Do Many of Australia’s (and Some of Japan’s) Treaties Not Give Full Consent to Investor-State Arbitration?

Indonesia recently announced that it would review its 67 bilateral investment treaties (BITs). Shortly beforehand, it had unsuccessfully challenged the jurisdiction of an ICSID arbitral tribunal in a claim for expropriation and other violations brought by the Australian subsidiary of a UK coal mining company (Planet Mining v Indonesia).
The tribunal’s decision found that consent to jurisdiction existed under the coal mining licences given by Indonesian authorities, but not under the wording of the 1992 Australia-Indonesia BIT. It found that the countries had only given a “promise to consent” rather than full advance consent to ICSID jurisdiction, meaning that Indonesia could still refuse consent subject to potential review through an inter-state arbitration procedure separately provided under the treaty. Further, as both countries remained party to the framework 1965 ICSID Convention facilitating enforcement of arbitral awards, another BIT provision for ad hoc investor-state arbitration (ISA) was also unavailable to investors.


My paper below critically assesses the arguments developed by the tribunal to reach this surprising interpretation of the Australia-Indonesia BIT. It also considers the wide-ranging implications of the tribunal’s reasoning given similar wording contained in many other treaties concluded by Australia, and (to a lesser extent) some other countries in the region such as Japan.
Fortunately for investors, some of those treaties (including the Australia-Indonesia BIT) are now complemented by ISA rights contained in bilateral or regional free trade agreements (FTAs), or may soon be. However, in light of the tribunal’s decision, Australia should clarify the scope of its other BITs, especially with countries in Eastern Europe and the Middle East.
Other nations, legal advisors and arbitrators will also need to examine treaty wording and practice more broadly, which risks adding to growing costs and delays in ISA proceedings.

Nottage, Luke R., Do Many of Australia’s Bilateral Treaties Really Not Provide Full Advance Consent to Investor-State Arbitration? Analysis of Planet Mining v Indonesia and Regional Implications (April 14, 2014). Sydney Law School Research Paper No. 14/39. Available at SSRN: http://ssrn.com/abstract=2424987

Author: Luke Nottage

Prof Luke Nottage (BCA, LLB, PhD VUW, LLM 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.

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