Australia and investor-state-dispute resolution mechanisms in the Trans-Pacific Partnership

In 2011, Australia’s Gillard government announced a new policy not to include investor-state-dispute resolution mechanisms in future investment treaties into which Australia enters. The first of such treaties without a direct route for investors to sue the host state, the Australia-Malaysia Free Trade Agreement, has been signed in May last year.

There has been a question mark over Australia’s approach to investor-state- dispute resolution mechanisms in the context of the negotiations of the Trans-Pacific Partnership treaty (TPP), where the negotiating states made it clear that they want to see relevant provisions in the treaty (see Outlines of the Trans-Pacific Partnership Agreement). (For a 2011 discussion of the topic, see our Blog entry of 21 November 2011.) Australia’s continued participation in the negotiations (most recently, in December 2012 in Auckland, and at the forthcoming meeting in Singapore in March 2013) indicates that the provisions relating to the investor-state-dispute resolution mechanism are not a deal-breaker. Australia may very well decide to sign up to the TPP, while entering into a reservation for the investor-state dispute resolution provisions (ie opting-out of those specific provisions).

The key benefits of the TPP for Australian companies are intended to be:

• The TPP has the potential to form a building block for Asia-Pacific regional economic integration. It is in Australia’s interests to be involved in order to shape the direction of the initiative.
• Regional rules of origin will provide new opportunities for Australian exporters to tap into global supply chains.
• The TPP could provide additional market access for goods and services into the markets of existing FTA and future TPP partners.
• Inclusion of Investment and Financial Services chapters in the TPP could provide improved opportunities for Australian financial services providers by mitigating barriers, such as foreign restrictions on capital and investment flows.
• The TPP provides a framework for engaging with Peru, a country with which we do not have an existing bilateral trade arrangement. In particular there is potential for better access for dairy products and mining services to Peru.

It covers some AU$135.303 billion (2011) of foreign trade with Australia.

With Japan and the US just having issued a joint statement on Japan possibly joining the negotiations, the TPP has not lost momentum. Once concluded, it will have a significant impact on trade in the Pacific region and will be an important issue for businesses engaged in cross-border activity in Asia-Pacific.