Investors who have suffered loss on an investment in a
member state should consider whether Investor-State Dispute
Settlement is available, particularly if the domestic law does not
With the agreement to the Trans-Pacific Partnership
(TPP) on 5 October 2015, the Australian Government
has taken another step to increase protection of Australian
citizens investments in the other member states of the TPP
(including some of Australia's largest outbound trade
There protection will be able to be enforced directly by
Australian investors against other member states of the TPP,
through Investor-State Dispute Settlement (ISDS) arbitration.
Although Australia already has agreements in place with most of
the TPP member states, the TPP provides entirely new investor-state
protections for Australian investors in Canada and Brunei.
According to official reports on the content of the TPP, the TPP
contains the full suite of modern protections for Australian
investors in TPP member states. These protections include
most-favoured-nation status (such that if a TPP member state has a
treaty with another state that has provisions that are more
favourable than the TPP, an Australian investor may take advantage
of them), national treatment (Australian investors should receive
treatment equal to that afforded to investors from the TPP member
states), possible compensation for expropriation where due
compensation has not been provided or the expropriation was done
for a non-public purpose or without due process, and possible
compensation if Australian investors do not receive the
"minimum standards of treatment" (including fair and
These protections are found in most modern treaties, and they
will allow Australian investors to invest in a more secure and
transparent environment in any of the TPP member states.
Health, safety, and environmental issues are to be excepted from
the mechanisms under which claims can be brought against a TPP
member state. Australia has insisted on retaining the right to
legislate in these areas without constraints. In this context, it
is worth noting that the only ISDS claim brought against Australia
has been in relation to the plain packaging of tobacco products
(which Australia considers to be a legitimate public health
measure). Even with these protections, it is likely that the treaty
will provide that the exceptions cannot be applied arbitrarily or
in bad faith (as was provided in article 9.8 of the China-Australia
Free Trade Agreement signed on 17 June 2015, which has similar
public welfare exceptions).
Investor recourse – ISDS
If a host TPP member state breaches any of the protections
guaranteed under the treaty, the recourse is ISDS. As such, the
investor may bring claims against the host TPP member state arising
out of the investment before a neutral arbitral tribunal rather
than in the domestic courts of the host TPP member state.
According to official reports, the drafters of the TPP have
endeavoured to create a transparent arbitral process.
To this end, the drafters have included safeguards such as
allowing submissions in the arbitration from third parties not
involved in the dispute (including amicus curiae), and containing a
review mechanism for interim awards. These measures improve
oversight in the decision making process, and increase
participation of interested parties who are otherwise not involved
in the dispute.
The TPP also includes mechanisms designed to prevent frivolous
claims such as the availability of an expedited process for claims
which are unfounded or frivolous on their face, and the ability to
award legal costs against a party bringing such a claim to pay the
legal costs of the other party.
The TPP drafters have also included provisions to clarify how to
handle parallel proceedings. These provisions assist in providing
greater understanding in the system, while also assisting in
preventing abuse of the system.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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PNG has domestic arbitration legislation, but does not provide for the enforcement of foreign arbitral awards.
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