993 with Hong Kong, for alleged expropriation of trademarks from Australia’s tobacco plain packaging legislation, led to escalating local media coverage – until the arbitral tribunal rejected jurisdiction in 2015 (Hepburn, Jarrod and Nottage, Luke R., Case Note: Philip Morris Asia v Australia, 2016). This cause celebre also became a factor behind the Gillard Government Trade Policy Statement announcing in 2011 a major shift for Australia: eschewing ISDS in new treaties, even with developing countries (Nottage, Luke R., The Rise and Possible Fall of Investor-State Arbitration in Asia: A Skeptic’s View of Australia’s ‘Gillard Government Trade Policy Statement’, 2011). This resulted in no significant FTAs being concluded, until a new Coalition Government gained power in late 2014 and reverted to including ISDS on a case-by-case assessment (Nottage, Luke R., Investor-State Arbitration Policy and Practice in Australia, 2016). The current Labor Opposition maintains its objections to ISDS, creating difficulties for Australia to ratify the TPP.

Australia’s temporary shift was partly due to politics: in 2011 the (centre-left) Gillard Labor Government was in coalition with the Greens, who are even more opposed to free trade and investment. But the stance also relied on arguments from some economists, even though they instead favour more free trade and foreign investment, albeit through unilateral or perhaps multilateral initiatives rather than bilateral or even regional FTAs. Developing the latter perspective , a majority report of the Productivity Commission in 2010 into Australia’s FTAs had argued against the common world-wide practice of offering foreign investors extra procedural rights such as ISDS. It did concede that such extra rights might be justified, for example if they led to greater cross-border flows in foreign direct investment (FDI). Yet the Commission pointed to a few studies suggesting that, on an aggregate (world-wide) basis, ISDS-backed treaty provisions had not significantly increased flows.

A recent econometric study by Luke Nottage (a co-author of this posting) with Shiro Armstrong casts doubt on that observation (Armstrong, Shiro Patrick and Nottage, Luke R., The Impact of Investment Treaties and ISDS Provisions on Foreign Direct Investment: A Baseline Econometric Analysis, 2016. After an extensive review of existing empirical research and associated methodological issues, their study instead found positive and significant impacts from ISDS provisions on FDI outflows from OECD countries over 1985-2014, using a Knowledge-Capital Model with a dynamic panel indicator (effectively addressing the problem of endogeneity in variables). This impact on FDI could be found from ISDS provisions on their own, especially when ISDS was included in treaties signed or promptly ratified with non-OECD or less developed countries. The econometric study by Armstrong and Nottage also found a positive and significant impact from ISDS provisions when combined with the Most-Favoured-Nation provision, which is a key and indicative substantive treaty commitment for foreign investors. (This aspect was tested because the “strength” of treaties can vary in terms of substantive commitments by host states: we might not expect much impact on FDI even from ISDS provisions if the substantive protections and liberalisation commitments are few.)

Counter-intuitively, however, the study found that in general FDI impact was even larger for weaker-form ISDS provisions. This could be due to investors historically having been impressed by a broader “signaling” effect from states concluding investment treaties. Yet the impact from ISDS provisions also seems to be diminishing since 2001, when ISDS claims started to pick up world-wide and therefore investors (or at least legal advisors) could have begun to pay more attention to the details of ISDS and other treaty provisions. Reduced impact since 2001 may be related to more efforts from host states to unilaterally liberalise and encourage FDI. However, it could also be due to a saturation effect (as treaties began to be concluded with less economically important partner states), or indeed due to less pro-investor provisions being incorporated into investment treaties (influenced by more recent US practice, partly in response to ISDS claims (Alschner, Wolfgang and Skougarevskiy, Dmitriy, Mapping the Universe of International Investment Agreements, 2016.

Further variables impacting on FDI (such as double-tax treaties) could be investigated, as can regional differences. Data limitations also remain, as there is now considerable FDI outflow from non-OECD countries. Nonetheless, this baseline study suggests that it has been and still may be risky to eschew ISDS provisions altogether. In particular, results indicate a strong positive effect on FDI flows from ratified investment treaties overall even from 2001. So states would have missed out on that if they had insisted on omitting ISDS, and this then became a deal-breaker for counterparty states.

Further econometric research underway at a Delhi-based thinktank suggests that India was correct not to abandon ISDS provisions altogether in its revised Model BIT (and to retreat from an even less pro-investor earlier draft of the Model BIT. While this study by Jaivir Singh (one of the co-authors of this posting) and his colleagues is still ongoing, preliminary results (using instead a gravity-type model) find that although the signing of individual BITs had an insignificant impact on FDI inflows into India, the cumulative effect of signing BITs is significant and so is the coefficient associated with the signing of FTAs. Since almost all of India’s investment treaties provide for full ISDS protections, these preliminary results suggest that ISDS can have a positive influence on foreign investment, albeit in a non-obvious compound manner.

Overall, these studies suggest that ISDS-backed treaty provisions liberalising and protecting FDI have had a significant impact, but in complex and evolving ways. Agreeing to dialed-back ISDS provisions and even substantive commitments (perhaps following recent EU preferences may be an acceptable way forward. This is true especially for Australia and India, as they continue negotiations bilaterally as well as through RCEP, and perhaps eventually for the FTAAP FTA.

Luke Nottage is Professor at University of Sydney Law School & Jaivir Singh is Associate Professor at Jawaharlal Nehru University, Delhi.

This post draws on Nottage’s joint project researching international investment dispute management, funded by the Australian Research Council (DP140102526, 2014-7); and Singh’s ongoing project assessing the impact of investment treaties on FDI in India, for the Indian Council for Research on International Economic Relations. Singh was a visitor at the University of Sydney in October 2016. The article was first published by the Asia-Pacific Forum for International Arbitration, and republished here with permission.

The Implications of Trump Denouncing the Trans-Pacific Partnership Agreement – Leon Trakman

President- elect Donald Trump’s announcement on Tuesday 22 November 2016 that the US will not ratify the Trans-Pacific Partnership Agreement (TPP) is not a surprise.  He had stated that he would do as such throughout the presidential campaign, as had his democratic rival, Hillary Clinton.

His formal announcement is that the state parties to the TPP, including Australia, will revert to the position they had been in before the TPP was negotiated, seven years ago.

For now, there is no doubt that the TPP’s demise will disappoint the expectations of some TPP states, such as Japan, itself a late party that has strongly endorsed it.  Developing countries like Vietnam that stood to benefit disproportionately from its ratification will also be disappointed.

However, President-elect Trump’s announcement is unlikely to throw transpacific economies into turmoil, not only because his position was fully expected, but because the perceived benefit of the TPP for regional trade has been hotly debated and denounced by various labour, environmental, health and consumer lobby groups, among others, from its inception.

President-elect Trump’s announcement nevertheless has strategic importance, particularly in asserting that the US will negotiate bilateral trade agreements that best suit US interests in place of the TPP.  This statement is vague at best and wholly unsubstantiated.  First, it amounts to little more than a broad aspiration in the absence of verification.  Second, it does not stem from prior strategic planning by key US authorities.  In fact, President-elect Trump has opined as much before appointing a Secretary of Commerce or a US Trade Representative.  It is difficult to conceive of how replacing the world’s largest regional trade agreement with a series of bilateral trade agreements could be seriously contemplated without the serious consideration of such trade authorities. Third, as a practical matter, negotiating bilateral agreements take time, as Britain is likely to learn post-Brexit; and until they are negotiated, trade barriers are likely to continue.  Fourth, there is no assurance that the US will do better in negotiating bilateral trade agreements than under a ratified TPP.  States may run for cover from such bilateralism fearing that a pro-US trade deal will be too expensive to sustain, even though the US remains the world’s largest trade importer.  Fifth, the US already has bilateral trade agreements with a number of transpacific countries, including its 2004 US-Australia Free Trade Agreement.  Therefore, in many cases, no new bilateral treaties will eventuate in the absence of real economic impetus to negotiate them.

Importantly, the US withdrawal from the TPP, which excludes China, may provide China with even greater opportunity to conclude regional trade partnerships that exclude the US, such as the Regional Comprehensive Economic Partnership (RCEP) to which Australia is also a party.

Trump’s rejection of the TPP nevertheless has important economic consequences.  The TPP is particularly attractive to member states as a prototype treaty directed at reducing and then eliminating trade barriers, including costly import and export duties.  In contrast, the RCEP does not replicate that resolve, making it less attractive economically to countries like Australia seeking access to foreign markets.

If the US is to remain the primary player in defining global trade, the result of Trump’s assertion is likely to be a reluctance of states to reduce or eliminate trade barriers in bilateral trade agreements.

If President-elect Trump’s declaration against the TPP has legs to stand on, it is likely to undermine trade liberalisation more generally; and that result, feared by macro-economists, is potentially the most troubling.

Professor Trakman is a Barrister, Professor of Law and Former Dean at the University of New South Wales

The Champagne Problems of the Paris Agreement – Josh Sheppard

 

Introduction

On 4 November 2016, the Paris Agreement came into force, just under a year after it was concluded and signed. Coming into force earlier than expected, the First Meeting of the Parties to the Paris Agreement (“CMA1”) has been hastily organised to coincide with the twenty-second session of the Conference of the Parties (“COP22”). This article will address two critical questions regarding CMA1 and COP22: what is left for discussion after last year’s historic result, and how will the earlier-than-expected CMA1 affect negotiations?

 

The Detail

Whereas the 21st Conference of the Parties (“COP21”) was primarily concerned with the broad mechanisms of international climate cooperation – limiting global warming to 2°C, with an aspirational limit of 1.5°C and mandating that greenhouse gas emissions peak by the second half of the 21st Century – COP22/CMA1 will focus on the practical details of how these mechanisms will work and goals achieved.

 

Nationally Determined Contributions 

Some of the key negotiations will centre around the Nationally Determined Contributions (“NDCs”), which outline each country’s intended emissions reductions. Successive NDCs must contain greater emissions reductions and must reflect each party’s “highest possible ambition”. Decisions are scheduled to be made about the features of NDCs, how NDCs can be communicated in ways that aid clarity, transparency, and understanding, and what guidance should be given regarding accounting for NDCs so that there is consistency between communication and implementation. The depth of what remains unknown surrounding the practical operation of the NDCs is evident through analysis of the different debates currently taking place, particularly regarding timing and accounting practices.

 

  1. Timing

NDCs are due every five years (Art. 4(9)), although the exact timeframe is to be determined by the Parties: Art. 4(10). India has suggested that developing countries should not have to submit NDCs every five years. This submission may fuel debate in respect of how far the principle of “common but differentiated responsibilities and respective capabilities” extends, especially given that the Agreement explicitly refers to a five-year timeframe.

 

  1. Accounting

Accounting rules for determining emissions reductions illustrate further contrasts in the approaches adopted between developed and developing country Parties. The power of such rules has been demonstrated by Australia, infamously taking advantage of a rule that allowed for the crediting of good past performance under the initial Kyoto Protocol period to meet its current 2020 target, despite emissions actually being projected to increase by the end of the target period.

 

Some countries are seeking to avoid a rigid accounting system, with China advancing the following proposal:

[D]eveloped country Parties should take the lead in applying the guidance for accounting” [while] developing country Parties should be allowed to choose … the sectors and gases covered in their NDCs and specific methodologies on accounting”.

 

Iran and India, too, stress the different responsibilities for developed and developing countries in communicating NDCs, both specifically suggesting that the latter should not have to report on land use.

 

Demonstrating these rules’ critical importance to an effective Paris Agreement, the United Nations Framework Convention on Climate Change (“UNFCCC”) has made several comments regarding the accounting practices employed by Parties in their intended NDCs. Inconsistent reporting on land use between parties and the failure to provide information on assumptions and methods used to account for those emissions are obstacles to evaluating the entire effect of the actions outlined in the NDCs. Meanwhile, Costa Rica (on behalf of a coalition of Latin American countries) and Japan have requested that NDCs more clearly outline which emissions reductions are unconditional and conditional. These concerns, along with the differing application of agreed accounting standards justified by “common but differentiated responsibilities and respective capabilities” may see confidence in the NDC system decline and the Agreement unravel, if left unaddressed.

 

The dilemmas posed by the unanticipated swiftness of the Paris Agreement

Entering into force faster than most commentators expected, the Paris Agreement’s swift adoption has also created a headache for administrators and diplomats. Those who have not yet ratified the Agreement are technically not allowed to participate in the Meeting. The Climate Institute have highlighted the importance of allowing those who have not yet ratified the Agreement to participate in these processes, especially as many of these countries may have legitimate reasons for not yet having ratified the Agreement. Meanwhile, guidance that is supposed to be provided by sub-committees and working groups to CMA1 remains unfinished, the process of creating such advice having only begun this year. Therefore, many of the decisions that CMA1 was scheduled to make under the decision of COP21 are not yet ready to be made.

 

The World Resources Institute points out that this ought to be easily resolved, as COP22 can simply adopt new timeframes that accord with the early entry into force of the Agreement. However, the Paris Agreement contains reference to decisions being made at its first meeting, including the determination of common timeframes for NDCs. As this is in the treaty text, it is more difficult to amend the requirement for decisions to be made.

 

The Climate Institute posits that COP22 must formally create a method by which these practicalities can continue to be discussed and determined until the end of 2018. The World Resources Institute suggests that one possible solution is the suspension of CMA1 until agreed, providing the example of COP6’s suspension for seven months after the Conference was first opened. This appears to be the most likely solution.

 

Conclusion 

COP22, as CMA1 or its potential starting point, is where the difficult work begins in ensuring that emissions are reduced in a manner consistent with the Paris Agreement. The early entry into force of the Paris Agreement has, perhaps ironically, made this difficult work all the more complicated. It will likely mean the delay of important decisions to allow for expert guidance, the opportunity for Parties to put their views, and ratification by most, if not all, Parties. To resolve these issues, countries will have to draw further on that same cooperative spirit that facilitated the swift and unanimous adoption of the Paris Agreement.

 

Josh Sheppard is Assistant Editor of the ILA Reporter.

President Trump: a risk to some, but an opportunity for others – Nathan Huynh

When we first heard the news of Donald Trump, financial markets initially plunged as expected. However what was remarkable was that upon hearing his surprisingly conciliatory speech, the market then underwent one of the most incredible recoveries in history. Many began to consider the opportunities that a Trump Administration brings, particularly in the legal market.

Before I go any further, I just want to make it clear that I am not a Trump supporter, nor am I a Clinton supporter and aim to make this as neutral as one can.

The short answer is that it is impossible to accurately predict how the election of Donald Trump will impact the legal market, particularly given his change of tone and direction post-election. However assuming that Trump does follow through on them, below are my thoughts on how some of his proposals will impact the legal market.

Financial regulation

One of Trump’s first post-election announcements has been that he will work towards dismantling the Dodd-Frank Act and replace it with policies that “encourage economic growth and job creation”. Assuming this means a loosening of the existing rules (which may be good or bad – depending on what side of the fence you sit on), financial institutions will be scrambling to seek legal advice on how to best prepare for and comply with Trump’s alternative to the Dodd-Frank Act.

International trade deals

If Trump does follow through on his plans to rip up the international trade deals such as the Trans-Pacific Partnership and adopt a more protectionist policy, it is safe to say that the United States’ allies and partners will not go down without a fight. There will be an increase in legal work in the area of international law, particularly in relation to the legality of overturning existing trade agreements, structuring newly negotiated trade agreements and international arbitrations with affected countries.

Infrastructure

On a less contentious note, in his acceptance speech Trump emphasised that he was going to rebuild infrastructure in the United States. Regardless of whether his claims that the infrastructure will be “second to none” turns true or not, an emphasis on infrastructure will lead to a need for legal advice in the areas of construction, finance, real estate and regulatory issues (and hopefully some of this will involve international parties, leading to some opportunities world wide).

Immigration and employment law

Let’s now get the elephant in the room out of the way. During the campaign, Trump announced proposals requiring employers to check the immigration status of their employees. I would imagine such a measure would leave businesses scrambling for legal advice on how to ensure compliance and (sadly) advice on whether their workers have any chance of staying in the United States.

Healthcare and insurance

In a country without universal health care, any change to healthcare and insurance laws will have a profound impact on most Americans. Insurance firms, employers and healthcare providers will no doubt need to seek legal advice should Trump follow through with the Republican party’s desire to get rid of Obamacare (which seems highly likely).

Conclusion

In summary, the election of Donald Trump will lead to a strong level of change and uncertainty. Nobody can predict what direction he will take the free world, however one thing is certain – like always, any change can be translated into an opportunity.

Nathan Huynh is an Australian-based lawyer practicing in the finance division of a leading global law firm.

Common Article 2 as a paradigmatically challenging threshold for the application of IHL – Rob McLaughlin

Our blog mini-series, co-hosted with the ICRC, wraps up with a post by Associate Professor Rob McLaughlin, Co-Director of the ANU Centre for Military and Security Law.  Dr McLaughlin shares his reflections on common article 2 and the important question of when IHL must be applied.

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Ensuring respect: the role of State practice in interpreting the Geneva Conventions – John Reid

In this second instalment of the mini-series on the ICRC’s Updated Geneva Convention Commentaries, John Reid, Head of the Office of International Law at the Commonwealth Attorney-General’s Department, highlights the importance of State practice in understanding the common article 1 obligation to respect and ensure respect for IHL.

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