Clive Palmer’s latest claims as a Singaporean coal mine investor using foreign investor state dispute settlement rights in trade agreements to claim billions from the Australian Government join a growing global list of ISDS claims by fossil fuel companies defined by the UN and the OECD as threats to the global climate transition. Labor should speed up its policy to remove ISDS from trade agreements and support proposals for coordinated multilateral withdrawal from ISDS arrangements.
Clive Palmer’s claims to be a Singaporean investor
The Australian billionaire has been in the news because of his opposition to limits on political campaign funds and attempts to trademark the Teal independent brand.
Not quite so well known is that he is also claiming to exercise special rights as a foreign investor in Australia. His fourth claim for $10 billion from the Australian government using foreign investor rights in trade agreements became public in December.
Palmer has registered his mining company, Zeph Investments, in Singapore and claims to be a Singaporean investor, using investor rights in two Australian trade agreements with Singapore. The first claim was for $300 billion after he lost a High Court appeal against a Western Australian government decision to refuse an iron ore mining licence. The last three claims, for a total of $120 billion, are because a Queensland Court refused his coal mining licence and a licence for a coal-fired power plant for environmental reasons, including increased carbon emissions. These last three cases are a challenge to government action to reduce carbon emissions.
The fourth case brings his total claims against the government to $420 billion. Yes, $420 billion, more than the planned expenditure on AUKUS submarines. Even if these cases fail, the government has to spend years and tens of millions defending them.
These rights for foreign investors, called Investor-State Dispute Settlement or ISDS, are a mechanism in some, but not all, trade and investment agreements. ISDS allows a single foreign investor to claim compensation for law or policy changes if it can convince an international tribunal that the change will reduce its future profits, even if the change is in the public interest. The Philip Morris Tobacco company claimed billions in compensation over Australia’s 2012 plain packaging law. The case was unsuccessful, but the government had to spend five years and $12 million defending it.
All the Palmer cases are now before international tribunals, but the last three have been suspended while the tribunal decides the threshold issue in the first WA case of whether Palmer can legitimately claim to be a Singaporean investor. This is not as straightforward as it seems because it depends partly on the timing of the Singapore investment and whether he can convince the tribunal that he has genuine business interests there. The decision is expected sometime in the next few months.
Investor-State Dispute Settlement strengthens corporate rights
The real culprit here is the ISDS system, which former Chief Justice French has noted lacks the safeguards of national legal systems. The system permits investors to arrange investments in order to source claims from countries with ISDS provisions in their trade agreements, and allows multiple claims based on the same facts. There are no independent judges, as tribunal members can continue to be practising lawyers, with potential conflicts of interest, and there are no precedents or appeals, so decisions lack consistency. Multiple cases maximise the time and cost for the government in defending these cases, as well as maximising potential compensation.
These special rights for foreign investors originally developed in the post-colonial period after World War 2 to compensate international investors for the direct expropriation or taking of property by governments. However, over the past 60 years, they have expanded to include “indirect” expropriation and “legitimate expectations”, which do not exist in national legal systems. Investors can claim that they deserve compensation if they can argue that a change in law or policy reduces expected future profits and/or that they were not consulted fairly about the change and did not expect the change to occur when they made the investment. These increased corporate rights are a threat to democratic rights to regulate in the public interest.
Fossil fuel company investor rights threaten government climate action
Today, ISDS cases are posing a global threat to the urgent government action required to combat the climate crisis. Palmer’s last three cases join a growing global list of ISDS cases from fossil fuel companies against government decisions to reduce carbon emissions. A recent United Nations Report concluded that ISDS is a “major obstacle” to government action on climate change. The OECD has acknowledged that ISDS is not aligned with the global climate transition.
There is growing resistance to ISDS from governments and communities. India and South Africa have withdrawn from ISDS arrangements, and Brazil has never agreed to them. The European Union and the United Kingdom have decided to quit the Energy Charter Treaty because its ISDS provisions are being used to sue governments over climate change policies. The 27 EU countries’ co-ordinated withdrawal from the ECT could be a precedent for a co-ordinated multilateral withdrawal from ISDS arrangements.
Labor should implement its policy against ISDS
Labor’s longstanding policy to exclude ISDS from future trade agreements and review it in existing agreements is inspired by its experience of the Philip Morris case and widespread community opposition. Labor has excluded ISDS from current negotiations for a comprehensive agreement with India and from the EU FTA negotiations. However, Labor has been slower to move on removing ISDS from existing agreements, as Palmer has found to his advantage.
Labor should speed up its review of existing agreements, including the agreements with ASEAN and Singapore, which are the source of Palmer’s cases. Labor should also use the opportunity of hosting the United Nations Framework Convention on Climate Change conference in 2026 to lead public discussion of the threat of ISDS to government climate action and support proposals for co-ordinated multilateral withdrawals from ISDS arrangements in trade agreements.
Labor’s policy is a point of difference with the LNP, which defends ISDS. Swifter action to remove ISDS from existing trade and investment agreements would not only protect climate action from more claims like Palmer’s, but could be an electoral plus, as it would demonstrate clear support for governments’ right to regulate in the public interest.
Patricia Ranald
Dr Patricia Ranald is the convener of the Australian Fair Trade and Investment Network and an honorary research associate at the University of Sydney.
Contributions to Pearls and Irritations
Your contribution will fund quality independent comment and analysis in Pearls and Irritations
Contribute
