Investor-State Dispute Settlement (ISDS) clauses are a prominent feature of many modern International Investment Agreements (IIAs). They are included in nearly all the IIAs to which Australia is a party. Typically, an ISDS clause allows a foreign investor (often a corporation) to challenge a government decision before a panel of private arbitrators who have the power to make decisions and make awards that are binding and enforceable.
Tag: economic law
2016 – Year in Review
The past year has been incredibly tumultuous, having reset the international stage and delivering incredibly unexpected political outcomes. From an international legal perspective, while events such as Brexit, Donald Trump’s election, and the crisis in Syria have undoubtedly raised important legal questions and will likely change international law in the future, there have been numerous other significant developments.
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.
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.
Lord Goldsmith talks to ACICA audience about Brexit and arbitration – Marina Kofman
On 24 October 2016, Lord Goldsmith addressed an ACICA audience in Sydney about Brexit and arbitration. He set the Brexit scene: Theresa May is still tight-lipped about the nature of Brexit, following a Brexit campaign characterised by a lack of clarity on what Brexit would actually mean. Uncertainty abounds, except for in one aspect: indications are that negotiations will not be easy. The EU has made it clear to the UK that there will be ‘no negotiation without notification.’
First things first – the constitutional challenge: May plans to trigger Article 50 of the Lisbon Treaty next year but does she have the authority to do that under the royal prerogative? This issue is being hotly debated and is currently being tried in the London Courts. On 3 November 2016, the High Court delivered judgment finding that Article 50 could not be invoked without an Act of Parliament. Arrangements are in place for an expedited appeal straight to the UK Supreme Court and that case will be heard by December. Consequences for the UK and EU will be massive. Much of that is only dimly seen right now.
Impact on London arbitration
The thesis of Lord Goldsmith’s talk was that Brexit will not lead to a diminution of the merits or popularity of London as a seat of arbitration, nor damage the popularity of English law as the commercial law of choice for many international transactions. Why is this the case?
At the centenary conference of the Chartered Institute of Arbitrators (CIArb) in London last year, the CIArb published a list of ten features necessary to make for a safe, effective and successful seat of arbitration. These features are: (1) a clear arbitration law; (2) an independent judiciary; (3) legal expertise; (4) education; (5) the right of choice in representation; (6) accessibility and safety of the seat; (7) facilities; (8) professional ethics that embrace diversity of traditions; (9) enforceability; and (10) arbitrator immunity. London meets all of these requirements, none of which depend on UK membership of the EU. There is, therefore, no reason to believe that London will diminish in popularity as a seat of arbitration. Lord Goldsmith opined that despite the growth of arbitration and arbitral institutions in Asia, Brexit will not spark a ‘land grab’ for traditionally London-based work by other arbitration centres.
Potential opportunities
In addition to the challenges presented by Brexit, there are certain opportunities. First, there may be a substantive disentanglement of English law and EU law. European law has coloured English law, so if EU regulations no longer apply then English common law may see a resurgence. Secondly, the determination of jurisdictional issues in court cases may end up vastly different should the UK go down the path of abandoning the Brussels Regulation regime and return to common law forum non conveniens principles. The current regime means a UK commercial court can be seized of a matter in circumstances where it is not necessarily the most appropriate forum, but then have limited ways to decline jurisdiction. Right now though, it is uncertain what will happen in terms of UK court judgments until we know more about how the UK will proceed in relation to its private international law framework with respect to the EU. This might push some users towards arbitration, which has a reliable enforcement regime under the New York Convention. Another advantage of Brexit might be that UK courts will again be able to issue anti-suit injunctions directed at European courts. UK courts once commonly issued anti-suit injunctions to prevent proceedings brought in breach of arbitration agreements. This was, however, put to an end in 2004 when the European Court of Justice held that the practice was incompatible with the Brussels Convention.
Thirdly, Brexit might influence the debate about investor-State dispute settlement (ISDS). The EU has proposed an ‘Investment Court System’, a permanent investment court with an appeals process for the Transatlantic Trade and Investment Partnership (TTIP). The competence for negotiating EU treaties currently rests with the EU, and the EU has been firm that the UK is not free to negotiate its own treaties whilst it remains in the EU. The question is, would being freed from the EU give the UK a negotiating advantage? Only time will tell.
In the meantime, it is plausible even if the USA agrees to the an investment court system that it will still opt for conventional ISDS mechanisms in its other trade deals, in which case we might not see the inexorable rise of the Investment Court System. The UK’s decision to opt for one model or the other will influence the course of the debate particularly as the UK will become one of the more active trade negotiating countries over the coming years.
In his concluding remarks, Lord Goldsmith stated that it may now be time for Australia and the UK to grow a new and invigorated cooperation in the field of common law. This is also the time for lawyers to examine closely the opportunities for collaboration in training, development of the law and finding better ways to serve clients.
Marina Kofman is Assistant Editor of the ILA Reporter. A version of this article was originally written for and published by ACICA. It is partially reproduced here with permission.
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.
Upcoming Event – ILS China Breakfast Seminar
WHAT’S NEW IN CHINA’S LEGAL LANDSCAPE
The Law Council of Australia’s International Law Section will host a China Law breakfast on Wednesday 26 October at King & Wood Mallesons in Sydney. Judge Judith Gibson of the District Court of New South Wales will chair a panel of six experts in Chinese law to discuss contemporary legal issues facing the country today.
TOPICS
- ‘One Belt One Road’ and Chinese investment policy;
- IP and Trade Mark legislative changes;
- Consumer legal protection in the era of M-commerce;
- The Guiding Case system; and
- Court use of social media and legal writing issues.
SPEAKERS
- Professor Vivienne Bath, University of Sydney
- Scott Gardiner, King & Wood Mallesons
- Mary Ip, University of New South Wales
- Professor Vai Io Lo, Bond University
- Belinda Melocco, King & Wood Mallesons
- Professor Natalie Stoianoff, King & Wood Mallesons
- Judge Judith Gibson, NSW District Court (Chair)
For details on the cost of a ticket and the registration form, please click here.
Getting India to Bite: the Australia-India Comprehensive Economic Cooperation Agreement – Umair Ghori
Everyone wants a piece of India in recent times. No surprises there! The Indian economy has gone from strength to strength. Indian Prime Minister Narendra Modi is pursuing an ambitious agenda for promoting manufacturing in India as the cornerstone for his long-term economic strategy.
What’s the Big Deal? Legal Implications for Australians in the wake of the TPP — Anna John
The final stages of the Trans Pacific Partnership (TPP) negotiations were well-publicised in Australia, albeit hazy with regard to the implications of the agreement. Negotiations between Australia, the US, Japan and nine other Asia-Pacific countries over the mammoth deal have been ongoing for seven years. From an international law point-of-view, the fact that an agreement has been reached is in itself laudable.
DFAT has said that outcomes from the conclusion of the TPP include new market opportunities for exporters and investors, increased transparency of regulators frameworks, greater certainty for businesses, improved access for regional supply chains, and a reduction in bureaucratic processes. However, reactions to the deal so far have been mixed, and key economic commentators have concluded that the advantages and the disadvantages of the TPP are largely unremarkable (see for example, opinions by Ross Gittins, Joseph Stiglitz and Adam S. Hersh). Major changes to existing legislation as a result of the TPP are unlikely. There are, however, legal implications to be aware of.
Investor-state dispute settlement arrangements
One of the most contentious issues appears to be the investor-state dispute settlement (ISDS) mechanisms in the TPP. Australia initially maintained that it would not accept any arbitration mechanisms for investor-state dispute settlements. However, the final text of the TPP reveals that Australia has conceded to the ISDS provisions, which allow for the establishment of an arbitration tribunal specifically to adjudicate on claims arising from the operation of the TPP. As a result, foreign investors will be able to bring claims against a participating TPP country.
ISDS mechanisms can enable foreign investors to attack legislation enacted for the protection of the public interest. The best example of such a such a scenario is the Phillip Morris litigation. One of the avenues Phillip Morris used to challenge Australian plain-packaging legislation was the ISDS mechanism in the 1993 Australian bilateral investment treaty with Hong Kong. Recently, the Permanent Court of Arbitration dismissed the case, agreeing with Australia’s position that it did not have jurisdiction to hear the case.
Notably, the TPP disallows tobacco companies to challenge public health legislation. So Phillip Morris, for example, will not be able to seek relief under the TPP. Nevertheless, such free trade agreements can stand in opposition to public interest legislation. Article 9.15 of the the TPP’s Investment Chapter provides that a signatory party is not prevented from legislating in the public interest. However, there is a clause allowing non-discriminatory public welfare legislation to be challenged ‘in rare circumstances’, at appendix 9-B, clause 3(b). Effectively, this can give rise to challenges against legislation that protects legitimate public welfare objectives.
Intellectual property
The Intellectual Property Chapter of the TPP was crucial to the conclusion of the negotiations, especially for the Australian delegation.
The TPP and pharmaceuticals
One of the central issues was the length of the data exclusivity period, especially for biologics. Biologics are a type of medicine made of protein-producing cells found in living organisms, and are used to treat a number of illnesses, including diabetes and cancer. Generic versions of biologics, known as biosimilars, can be manufactured in Australia after a minimum of five years since the release of the biologic. This is known as the data exclusivity period.
The US pushed for a twelve-year minimum data exclusivity period during the negotiations. However, according to the final text of the TPP, the agreed data exclusivity period is five years. Since this is the same level of protection that is afforded to biologics under Australian legislation, there is no real impact here.
The TPP and copyright
Once again, it is unlikely that there will be any major change to domestic copyright laws. DFAT has confirmed that provisions under domestic legislation relating to copyright terms, patents and Internet Service Provider liability are all consistent with the TPP’s standards. Notably, there will likely be no introduction of new civil or criminal penalties for individuals who download movies illegally.
The biggest legal implication here for the Asia-Pacific region involves the TPP’s provisions on counterfeit and pirated goods. The TPP requires signatory countries to legislate against the use of counterfeit and pirated goods. This includes expanding the range of offences for counterfeit or pirated labels and packaging, broaden powers to allow the forfeiture of counterfeit or private goods, and ensuring that adequate damages are available for copyright and trademark infringement. Within the Asia-Pacific region, this may have large implications, given that the large majority of counterfeit goods originate from the Asia-Pacific region (mostly from China, but also from Malaysia, a TPP signatory). These countries will now be required to legislate according to the TPP’s provisions. This is a welcome development for Australia.
Finance Expats in the Asia-Pacific Region
Under the TPP, the Australian financial sector has more opportunity to integrate with those in the Asia-Pacific region. Australian bank and asset managers have been seeking expanded growth in Asia, with a focus on financial services exports. This includes lowering restrictions for Australian professionals to work in Australian financial companies overseas. Some countries within the Asia-Pacific region limit the number of foreign persons that can hold senior managerial positions in a financial institution in their country. The TPP places a cap on these restrictions, and also provides for special visa arrangements that will allow such professionals more certainty during their stay overseas. This is outlined by DFAT, announcing that Australian financial institutions will be ‘guaranteed’ the option to transfer specialists and managerial staff to their overseas branches for extended periods. Conversely, such provisions will also lead to an increase in financial services (and expats) from Asia-Pacific countries.
Where does the TPP leave us?
Overall, the TPP is a good deal for Australia, and promotes Australian involvement in the Asia-Pacific. Legally, the biggest uncertainty is what the ISDS provisions will entail. While an exception has justifiably been made for tobacco companies, the clause allowing public welfare legislation to be challenged is perturbing. For example, under a similar ISDS mechanism, a US investor was able to sue Costa Rica on the basis that its environmental legislation impeded their business interests, thus contravening a free trade agreement. As has been pointed out, ‘tobacco control measures are not the only policies worth protecting’. Litigation against public welfare legislation is detrimental to the public interest, can encroach on national sovereignty in a negative way, and could ultimately lead to the public expenditure of millions in legal fees.
A further (albeit political) consideration for Australia is its relationship with the US. Australia has an important role to play in the imminent economic dominance of the Asian countries. A criticism often brought against the TPP is that it preserves US interests in the Asia-Pacific region in the face of growing Chinese influence. Tellingly, the negotiations (released on Wikileaks)showed a reluctance on Australia’s part to step away from its alignment with US interests and establish itself as an important regional player in its own right. For example, Australia’s position in the negotiations lined up with the US 64 times. This was higher than its alignment with the next highest, Peru (54 times) and Singapore (51 times). Additionally, Australia ranked second last in terms of the support drawn by its proposals. The dominance of Asia-Pacific region should lead to a convergence in regional interests, but Australia appears to be taking a step away from this direction.
The TPP is an important step towards economic integration within the Asia-Pacific region. This is not without legal implications, and while many aspects of the deal are welcome and needed, a better outcome could be achieved in others.
Anna John is a final year Law/Arts student at the University of Queensland. She works as a research assistant at the T. C. Beirne School of Law. Anna was recently also a guest researcher and research assistant at the Max Planck Institute of Comparative Public and International Law in Heidelberg, Germany.
French Australian Lawyers Society Event – Melbourne – EU Seminar on Wine Law Regulations and Implications for Australian Lawyers
On 17 September 2015, the French Australian Lawyers Society will hold a seminar on European Wine Law and Regulation and Australian Implications with the Hellenic Australian Lawyers Association and the Italian Australian Lawyers Association.
The speakers are: Dr Matt Harvey, Senior Lecturer in Law at Victoria University, and Stephen Stern, Senior Partner at Corrs Chambers Westgarth.
The event will be held at the RACV Club, 501 Bourke Street, Melbourne, and includes dinner and drinks at a cost of $110 per head.
Registrations may be made here and close 13 September 2015.