Australia: The ASEAN – Australia - New Zealand Free Trade Agreement – Safer Investment In Asia?

At the recent ASEAN Summit it was decided that the ASEAN-Australia-New Zealand Free Trade Agreement (AANZ-FTA) will enter into force on 1 January 2010.

The AANZ-FTA, signed in early 2009, covers 12 countries, over 600 million people and approximately 20% of Australia's total trade. For Australians investing in Asia, the AANZ-FTA heralds a new era of safer investment and simpler dispute resolution.

The AANZ-FTA grants significant rights in respect of trade and implements a tried and true dispute resolution mechanism, international arbitration. In conjunction, the two make the AANZ-FTA a very powerful tool for anyone asserting trade-related rights in an Asian country.

Who is in ASEAN again?

Burma, Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

What is an FTA?

An FTA is a treaty that imposes obligations on each State party to protect the investments of investors from other State parties. What makes FTA's particularly nifty is that they give an investor a cause of action against the State in which it invests.

What does the AANZ-FTA protect?

The AANZ-FTA covers goods, services, investment, intellectual property, e-commerce, temporary movement of business people and economic cooperation.

Investment is defined broadly in the AANZ-FTA and includes movable and immovable property andother property rights, shares, stocks, bonds and debentures, contractual rights and business concessions.

What protections does the AANZ-FTA offer for Investment?

The Investment protections offered by the AANZ-FTA include:

• no expropriation or nationalisation of an investment unless it is done with due process for a public purpose, is non-discriminatory and is promptly, adequately and effectively compensated
• fair and equitable treatment, and full protection and security
• national treatment (i.e. investments to be treated no less favourably than investments by the nationals of the host State)
• transparency of State regulations.

How will Investment disputes be resolved?

Investment disputes are to be resolved by way of consultation and, failing that, conciliation or arbitration under either the ICSID Rules (the Arbitration Rules of the International Centre for Settlement of Investment Disputes), ICSID Additional Facility Rules, UNCITRAL Arbitration Rules (United Nations Commission on International Trade Law), or other rules if the parties agree.

It is important to note that where an Investment claim is made against the Philippines or Vietnam, those countries have the option of referring the dispute to the courts or tribunals of those countries (provided that they have jurisdiction).

It is also important to note that there is a three year limitation period on any Investment claims brought under the AANZ-FTA.

How is this relevant to me?

The AANZ-FTA provides significant protections for Australian companies operating or investing in Asia.

Imagine that you are an Australian company that owns a rubber plantation in an ASEAN country. The Prime Minister of that country, following local criticism for allowing natural resources to be 'plundered' by foreign companies, begins implementing a policy of nationalising various export industries.

As a result, the government nationalises your plantation, paying only nominal compensation. In a scenario like this you would have a claim for relief under the AANZ-FTA.

For more information, please contact:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.