GREG WOOD. The TPP-11 : Discarding Australia’s Sovereignty

The latest iteration of the Trans Pacific Partnership (TPP) now comprises 11 countries, the US not included given President Trump’s strongly stated, but not explained, aversion.  The agreement’s revised text won’t be made public until signature, scheduled to take place in Chile in early March. Wisely, the ALP Opposition in our Federal Parliament has said that it will make its judgement on it only after seeing that text. However it is clear that Investor State Dispute Settlement (ISDS) provisions remain in the revised agreement, though apparently they have been tweaked.

With a few exclusions and qualifications these ISDS provisions allow a foreign investor to sue a government if a change in national policy affects the profitability of their investment. For business, this concept provides cream on the foreign investment cake, reducing sovereign risk.

But ISDS is also a classic example of corporate business advancing its interests at the expense of civil society and the community more generally. While the concept comes in many forms, and the exact wording of the version in the new TPP-11 remains to be seen, it works as a constraint on the ability of governments to legislate in future as issues, circumstances and community attitudes shift, which inevitably and necessarily they will. While Australia will have secured wording to limit actions directed at our environmental and health policies, there is no predicting what citizens and governments will see as needing redress in future.

ISDS constrains change by imposing an entitlement to financial compensation, a ‘tax’, if the profitability of a foreign investment is affected by any new legislation. It favours foreign over domestic investments as there is no equivalent ‘right’ provided local firms, so far at least.  Decisions are made by a tribunal system outside and beyond the national court system. The standing, competence and real independence of tribunal members is uncertain, often suspect.

With the US absent from the TPP, the opportunity to scrap this imprudent, intrusive undemocratic provision was there for the taking. So who sought its retention? From the vigour of Mr Ciobo’s advocacy in a recent interview, one fears it may have been Australia.

Last week, speaking with the ABC’s Fran Kelly, Trade Minister Ciobo said:

 “if there was ever a scare campaign that’s been run, it has been the absurd scare campaign around ISDS…Let’s be clear Australia won the action with respect of plain packaging of cigarettes….”…  “More importantly Fran, ISDS protects Australian investments abroad. … it’s been used by Australian businesses overseas far more than it’s ever been used against Australia”.

Fran Kelly:

“The question is though does ISDS give governments less ability to regulate big corporations?

Ciobo:

“absolutely not…we retain the ability to regulate and put in place domestic policy in a range of areas Fran including buyer’s security, health policy, environmental policy, all these type of things…”

Mr Ciobo is nothing if not slap dash.  Clearly he sees it as sufficient that the Australian Parliament retains the ability to regulate in “a range of areas”.  Also to say that Australia ‘won’ the Philip Morris case is to dissemble.  When Philip Morris took the Australian plain packaging legislation to an ISDS tribunal, seeking to use an obscure Australia-Hong Kong investment treaty, it was seeking to overturn a decision of the Australian High Court that did not go in its favour. The case was ultimately rejected by the tribunal which decided that the company had contrived its affairs so as to try to secure ‘standing’ under this particular bilateral treaty. However Philip Morris’ argument that its intellectual property had been damaged by the plain packaging legislation was not put to the test by the tribunal on its merits, and there’s no certainty as to where it would have come out.

Previously the ALP has said it would not sign any trade agreement containing ISDS provisions and hopefully it sticks to that position. Hopefully too, enough of the cross benchers in our Parliament do likewise, opt to protect Australian sovereignty, and insist that TPP-11 ratification by Australia is dependent on the ISDS provision being deleted.

The fact that we don’t already have the TPP-11 agreement text is a further issue to address. The Parliament should insist that ratification of the amended TPP-11 comes with a requirement for better, early, publicly available, information as to Australia’s exact negotiating objectives and, progressively, the state of play reached, in all future trade negotiations.

 

Greg Wood was formerly Deputy Secretary of Prime Minister and Cabinet. He headed the Americas and Europe and the North Asia Divisions in DFAT. He has had a long involvement in international trade policy and trade negotiations.

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5 Responses to GREG WOOD. The TPP-11 : Discarding Australia’s Sovereignty

  1. michael lacey says:

    There is enough information out there on all these neoliberal investor rights agreement scams. Reject them!

  2. Craig Welch says:

    “… US not included given President Trump’s strongly stated, but not explained, aversion”.

    That seems easy to explain. Every single action that President Trump has taken is a reaction to his predecessor. If Obama did something, Trump seeks to undo it. If Obama undid something, Trump seeks to redo it.

    “ISDS constrains change by imposing an entitlement to financial compensation, a ‘tax’, if the profitability of a foreign investment is affected by any new legislation”.

    That’s a very simple, and quite wrong explanation. An investor can raise an arbitration dispute if, and only if, its investment has been harmed by an action of the State *that breaches the agreement*. Otherwise every time a government increased taxes, for example, or raised the minimum wage, there would be a slew of ISDS cases. But there isn’t.

    “When Philip Morris took the Australian plain packaging legislation to an ISDS tribunal, seeking to use an obscure Australia-Hong Kong investment treaty, it was seeking to overturn a decision of the Australian High Court that did not go in its favour”.

    No it wasn’t. The ISDS dispute was filed before the HCA case.

    Ciobo: “[ISDS has] been used by Australian businesses overseas far more than it’s ever been used against Australia”.

    Wow. Four Australian investors have raised disputes, and two have been raised against Australia. Hardly a sufficient number to claim ‘far more’.

    Joe Goozeff asks: “Why is the ISDS not unconstitutional under Chapter III of the Constitution?”

    There’s a very good discussion of this in Picker C, Wang H and Zhou W, The China-Australia Free Trade Agreement: A 21st-Century Model (Bloomsbury Publishing 2017)

  3. Joe Goozeff says:

    Why is the ISDS not unconstitutional under Chapter III of the Constitution?

  4. Paul Frijters says:

    yes, an important issue across the world. The big area where this will really bite in future is tax evasion. Sooner or later states are going to have to get more tax out of the large corporations and when they do, they will come up against these ISDS provisions. The roadblocks currently being built into these treaties against new tax measures will then have to be dismantled, either by re-negotiations or, more likely, by abandoning these treaties altogether. That will be a legal minefield, but the issue of tax is so fundamental to the health of the nation that it will be unavoidable.

    If it is true that the ISDS provisions mainly help Western companies holding poorer countries to the long-term agreements they made with dictators at some point in the past, then we should really see these provisions as a form of imperialism. Very similar to how the ‘treaties’ that the Dutch and British East India Companies made with local principalities in the East were eventually backed up with the armies of the state. The main difference is that gunboats have been replaced with lawyers.

  5. David Maxwell Gray says:

    The fact that the Investor State Dispute Settlement (ISDS) provisions will not be made public until signing is itself unconscionable, and should concern Australians interested in the role of public discussion in policy formulation. This strong tendency of this Government, but also of previous Labor Governments to present a fait accompli, locking in the arrangements with international parties particularly, is against liberal democratic precepts. We have had years of incremental erosion of civil rights and aspects of national sovereignty justified by often poorly argued and evidenced “security” and defence grounds. To describe this as a fascist tendency may be a bit extreme, but “governmental over-reach” is certainly accurate, in my view.

    In any event, the outcomes of continuing incremental changes can, in the longer-term, be very negative.

    The concepts and benefits of free trade, which I generally agree about, are quite separate from those of preferring the interests of international capitalists conjured through obtuse concepts of intellectual property over legitimate values and concerns of Australians – about product safety, about environmental effects of products or industrial processes, about many other matters – expressed through democratic means. The ISDS is also extra-judicial, and matters are heard in private, and do not necessarily follow Australian law and legal processes.

    At the very least, there should be open and robust public discussion about extending this ISDS regime with some of our important trading partners. Whether global companies should be compensated in major ways for governmental policy changes that affect them is a matter for debate. Of course they would like to reduce “sovereign risk”. But it can be argued this is a risk they need to evaluate and face.

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