Investor-state Arbitration Down Under: KAFTA review and the anti-ISDS Bill

On 4 September 2014 Australia’s Joint Standing Committee on Treaties recommended parliamentary ratification of the FTA with Korea (KAFTA) signed earlier this year. But there were dissenting reports from (major Opposition) Labor Party members as well as (very minority) Greens Party Senator Whish-Wilson, based partly on objections to ISDS.
If Labor and Greens Senators follow their (Party) line on ISDS, the ruling Coalition lacks a majority (only) in the upper house and so will struggle to get KAFTA implementation legislation enacted, hence the government is unlikely to be able to ratify KAFTA. It depends on whether the Coalition government can bring onside maverick mining billionaire Senator Clive Palmer (suddenly xenophobic, yet again and in the context also of his personal business dealings, about China and its traders/investors!) and his Party members and independents in the Senate.
The Australian Government may then have to go back to Korea to see if it will alter its stance and agree to exclude ISDS after all (as in the subsequently signed Australia – Japan FTA). Interestingly, there had been considerable political discussion in Korea about ISDS (among other issues) in the context of ratifying its FTA with the US, although KORUS was ratified by the Korean legislature on 22 November 2011 and came into effect from 2012. The possibility of Australia and then Korea now removing or redrafting ISDS provisions in their bilateral FTA has significant implications for Australia’s other pending bilateral and regional treaty negos, including RCEP (ASEAN+6, including of course Korea and Japan) and TPP (apparently with the possibility of Korea joining those negotiations).
Curiously, Senator Whish-Wilson’s dissenting Report yesterday mentions that the Greens Party (namely himself) introduced a Bill to prevent the government entering into any future treaties containing any form of ISDS, but he doesn’t add that on 27 August a (different) Committee recommended against the Senate enacting that “anti-ISDS Bill“. (Nor can I see the mentioned in the other Reports on KAFTA ratification.)
The Senate inquiry into the anti-ISDS Bill heard further evidence, including from myself, with both Coalition and Labor Senators agreeing that the Bill should not be passed – albeit with “Additional Comments” from Labor members emphasising that enactment would drastically curtail the constitutional responsibility of the executive branch to negotiate treaties. (Senator Whish-Wilson unsurprisingly dissented, and recommended enactment of his own private member’s Bill.) Against this backdrop, it is quite unlikely that the Senate will ever vote on this particular Bill (many such members’ Bill never go forward) and anyway it would fail resoundingly, assuming other Labor Senators follow their committee colleagues (the usual practice).


For recent commentary especially on the anti-ISDS Bill, see:
http://kluwerarbitrationblog.com/blog/2014/08/27/the-anti-isds-bill-before-the-australian-senate/
http://www.theage.com.au/business/trade-treaties-expose-australia-to-costly-litigation-experts-warn-20140828-109ht7.html
http://globalarbitrationreview.com/news/article/32936/dont-rule-isds-says-australian-senate-committee/ (3 Sept)
and (updated for the 27 August report, but not yet the KAFTA ratification report of 4 Sept):
Nottage, Luke R., The ‘Anti-ISDS Bill’ Before the Senate: What Future for Investor-State Arbitration in Australia? (August 20, 2014). Sydney Law School Research Paper No. 14/76. Available at SSRN: http://ssrn.com/abstract=2483610
ABC National Radio will also focus on ISDS in the context of the TPP negotiations, in an extended feature broadcast on 14 and 16 September 2014.

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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