Philip Morris v Australia award released: Tribunal decides that Philip Morris’ claim constitutes an abuse of rights – Jack Williams

On 16 May 2016 the Permanent Court of Arbitration released a redacted version of the Tribunal’s award on Jurisdiction and Admissibility (“Award”) in the investor-State arbitration dispute between Philip Morris Asia Limited (“Philip Morris”) (part of the Philip Morris group) and the Commonwealth of Australia.

The arbitration concerned the Tobacco Plain Packaging Act 2011, which was passed by the Australian Parliament on 21 November 2011 (and became law following Royal Assent on 1 December 2011). On 21 November 2011 Philip Morris served Australia with a formal Notice of Arbitration that initiated a lengthy international arbitration proceeding over Australia’s tobacco plain packaging laws. On 17 December 2015 the Tribunal issued a unanimous decision in Australia’s favour, but the award could not be released until confidential information was redacted.

In its award the Tribunal held that it was precluded from exercising jurisdiction over the tobacco plain packaging dispute because Philip Morris’ initiation of the arbitration constituted an ‘abuse of rights’. This was so, the Tribunal held, because Philip Morris had restructured its business at a time when there was a reasonable prospect that the dispute would materialise and it did this for the principal, if not sole, purpose of initiating arbitration proceedings against Australia over its tobacco plain packaging laws under the 1993 bilateral investment treaty between Australia and Hong Kong. The Tribunal was unconvinced by Philip Morris’ argument that other business and tax advantages were the principle drivers behind the restructure (Award, paras 582 and 584).

Interestingly, the Tribunal held that the test for whether a corporate restructure will constitute an abuse of rights is if an investor restructures its business to take advantage of treaty protection at a time when a specific dispute is foreseeable. The Tribunal held that ‘a dispute is foreseeable when there is a reasonable prospect…that a measure which may give rise to a treaty claim will materialise’ (Award, para 554). This can be contrasted with another leading award on the abuse of rights doctrine, Pac Rim v El Salvador, where the Tribunal held that an abuse of rights will only be established where restructuring takes place at a time when a specific dispute can be foreseen ‘as a very high probability and not merely as a possible controversy’ (Award, para 554). Accordingly this latest award applies a lower threshold test than that in the Pac Rim award for what constitutes an abusive restructure.

In conclusion this award provides authority for the proposition that multinational companies may restructure their business to take general advantage of potential treaty protections. However, if the corporate restructuring occurs at a time when there is a reasonable prospect that a specific dispute will materialise, the abuse of rights doctrine may preclude the investor from taking advantage of any applicable treaty protections with respect to that specific dispute.

Philip Morris sought to either have the tobacco plain packaging laws withdrawn or not applied to their investments or, in the alternative, to be awarded at least US$4.16 billion in damages from the Australian Government (Award, para 89).

The next and final stage in the proceedings is for the Tribunal to decide on the allocation of costs associated with the arbitration (Award, para 590).

Jack Williams is a Legal Officer at the Australian Attorney-General’s Department and spent three years working on the Australian Government’s legal defence of tobacco plain packaging in the arbitration that is the focus of this article and in the World Trade Organization. The views expressed in this article are the author’s own and do not necessarily represent the views of the Australian Government.

Melbourne Journal of International Law – Call for papers for issue 17(2)

The Editors of the ILA Reporter are pleased to alert readers to the following call for papers issued by the Melbourne Journal of International Law:

The Editors of the Melbourne Journal of International Law, Australia’s premier generalist international law journal, are now inviting submissions for volume 17(2). This issue will have a special focus on the legal implications of the Trans-Pacific Partnership, and space will also be available for articles on other issues of international law.

For consideration for inclusion in the print issue of 17(2), authors should submit on or before July 1, 2016. Submissions and inquiries should be directed to law-mjil@unimelb.edu.au. For more information, please visit http://www.law.unimelb.edu.au/mjil#submissions.

ILA Conference 2016 – Johannesburg – Update

The 77th ILA conference will be taking place in Johannesburg, South Africa, from 7-11 August 2016. The President of the South African Branch, which is organising the conference, has sent the following update to the Australian Branch:

“The 77th Biennial Conference of the International Law Association, which is scheduled for 7 – 11 August 2016 in Johannesburg, will mark the second time only for a biennial conference to take place on the African continent in the almost 150 year history of the Association. Expectations are therefore high that the members of the historically dominant ILA constituencies in the North will attend the conference in substantial numbers in the interest of providing a platform for the establishment of a community of international law scholars that is more representative of the regions of the world than is currently the case.

Apart from this imperative, and in addition to the reporting sessions of some thirty ILA committees and study groups, the programme offers parallel sessions on issues of regional and global interest and significance. These include the UN report on Africa’s illegal capital flight; harmonization efforts in international commercial law; BRICS in international law; the peace and security architecture of the African Union; automated weapon systems and international law; marine bio-diversity beyond areas of national jurisdiction; investor – state dispute resolution; nuclear weapons, non-proliferation and contemporary international law; the law of armed conflict in Africa; and international criminal law.

Leisure options abound. Pre- and post-conference tours to the spectacular Victoria Falls and to Cape Town are available. In Johannesburg and surroundings delegates have the option to visit game farms, the Constitutional Court, the Apartheid museum, SOWETO and Liliesleaf Farm where senior members of the ANC were arrested in 1963 for plotting the overthrow of the Apartheid government.

The members of the South African Branch of the ILA have invested a lot of time and energy in putting this conference together in adverse circumstances. We hope that we can count on the patronage of our fellow ILA members in other branches.”

All members and subscribers are encouraged to attend this significant conference. To register, visit http://ila2016.com/index.php/register-now/.

Transparency the key to avoiding a climate-action-induced economic crisis – Joshua Sheppard

An unfortunate side-effect of action on climate change

Buoyed by renewed global enthusiasm for climate action after the Paris Agreement and the US-China Joint Presidential Statement on Climate Change, the financial community is increasingly turning its mind to what happens when governments act to limit greenhouse gas emissions. Previously, fossil fuel companies had planned to develop approximately five times the amount of fossil fuel than we can safely burn if we are to prevent an average temperature increase of more than 2°C. Capital has been and will continue to be wasted on carbon intensive projects that should not proceed under the new regime; a reality that the market is beginning to wake up to. When this reality truly strikes investors, it may prompt a dangerous market-wide share sale in fossil fuel companies and precipitate a decline in those companies’ market values.

Australians with superannuation fund accounts stand to lose money when this carbon bubble bursts, because most superannuation funds invest in blue chip energy and resources companies such as ExxonMobil, BP, Shell, AGL, Santos and their financiers, large global banks and our Big Four banks in Australia; NAB, Commonwealth Bank, ANZ and Westpac. If and when fossil fuel companies suffer economic hardship because their projects are no longer viable (see, for instance, the bankruptcy of Peabody Energy in mid-April 2016), superannuation members will lose out. As the Asset Owners Disclosure Project Chair and former federal leader of the Liberal Party of Australia, Dr John Hewson, put it, the eventuation of climate risk could “easily precipitate a financial crisis”. Having put its support behind UN action on climate, the G20 has begun turning attention towards how to prevent such a crisis.

Why the risk of stranded asset persists

We all have a degree of leverage to ensure our concerns over the management of climate risk are addressed through our “consumer sovereignty”. Most Australians could easily change superannuation funds to those that are mitigating climate change risk in their investment portfolios. Like any market, if people demand a certain product, it is often supplied by budding entrepreneurs. However, it can be difficult at the best of times to understand whether one superannuation fund is better than another at managing its investment portfolio, let alone climate risk. Considering that many funds present their climate-related information in different ways, and use different metric systems of measurement, it is a tough task to make meaningful comparisons. This presents a concerning information and comprehension gap for consumers that has to be filled.

The G20’s big move

The challenge of providing transparency on climate risk to the financial sector has been recently taken up by the G20, which has asked the Financial Stability Board (‘FSB’) to examine how the financial system can better acknowledge and consider climate change risks. The FSB, made up of the finance ministers and central bank governors of the G20 countries, is a soft law body established in the wake of the Global Financial Crisis which aims to ‘assess vulnerabilities affecting the global financial system and identify…the regulatory, supervisory and related actions needed to address them’ (Art 2(1)(a), FSB Charter).

The FSB has, in turn, established a new Taskforce for Climate-Related Financial Disclosures (‘TCFD’), and appointed three-time mayor of New York City and businessman Michael Bloomberg, to lead the initiative. Its mission is to ‘develop voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers and other stakeholders’. In its Phase I report (p 2), the TCFD concluded that disclosure by companies currently is ‘fragmented and incomplete’, and this is preventing ‘investors, creditors, and underwriters from accessing information that can inform their decisions’.

Most significantly, the TCFD announced in its Phase I report (p 26) that it will now examine voluntary, common disclosure standards for institutional investors. This will make disclosure frameworks part of the mainstream consciousness of the superannuation sector.

One model for the TCFD to consider is the Asset Owners Disclosure Project (AODP). The AODP aims to rectify the information and comprehension gap, by producing rankings and ratings of the world’s 375 largest superannuation and pension , as well as insurers and sovereign wealth funds, in regard to their management of climate risk. This initiative establishes transparency and comparability between pension funds by using a quick and easy-to-use scale. It encourages pension funds to take the initiative to file shareholder resolutions, which request that companies’ business models comply with a low-carbon economy, create innovative ways of financing renewable energy and reduce exposure to fossil fuel assets.

The forthcoming TCFD disclosure standards will give individual superannuation fund members a bigger source of leverage to demand that climate risk is managed properly. In turn, this will continue to drive competition between superannuation funds and their suppliers, which can only mean better outcomes for members. The information and comprehension gap appears to be closing swiftly and comprehensively. By focusing on transparency and disclosure, the G20 may well consolidate recent climate action successes with the assurance that the transition to a post-fossil fuel world can be more financially stable too.

Joshua Sheppard is a penultimate year law student at Monash University and a project manager for the Asset Owners Disclosure Project.

Resolution 29/22: Does international law protect ‘various forms of families’? — Giulia Dondoli

In July 2015, the United Nations Human Rights Council issued Resolution 29/22 on the protection of the family as the natural and fundamental group unit of society. The Human Rights Council requested that the Office of the High Commissioner for Human Rights (OHCHR) prepare a report on the protection of the family and present it at the 31st session of the Human Rights Council. Such a report is a relevant step forward for lesbian gay bisexual and transgender (LGBT) parent-families’ rights within the United Nations aegis.

Resolution 29/22 focused on issues related to single-headed households, protection of children, disparity of household responsibilities between men and women and the protection of disabled members of families. To prepare the report, a note verbale was sent; 24 states and 81 civil society organisations responded with their input to the OHCHR. In particular, Denmark pointed out that Resolution 29/22 does not ‘properly recognize [sic] the fact that various forms of families exist’. Furthermore, the United Kingdom, the United States, and organisations such as Sexual Rights Initiative, and OutRight Action International, asked the OHCHR to consider LGBT parent-families.

Indeed, in the report submitted by the OHCHR to the Human Rights Council pursuant to item 37 of Resolution 29/22 (OHCHR report), the OHCHR states that there is no definition of ‘family’ in international law, and that there is a general consensus within UN documents that the concept of ‘family’ must be understood in a ‘wide sense’. While states maintain a margin of appreciation in defining the concept of family (para 26), the report encourages states to ensure that children born in de facto unions and in LGBT parent-families have equal rights of those born from married and heterosexual couples (para 42).

However, the OHCHR report also reiterates that men and women of full age have the right to marry (para 28. See also article 16 of the Universal Declaration of Human Rights and article 23(2) of the International Covenant on Civil and Political Rights (ICCPR)), and this right can only be understood to mean that a man can marry a woman and vice versa. Indeed, in 2002, the UN Human Rights Committee clarified in Joslin et al v New Zealand that the expression ‘men and women’ denotes that only different sex couples have the right to marry, because the drafters of the ICCPR considered marriage to mean an exclusively heterosexual institution (Luca Paladini, ‘Same-Sex Couples before Quasi-Jurisdictional Bodies: The Case of the UN Human Rights Committee’ in Daniele Gallo, Pietro Pustorino, Luca Paladini (eds) Same-Sex Couples before National, Supranational and International Jurisdictions (Springer, Heidelberg, 2014) 533 at 545). Nevertheless, the OHCHR report also stresses that the Committee on Economic, Social and Cultural Rights has called upon states to provide some sort of legal recognition — for example civil partnership acts or legal recognition of de facto couples — for same-sex couples (OHCHR report, para 27).

The prohibition of discrimination on grounds of sexual orientation and gender identity is a politically controversial issue and a developing concept in international human rights law (Frederick Cowell and Angelina Milon, ‘Decriminalisation of Sexual Orientation through the Universal Periodic Review’ (2012) 12 Human Rights Law Review 341 at 344; Ronald Holzhacjer, ‘State-Sponsored Homophobia and the Denial of the Right of Assembly in Central and Eastern Europe: The “Boomerang” and the “Ricochet” between European Organizations and Civil Society to Uphold Human Rights’ (2013) 35 Law & Policy 1 at 8). In general, issues related to LGBT rights — particularly those related to LGBT family rights — trigger strong reactions from conservative/religious states and organisations. Indeed, conservative voices did not delay in expressing their disappointment with the OHCHR report. In February 2016, Global Helping to Advance Women and Children, the UN Family Rights Caucus and 26 organisations with consultative status at the UN Economic and Social Council submitted a written statement to the UN Secretary General (A/HRC/31/NGO/155) which maintained that the OHCHR report seeks to advance the status of LGBT relationships contrary to international law. The written statement continued to say that the claim that there is a general consensus within the UN on the term ‘various forms of families’ is ‘false and disingenuous’; and concluded by calling upon the OHCHR to edit the report by removing reference to the recognition of different forms of families.

In conclusion, the mention in the OHCHR report to different types of families, and the prohibition of discrimination against children born in LGBT parents-families, are much-needed steps forward in the advancement of LGBT family rights. However, at this point, it is crucial to see whether a second resolution on the protection of the family can evolve in a direction that reflects the sentiments expressed in the OHCHR report.

Giulia Dondoli is a PhD Candidate at Te Piringa — Faculty of Law of the University of Waikato.

Australia’s use of private military and security companies: Options for accountability under international law — Anna John

Introduction

On 23 February 2016, news emerged that the Australian Department of Foreign Affairs and Trade (DFAT) had renewed its contract with Australian private security company, Unity Resources Group (URG). URG was contracted by DFAT to provide personal security services for embassy staff at the Australian diplomatic mission in Baghdad. URG won this contract after allegedly halving its fees from $101.5 million between 2011 and 2015 to about $51 million for the next five years. The company’s staff have claimed that URG’s cost-cutting has compromised their wages, as well as the quality of weapons, equipment and medical treatment provided to them. As a result, staff have had to buy their own equipment, and many have chosen not to continue with the company.

Why privatise security?

This news raises broader issues about Australia’s use of private security companies. There are, for a start, fundamental moral and ethical concerns. Why aren’t personnel from the Australian Defence Force (ADF) being assigned the task of providing security at the diplomatic mission? The ADF, as a public institution, has been entrusted to act in the interest of the Australian public. On the other hand, private actors are thought to be motivated primarily by profit, which may not necessarily translate to the best interests of the Australian public. URG’s cost-cutting moves do little to assuage this fear. Further, the reliance on such companies is also contentious because of their reputation for excessive force and disregard for human rights. For example, the notorious incidents at Abu Ghraib in 2003 and Nisour Square in Iraq in 2007 both involved gross misconduct by private security contractors employed by the US military.

On the other hand, there are strong arguments for the use of private military and security companies (PMSC). The term ‘PMSC’ is a broad label for companies that undertake a range of security activities including guarding, military training, intelligence gathering, logistical support and combat advice. PMSCs may provide governments with an organised, efficient and cost-effective option to supplement their existing military presence. The UN has used PMSCs in its peacekeeping operations, and it is generally acknowledged that PMSCs have in some cases been able to contribute to a peaceful outcome where a state’s armed forces have not. The classic example of this was in the 1990s conflict in Sierra Leone. Executive Outcomes, a PMSC, was successful in containing a violent uprising by the guerrilla force Revolutionary United Front, negotiating a peace agreement, and regaining control of the diamond fields in the country. Just six months after Executive Outcomes’ contract was terminated in 1997, a military coup ousted the democratically elected civilian government.

Legal issues

There are however a number of legal issues that arise from the Australian Government’s use of PMSCs. While it is not possible to address all of these legal issues (and applicable legal frameworks) in this post, a significant problem area is accountability for the wrongdoing for PMSCs under international humanitarian law, international human rights law and international criminal law. The violent and unpredictable circumstances in which PMSC personnel operate places them in positions where they can readily violate human rights laws and other international rules. For example, if the situation in Iraq worsens — which it may, in light of Islamic State activity — URG personnel may be compelled to use force; potentially lethal force. This has occurred in the past: in 2007, an URG security convoy used excessive force, killing two women (including one humanitarian worker) in a car that did not stop for the security convoy despite ‘hand gestures and signal fire’. Similarly, in Baghdad in 2006, URG contractors shot and killed 72 year-old Australian-Iraqi, Professor Kays Juma who also did not stop for security guards.

To date, there has been no criminal prosecution for either of URG’s acts. Problems of jurisdiction have been the major obstacle to the accountability of URG for their conduct. In particular, as PMSC operations may be governed by more than one jurisdiction, the application and enforceability of criminal laws becomes complicated. One might even go so far as to suggest that this is an unspoken reason of why states find the option of private security attractive: it allows them to avoid the risks of deploying the military. Security companies have their own insurance, and DFAT bears no responsibility for the provision of medical aid, evacuation and ongoing rehabilitation (See James Brown, ‘Guns for Hire’, The Monthly (May 2014)).

Accountability under international human rights law

One obvious option for accountability under international law is international human rights law (IHRL). IHRL is an attractive option for victims because it allows for an acknowledgement that there has been a violation of their human rights or those of their loved ones. Under some frameworks, such as the European Convention of Human Rights, wrongdoers can be ordered to compensate victims. It is also an attractive framework because it covers the spectrum of potential wrongdoing by PMSCs. In the two incidents outlined above, URG may have violated the right to life enshrined in article 6 of the International Covenant on Civil and Political Rights. Other rights that are susceptible to violations by PMSCs include: the right to liberty and security of the person, the right to freedom from torture and cruel, inhuman and degrading treatment, the right to health, the right to a private life, the right to an adequate standard of living and the right to the use and enjoyment of property (see Lenzerini and Francioni, ‘The Role of Human Rights in the Regulation of Private Military and Security Companies’ in Francioni and Ronzitti (eds) War by Contract: Human Rights, Humanitarian Law, and Private Contractors (Oxford University Press, 2011)). These human rights are enumerated in human rights treaties that impose enforcement obligations upon states. The obligations upon states to prevent and prosecute abuses by private actors act as an accountability mechanism. However, the extent to which IHRL imposes binding obligations on non-state actors is unclear; while IHRL traditionally addressed only states, customary international law is developing to include non-state actors (see Andrew Clapham, Human Rights Obligations of Non-State Actors (Oxford University Press, 2006)).

PMSCs act in a contractual relationship with the hiring state. Their acts are thus considered to be acts of private persons and not acts of the state, despite their services often entailing the carrying weapons and the risk of physical harm to other people (Francioni, ‘Private Military Contractors and International Law: An Introduction’ (2008) 19 European Journal of International Law 961 at 962). Therefore, any human rights violations committed by a private security provider contracted by the Australian Government will not be attributable to the Government prima facie. The exception to this is where PMSCs exercise elements of ‘governmental authority’ or where the state exercises control over the PMSC’s conduct. Even if this threshold is not met, but a state gives a ‘quiet nod’ to PMSC misconduct, state responsibility for a lack of state due diligence can be engaged. Nevertheless, the nature of the relationship between the state and the PMSC renders it difficult to impose and enforce international human rights laws.

Accountability under international humanitarian law and international criminal law

International humanitarian law (IHL) is another framework through which PMSCs could be held to account for their wrongdoing. To an extent, IHL applies automatically during times of armed conflict. The status of PMSC personnel in situations of armed conflict is determined on a case-by-case basis. While PMSC personnel will generally be considered to be civilians under this framework, they can be held to account for their violations of IHL. The enforcement of IHL is through the criminalisation of grave breaches of international law (e.g. war crimes) under the Statute of the International Criminal Court (the ICC Statute) or the instrument of an ad hoc international court or tribunal, or through the suppression of its violations through the use of national legislation.

Here, there is an interplay between IHL, international criminal law (ICL) and domestic criminal law when it comes to the enforcement of IHL. Importantly, ICL does not impose obligations on corporations. Therefore, PMSCs as corporations cannot be held criminally liable for grave violations of ICL (except, for instance, in circumstances where ICL is incorporated into domestic legislation allowing for the criminal prosecution of corporations – this is discussed further below). PMSC contractors can be prosecuted individually for their breaches of IHL either through ICL or through national legislation. However, there are a number of obstacles involved in establishing the individual criminal liability of PMSC personnel.

First, host States are unlikely to prosecute PMSC personnel due to their limited capacity in times of conflict. In armed conflicts, it is not unusual for States to lose control over the own capitals, let alone exercise control over the actions of PMSCs. Second, hiring States are generally reluctant to prosecute their own troops for fear that this will undermine morale (Quirico, ‘The Criminal Responsibility of Private Military and Security Company Personnel under International Humanitarian Law’ in War by Contract, 424). Furthermore, the collection of evidence for the prosecution of war crimes in a national court requires an exceedingly coordinated international effort. Few States are prepared to undertake the efforts required to acquire evidence (Quirico, 424). In addition, PMSC personnel are often granted immunity contractually through agreements that the hiring state has with the host state. The details of the agreements between the Iraqi government and the Australian government are not public, so we do not know for sure whether URG, for example, enjoys immunity. In comparison, US forces deployed in Afghanistan did have immunity from local jurisdiction (Quirico, 444). Moreover, de facto immunity can be granted through judicial approaches. For instance, courts in the US have cited the political-question doctrine while declining to adjudicate upon claims relating to governmental action where discretion is essential to protect constitutional or political interests (Quirico, 443). In Australia, claims against PMSC personnel might fail on the basis of justiciability. Cases such as Minister for Arts, Heritage and Environment v. Peko-Wallsend and Hicks v Ruddock demonstrate how justiciability considerations underlie the courts’ decision to review (or not to review) government decisions involving international relations. Finally, if PMSC personnel are prosecuted, they are often charged with ‘street crimes’ under domestic law rather than war crimes. For example, the former Blackwater employees implicated in the Nisour Square massacre were charged with crimes of manslaughter and firearms offences. However, their conduct could potentially have amounted to violations of the War Crimes Act of 1996 (US), for murder of civilians, mutilation or maiming, and intentionally causing serious bodily injury (Quirico, 443).

Importantly, the Australian Criminal Code 1995 (Cth) introduces offences ‘equivalent’ to the ICC Statute offences of genocide, crimes against humanity and war crimes into domestic federal criminal legislation. This introduction of international crimes confers jurisdiction upon courts to prosecute corporations for war crimes. This is an important and positive step towards the accountability of Australian PMSCs. However, many of the obstacles to accountability outlined above are also likely to prevent PMSC liability under the Australian federal criminal legislation.

Conclusions

Governments all around the world have been taking advantage of the cost-effective and efficient services that PMSCs provide to their armed forces. However, as demonstrated by the case of URG, there is a risk that such companies can violate international law during the course of their operations. Accountability mechanisms under IHL, IHRL and ICL are not yet sufficiently developed to tackle the introduction of a private actor into the military sphere, which has traditionally been reserved exclusively for States. URG’s cost-cutting moves may well have implications for the human rights of the local Iraqi population, but there appears to be no certain corresponding way in which these branches of international law can hold URG criminally responsible if such violations do occur.

Anna John is a final year Law/Arts student at the University of Queensland. She works as a research assistant at the University of Queensland’s T. C. Beirne School of Law. Anna was recently a guest researcher and research assistant at the Max Planck Institute of Comparative Public and International Law in Heidelberg, Germany.

Australia-China relations: A lawyer’s perspective — David Douglas

Recently, the Australia-China Youth Association (ACYA) hosted Australia-China Emerging Leaders’ Summits (ACELS) in Shanghai and Sydney respectively, which brought together many prominent youth delegates from the two nations. Legal practice in the Asia-Pacific region was a strong focus. Amongst the delegates and networking participants, there were a number of legal practitioners and law students from both Australia and the People’s Republic of China. Additionally, interesting conclusions were reached regarding the prevalence of legal issues for cross-border commercial activities between the nations.

Foremost, government and business leaders from the two countries attended ACELS. The consistent message coming across was one that all lawyers will be familiar with — the complexity of navigating regulatory regimes between Australia and China. Despite an overall decrease in regulation (a result of the China-Australia Free Trade Agreement and similar initiatives), the primary challenges facing businesses that aim to have bilateral operations still appear to be legal requirements of compliance with regulatory systems and effective communication with relevant regulators. Without knowledge of the precise regulatory limitations for a business’ operations in a jurisdiction, it is difficult for companies to achieve commercial certainty. It is imperative to understand the existing law and its practical application. Attendees highlighted that an absence of this knowledge acts as a ‘legal handbrake’ on prospective commercial operations.

An Australian company, whose operations in China are about 1/50 the size of their presence in Australia, provided the following example. Despite this overwhelming difference in size, it must complete double the number of reports in China as in Australia for regulatory compliance,. Evidently, the complexity of regulatory requirements places substantial burdens on the company, whose operations in China are not large. For the majority of foreign companies operating in China, this appears to be a shared experience — the inability to obtain commercial certainty can hamper their investment options.

Importantly however, Chinese companies looking to invest in Australia have faced similar difficulties. Many large-scale proposed investments appear before the Foreign Investment Review Board, or are so politically-charged that the project’s future becomes uncertain, such as Shanghai Pengxin’s involvement in a bid for the Kidman pastoral empire (see for example this ABC article). Similarly, the recent approval of the bid by Chinese company Landbridge to operate the Port of Darwin has been highly controversial and subject to intense public scrutiny (see for example this ABC article).

These shared experiences at ACELS helped delegates to realise the high demand for cross-border commercial legal practice. Many commercial law firms specialise in advising foreign clients on the local regulatory environment, which presents an opportunity to the next generation of emerging commercial lawyers. They will need to be equipped with fluid skillsets, that enable them to not only advise clients on their home jurisdiction, but to collaborate with colleagues overseas in order to provide seamless advice that gives clients a holistic appraisal of regulatory conditions in each jurisdiction and the interplay between them. Following a string of newly signed free trade agreements between Australia and our major Asian trading partners in China, South Korea and Japan, much larger numbers of companies and investors will be exposed to the legal and regulatory difficulties associated with cross-border business. Naturally, this will lead to an increase in the demand for legal expertise in dealing with these issues.

David Douglas, President of the Australia-China Youth Association and graduate lawyer at a leading international law firm.