Negotiating and Applying Investor-State Arbitration Provisions in Free Trade Agreements and Investment Treaties: Australia, Japan and the Asia-Pacific

My recent Sydney Law School Research Paper No. 12/84, forthcoming in a special issue 119 (9&10) Hogaku Shimpo (Chuo University) for Professor Satoru Osanai, is an edited and updated collection of postings over 2012 on this ‘Japanese Law and the Asia-Pacific’ blog (and/or the East Asia Forum blog) dealing with investor-state arbitration (ISA) and other forms of investor-state dispute settlement.
The topic has become particularly controversial for Australia, given its ongoing Free Trade Agreement negotiations with Japan. Japan is also considering joining negotiations underway among Australia and 10 other states (including the US) for an expanded Trans-Pacific Partnership Agreement, and both are also interested in the more recent ‘Regional Comprehensive Economic Partnership‘ (RCEP) initiative (ASEAN+6). Both Japan and Australia have almost always included ISA protections in their investment treaties, but Australia omitted them in investment treaties with the USA and New Zealand, and recently declared that it will no longer accept ISA in future treaties – even with countries with less developed legal systems and economies.

Part of the reason for Australia’s policy shift is a claim under its 1993 investment treaty with Hong Kong, by Philip Morris Asia complaining about expropriation and other treaty violations allegedly arising from Australia’s Tobacco Plain Packaging Act 2011 (outlined in Part 4 of the paper). This arbitration is ongoing and may at least partially succeed. By contrast, Japan Tobacco and other large cigarette manufacturers failed this year in their claim before the High Court of Australia, arguing that plain packaging requirements amounted to an unconstitutional ‘acquisition’ of intellectual property rights under Australian domestic law (Part 9).
The paper begins (in Part 2) by setting such issues in a broader socio-economic setting: the characteristics of government lawyers in Australia and Japan (as well as Korea, also negotiating an FTA with Australia and which signed this year a trilateral investment treaty with Japan and China). The question of ISA protections is also located, in Parts 3 and Part 10, in the context of the Australia-Japan FTA negotiations as a whole. Parts 5-9 hone in on ISA, but also other existing or potential forms of investor-state dispute settlement, including investment law issues highlighted recently in another key economy for both Japan and Australia – Indonesia.
For my media commentary on these and related topics this year, see also:
• 20 November 2012: Phnom Penh Post, cited in Erika Mudie, “Warning on Investment in Laos”,
• 16 November 2012: Australian Financial Review (p31), cited in Claire Stewart, “High Court Stoush Puts Arbitration Standing At Risk”, also via
• 2 November 2012: The Australian (p10), cited by Rowan Callick “Arbitration Hitch Holds Up FTAs”
• 23 September 2012: Financial Times, cited in Alan Beattie “Intellectual Property: A New World of Royalties”, also via
• 16 May 2012: Jakarta Globe, “Divestment of Foreign Mining Interests in Indonesia”; also East Asia Forum, via

Author: Luke Nottage

Prof Luke Nottage (BCA, LLB, PhD VUW, LLM LLD Kyoto) is founding co-director of the Australian Network for Japanese Law (ANJeL), Associate Director (Japan) of the Centre for Asian and Pacific Law at the University of Sydney (CAPLUS), and Professor of Comparative and Transnational Business Law at Sydney Law School. He specialises in international dispute resolution, foreign investment law, contract and consumer (product safety) law.