Investor-state update
Australia announced last week that it had signed a free trade agreement with South Korea – this is good news for Australian exporters!
The agreement was said to be a long time coming because South Korea insisted on having a dispute resolution clause that allows investors to bring an arbitration against the State if they haven't been treated fairly.
Australia had refused to include investor-state arbitration provisions ever since (as we reported earlier) Australia was sued by cigarette giant Phillip Morris before an international arbitration tribunal in Singapore under a similar treaty between Hong Kong and Australia.
We haven't seen the text of the South Korea-Australia treaty yet but it is said to include an investor-state arbitration clause, with special carve outs for environmental or health policies adopted by a government.
But the question remains, what happens if an investor gets an arbitral award against Australia – how and where could it be enforced? Well in the other big news of last week: an investor who sued Argentina and won, brought that question before the US Supreme Court.
In the early 1990s BG invested in the newly privatised gas distribution network in Argentina. By the early 2000s Argentina implemented a number of macroeconomic measures that compromised BG's investment and contravened the terms of the 1990 United Kingdom-Argentina Bilateral Investment Treaty (BIT). BG brought an investor-state arbitration against Argentina under the BIT. In 2007, the arbitral tribunal found in favour of BG awarding it US$185 million. BG now wants to enforce that award in the US.
To resist enforcement Argentina had to show that the tribunal acted outside of its jurisdiction.
The final judgment is yet to be delivered and we'll keep you posted on the outcome.
In any event, if you'll be doing business in South Korea or anywhere overseas, it's worth structuring the deal to get the protection of treaties like these.
We do not disclaim anything about this article. We're quite proud of it really.
