Category: Asia-Pacific regional architecture

Open Letter – Assessing Treaty-based Investor-State Dispute Settlement

Some are concerned about treaty-based Investor-State Dispute Settlement (ISDS), especially binding Investor-State Arbitration procedures in investment treaties and Free Trade Agreements. One response includes public calls for states to eschew such procedures completely in future treaties, for example in the expanded Trans-Pacific Partnership Agreement presently under negotiation. This approach would essentially leave foreign investors to approach local courts if host states illegally interfere with their investments, or to encourage their home states to activate an inter-state dispute resolution process, or to try to negotiate individualised arbitration agreements with host states.
An alternative approach is to identify and address more specific concerns with treaty-based ISDS. An example is the scoping paper and Public Consultation on ISDS generated by the Organisation for Economic Cooperation and Development, over 16 May – 23 July.
As a constructive contribution to this debate, we created an online form asking for views on whether ISDS should be left as is, abandoned completely, or adapted in various listed ways. As explained below, no respondents favoured eschewing ISDS completely. Yet that position represents the policy shift announced by Australia in the “Gillard Government Trade Policy Statement” (April 2011), resulting in ISDS being omitted from the Australia-Malaysia FTA (May 2012) but difficulties in negotiating other bilateral treaties (with Korea, and Japan) and the TPPA. Implications and other topics related to the TPPA negotiations will be discussed at a Roundtable in Canberra on 8 August, hosted by the Crawford School of Public Policy (ANU College of Asia and the Pacific).

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TPP negotiations and the IBA’s Draft Rules on Investor-State Mediation

As NZ lawyer Daniel Kalderimis points out recently, concerns about treaty-based investor-state arbitration (ISA) have been:

stirred up by the release of an “Open Letter from Lawyers to the Negotiators of the Trans-Pacific Partnership Urging the Rejection of Investor-State Dispute Settlement” on 8 May 2012. The letter is backed by well-meaning, and several well-known, signatories; most of whom are not especially well-informed about investor-state arbitration. The fact of the letter is welcome, as the issues are important. But the letter itself contains several overstatements and does not make a balanced contribution to the debate.

Another oddity about the “Open Letter” is that it refers generically to “Investor-State Dispute Settlement” (ISDS) and ends by calling on “all governments engaged in the TPP [Trans-Pacific Partnership FTA] negotiations to follow Australia’s example by rejecting the Investor-State dispute mechanism and reasserting the integrity of our domestic legal processes”. ISDS incorporates both ISA (where the parties agree to be bound by the arbitrators’ decision) and investor-state mediation (“ISM”) or conciliation procedures (where the parties agree to negotiate a settlement but are not obliged to accept any proposals made by the third-party neutral mediator). At least the rest of the “Open Letter” indicates that the primary objection is to binding ISA.
By contrast, the “Gillard Government Trade Policy Statement” (April 2011) simply eschews ISDS in Australia’s future treaties, including the TPP. Perhaps the Statement meant only ISA, which allows greater inroads into host state sovereignty, given that overall it draws on the Productivity Commission’s recommendations from a 2010 Trade Policy Review report. But, by seemingly eschewing all forms of ISA, the Statement seems to go beyond the Commission’s recommendation on ISA itself.
Hopefully the Australian government, other states involved in FTA negotiations (such as the TPP) and those who wish to improve the ISA system (such as myself) or abandon it altogether (as do some signatories to the Open Letter) will not simply transpose their objections over to ISM too. There is significant scope for mediating investor-state disputes, and indeed the Draft Rules on ISM published recently by the International Bar Association (IBA) are a valuable guide to conducting mediation more effectively. Below I set out some preliminary analysis of those Draft Rules, prepared for the Law Council of Australia but representing my own personal views – particularly regarding the scope for arbitrators to adopt them as a means of settling ISA claims earlier and more effectively (ie ‘Arb-Med‘). A fully-footnoted version of my views is available on request, and I encourage feedback.

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“Asian Investment and Finance Law” – Special issue 34(1) Sydney Law Review (March 2012)

Professor Vivienne Bath and myself are guest editors and authors of two articles for this special issue, the first dedicated the Sydney Law Review to developments in or across Asian legal systems. The issue also includes an article on Indonesian law co-authored by Dr Simon Butt, presently serving as Director of the Centre for Asian and Pacific Law at the University of Sydney (CAPLUS).
The special issue contains the following nine contributions, with full-text PDF versions freely downloadable from the Sydney Law Review webpage:

Introduction: Asian Investment and Finance Law
Vivienne Bath and Luke Nottage
Articles:
Corporate Rescue in Asia – Trends and Challenges
Andrew Godwin
Lessons from Product Safety Regulation for Reforming Consumer Credit Markets in Japan and Beyond?
Luke Nottage and Souichirou Kozuka
Embracing Sharia-Compliant Products through Regulatory Amendment to Achieve Parity of Treatment
Kerrie Sadiq and Ann Black
Between Piety and Prudence: State Syariah and the Regulation of Islamic Banking in Indonesia
Tim Lindsey
Reining in Regional Governments? Local Taxes and Investment in Decentralised Indonesia
Simon Butt and Nicholas Parsons
Foreign Investment, the National Interest and National Security – Foreign Direct Investment in Australia and China
Vivienne Bath
Responding to Industrial Unrest in China: Prospects for Strengthening the Role of Collective Bargaining
Sarah Biddulph
The Influence of the WTO over China’s Intellectual Property Regime
Natalie P Stoianoff
Book Review: The Derivative Action in Asia: A Comparative and Functional Approach [edited by Harald Baum, Dan Puchniak and Michael Ewing-Chow, Cambridge University Press, 2012]
Luke Nottage and Fady Aoun

Vivienne Bath and I also reproduce below the text of our Introduction (omitting footnote references). It outlines and commemorates the long and strong tradition of engagement with Asian legal systems on the part of Sydney Law School, CAPLUS and the Australian Network for Japanese Law (ANJeL).

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Divestment of foreign mining interests in Indonesia meets the ‘Gillard Government Trade Policy Statement’

By: Simon Butt and Luke Nottage (University of Sydney Law School)
[with a shorter version at http://www.eastasiaforum.org/]
Professor Chris Findlay recently wrote on the East Asia Forum about ‘Australia’s FDI challenges in the Asian Century’, highlighting problems reported recently by ANZ Bank and Qantas in the region. His proposals including ‘innovation in negotiating modalities’, including a possible new plurilateral agreement in the WTO that would cover all investments (not just in some services sectors). That’s a nice idea, but it’s proving hard enough to complete the current round of Doha Round negotiations. In light also of recent problems in Indonesia, the Australian government should meanwhile reconsider its abrupt policy shift last April regarding an important protection found in most of its bilateral and regional Free Trade Agreements (FTAs) and bilateral investment agreements (BITs): investor-state arbitration (ISA).

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ANJeL Anniversary Conference debrief – commemorating and comparing the 11 March disasters in Japan

Like so many in Australia and worldwide, we remember sadly today over 19,000 confirmed dead or still missing from Japan’s triple disasters a year ago. Our thoughts and prayers also go out to the many more who collectively have lost their lives from natural disasters in other parts of the Asia-Pacific – including the 2004 tsunami in Indonesia and other countries facing the Indian Ocean, the 2008 earthquake in Sichuan, the Christchurch earthquake and the Queensland floods – just over a year ago, too.

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ANJeL Anniversary Conference (Asia-Pacific Disaster Prevention and Management): Opening Remarks (for 1 March)

On behalf of the University of Sydney, please let me welcome you all to this international conference, on ‘Socio-legal norms in preventing and managing disasters in Japan: Asia-Pacific and interdisciplinary perspectives’, by acknowledging the many people and organizations that have made it possible. I thank especially our many speakers, session chairs and other participants here today – including Consul-General Kohara (who will soon add a few words to open the conference) and several others who will be joining us later (by Skype from Japan and the US, as well as the Federal Minister for Emergency Services and Adelaide University’s new Pro Vice-Chancellor (Int’l) Professor Kent Anderson, who will give closing speeches tomorrow).
I also gratefully acknowledge our main sponsor, the Japan Foundation Sydney, which last year requested applications for joint research events on this important topic; and the other participating institutions – the Law Faculty of Tohoku University (one of USydney’s longstanding partners in Japan) and various USydney-related organisations that have come together to provide matching funding: the Law School and its Centre for Asian and Pacific Law (CAPLUS), the Australian Network for Japanese Law (ANJeL, centred on the Law Schools at USydney, ANU and Bond University), the new China Studies Centre, the Department of Japanese Studies, and the Office of the Deputy Vice-Chancellor (Int’l).
May I also single out our fine administrative support staff: Dale Nouwens (Law School Events Coordinator) and Melanie Trezise (ANJeL Executive Coordinator). I truly appreciate their help, especially as I will need to step outside this conference occasionally over the next few days. As the relevant Associate Dean, I also need to keep an eye on the Orientation Program for new International Students in the Law School, which will be taking place in parallel in the lecture theatre across the corridor.

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Anniversary Conference, 1-2 March 2012: “Socio-legal Norms in Preventing and Managing Disasters in Japan: Asia-Pacific and Interdisciplinary Perspectives”

The “3-11 triple disasters” that afflicted Japan on 11 March 2011 have highlighted broader regulatory issues facing countries particularly in the Asia-Pacific region, including Japan’s FTA negotiation program. A few months after “3-11”, the Japan Foundation established a special grant program calling for collaborative research conferences on disaster prevention and management – seeking applications by end-September, with decisions to be reached by end-October and conferences to be concluded by March 2012. An application by a consortium led by the University of Sydney Law School was successful, allowing a major international conference to take place in the new Sydney Law School premises over Friday 1 March and Saturday 2 March 2012. Other sponsors of this event are the University’s Japanese Studies Department and the new China Studies Centre, the Centre for Asian and Pacific Law at the University of Sydney (CAPLUS), the Australian Network for Japanese Law (ANJeL), and the Law Faculty of Tohoku University (one of the University of Sydney’s longstanding partner institutions).
The conference will commemorate the first anniversary of the 3-11 disasters, and also represents ANJeL’s tenth international conference on diverse aspects of Japanese Law. It will examine regulatory issues from a variety of social science perspectives, focusing on Japan but comparing Australia (of course, especially in the wake of January’s devastating floods in Queensland), New Zealand (especially issues highlighted by the Christchurch earthquake), Indonesia (the Aceh tsunami), China and the USA (especially earthquakes and nuclear power issues).
Please “save the date”, and keep an eye on the ANJeL website and the Sydney Law School “events” website for forthcoming registration and other details.

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Guest Blog – “Tax Treaty Arbitration: The Next Frontier in Asia-Pacific Commercial Dispute Resolution?”

[This guest blog by Micah Burch, Senior Lecturer at Sydney Law School, draws on our joint research for the project, “Fostering a Common Culture in Cross-Border Dispute Resolution: Australia, Japan and the Asia-Pacific“, supported by the Commonwealth through the Australia-Japan Foundation which is part of the Department of Foreign Affairs and Trade. We have subsequently co-authored a related paper entitled “Novel Treaty-Based Approaches to Resolving International Investment and Tax Disputes in the Asia-Pacific Region” (October 4, 2011) Sydney Law School Research Paper No. 11/66, available here.]
Much was made (in tax treaty circles, at least) three years ago when, after decades of mounting discussion, the Organisation for Economic Co-operation and Development (OECD) included in its model tax treaty a provision requiring arbitration. The controversial provision (Article 25(5) of the OECD Model Tax Convention on Income and on Capital (2003)) takes the substantial step of requiring states to arbitrate tax disputes arising under the treaty if they remain unresolved after two years of negotiation between the two competent authorities. While arbitration is a generally accepted facet of international commercial dispute resolution worldwide, including now throughout Asia, dispute resolution under bilateral tax treaties has been relatively undeveloped. But there are now signs of change.

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Investor-state Arbitration Policy and Practice after Philip Morris v Australia

[Updated 3 August 2011]
Justice Oliver Wendell Holmes famously remarked in Northern Securities Co v United States 193 US 197 (1904) that:

“Great cases like hard cases make bad law. For great cases are called great, not by reason of their importance… but because of some accident of immediate overwhelming interest which appeals to the feelings and distorts the judgment”.

We might take this reasoning a step further: big cases make or entrench bad policy. A contemporary example is the request for arbitration (in Singapore) initiated on 27 June by tobacco giant Philip Morris Asia (PM) against Australia, pursuant to the 1993 “Agreement between the Government of Australia and the Government of Hong Kong for the Promotion and Protection of Investments”. PM seems to be alleging that proposed legislation mandating plain packaging of cigarettes amounts to “expropriation” of its trademarks (Art 6) and possibly a violation of “fair and equitable treatment” obligations (Art 2(2)).

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The Rise and Possible Fall of Investor-State Arbitration in Asia: A Skeptic’s View of Australia’s “Gillard Government Trade Policy Statement”

Downloadable here is my draft paper on this topic for various forthcoming events, beginning with a 3 August seminar hosted by Sydney Law School on “Australia’s New Policy on Investor-State Dispute Settlement”.
The paper draws on research for the project, ‘Fostering a Common Culture in Cross-Border Dispute Resolution: Australia, Japan and the Asia-Pacific‘, supported by the Commonwealth through the Australia-Japan Foundation which is part of the Department of Foreign Affairs and Trade.
Treaty-based investor-state arbitration (ISA) has gradually become a more established part of the legal landscape in the Asian region. But this development is threatened by the ‘Gillard Government Trade Policy Statement‘ announced in April 2011.

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