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