Zeph v Australia ISDS Arbitration Claims under AANZFTA

[Some of the background below is included in my posting on the Kluwer Arbitration Blog on 15 September 2024 entitled “Aggravating Australia’s Arbitration Ambivalence: Zeph’s ISDS Claims“. I conclude:

“… Overall, the Zeph claims against Australia, as well as parliamentary inquiries into ratification of IIAs like AANZFTA’s Second Protocol, are therefore likely to aggravate rather than assuage concerns in Australia over ISDS rekindled by the Labor Government’s new policy. This is despite tribunal rulings like those mentioned at the beginning [of the Blog posting, on interim measures], and considerable transparency in these multiple forums. Governments and stakeholders therefore need to work harder to promote productive debate and seek workable ways forward. An EU-style investment court or key features can be a useful discussion point for Australia and its counterparties to IIAs.”

***

The opportunity for nuanced public debate about Australia’s Labor Government’s late 2022 reversion to eschewing ISDS, and my proposed compromise of an EU-style investment court alternative process or key features thereof (such as a standing panel of arbitrators or an appellate review mechanism), is complicated politically by a succession of ad hoc arbitration claims brought by Singapore-incorporated Zeph. Controlled by Clive Palmer and his subsidiaries based in Australia, Zeph has filed several claims since 2023 under the 2021 UNCITRAL Arbitration Rules, pursuant to the investment chapter of the original AANZFTA (signed in 2009) rather than the Second Protocol agreed in 2022 and expected to be ratified by Australia from mid-2024 (after the positive recommendation from JSCOT’s inquiry in which I gave evidence). Those objecting to retaining ISDS in the Protocol, albeit subject to a Work Program where the states party agreed to review whether ISDS should be retained, highlighted these Zeph claims. However, the JSCOT Report did not specifically mention the claimant, and its links to Australian mining magnate and former right-wing politician Clive Palmer.

The first Zeph v Australia arbitration claim (commenced on 29 March 2023) impugns Western Australia legislation enacted in 2020 (unsuccessfully challenged under Australian constitutional law) interfering with rights awarded to his subsidiary Mineralogy in 2002 regarding an iron ore project, as confirmed by two commercial arbitration awards. By preventing also access to judicial and administrative review, the claim appears strong on the merits, as elaborated in a publically available Notice of Dispute of 14 October 2020 (albeit under the Singapore-Australia FTA) evoking breach of fair and equitable treatment, non-discrimination and other protections. However, the jurisdictional objections are significant. Was Zeph incorporated in Singapore (seemingly in 2019) when the dispute was “reasonably foreseeable”, so the tribunal loses jurisdiction under customary international law due to abuse of rights, under the test applied and found to be made out in Philip Morris Asia v Australia? Can Australia further invoke the ‘denial of benefits’ Article 11 in AANZFTA’s Investment Chapter 11, as Zeph is controlled by an Australian and arguably has “no substantive business operations” in Singapore?

Accordingly, interesting legal and factual arguments are expected in hearings scheduled for the week of 16 September 2024 (under Procedural Order No 1), for the arbitration with the seat decided by the tribunal to be Geneva (contrary to Australia’s preference for London as seat). These hearings may take place at the seat in Geneva. However, as the agreed repository for documentation in this first Zeph case is the Permanent Court of Arbitration (PCA) in The Hague, parties and the tribunal may instead decide to request use of the PCA’s well-appointed hearing rooms.

Procedural Order No 3 (issued 19 January 2024), setting out transparency in most aspects for this first arbitration, interprets AANZFTA Chapter 11 Article 26.3 to make public such hearings and their transcripts (unless a party seeks and justifies confidentiality around certain information). Paragraph 15.iii of the Order adds that the parties’ “main written submissions shall be published on the PCA website at the end of the hearing to which they relate, subject to any prior redactions” of confidential information).

Procedural Order No 2 largely rejected various interim measures applications by Zeph, including curiously that the JSCOT chair stop making public statements impugning ISDS generally. But some of these applications might be revived (if for example Western Australia invokes indemnities against Palmer and his interests, pursuant to its 2020 state legislation).

Secondly, the Zeph v Australia (II) arbitration impugns measures taken by the Queensland state government relating to a minerals exploration project of Palmer’s subsidiary Waratah Coal. The Attorney-General’s Department revealed to federal Parliament in mid-2023 that Zeph had initiated a second ISDS claim, reportedly by notice of dispute under AANZFTA on 21 February 2023 followed by a formal notice of arbitration on 29 May 2023, seeking around A$41 billion in compensation. The agreed repository for this arbitration is again the PCA in The Hague.

A decision of 26 September 2023, from the agreed Appointing Authority (PCA Secretary-General Dr Marcin Czepkelak) adds that the Notice of Arbitration includes alleged breaches of AANZFTA investment Chapter 11’s articles 6 and 9 (FET and expropriation) concerning the Queensland state government’s “decision to grant an environmental offset to a direct competitor of the Claimant over land in which the Claimant’s subsidiary had certain coal exploration permits”.

The Appointing Authority’s decision rejected Australia’s challenge to Zeph’s nomination of Geneva-based Charles Poncet as arbitrator, based on old proceedings involving in him in Italian courts. Other public sources had indicated that Australia nominated Prof Don McCrae (also for the first Zeph case, and earlier the Philip Morris Asia v Australia case) and that the presiding arbitrator is Laurent Levy (who works in the same Geneva law firm as Prof Kaufmann-Kohler, who is presiding arbitrator in the first Zeph case).

In late July 2024 three Procedural Orders from the Zeph II tribunal were also made available via the Zeph II arbitration’s PCA webpage. The first (dated 25 October 2023) sets the first hearing on preliminary objections as the week of 29 September 2024. Curiously, paragraph 10.5 observes that “In accordance with Article 25(4) of the UNCITRAL Rules, hearings shall be held in camera unless the Parties agree otherwise”.

By contrast, Procedural Order No 3 (25 June 2024) paragraph 2.3 adopts the identical reasoning of the first Zeph arbitration tribunal in the latter’s Procedural Order No 3 on Transparency: AANZFTA’s “Article 26(3) stipulates that information submitted to the Tribunal or to either Party shall be protected from disclosure to the public if specifically designated as confidential. A contrario this implies that, absent such a specific confidentiality designation, the information in the record may be disclosed to the public.” Consistently, later in the Zeph II tribunal’s Procedural Order No 3, paragraph 2.9 notes that the parties agreed to apply certain elements of the first Zeph arbitration tribunal including that: “Hearings (other than procedural conferences) shall be open to the public. … Transcripts of the hearings shall be made public, subject to the redaction of protected information. Sound and/or video recordings should not be made public.” Again, it will be interesting therefore to see from the hearings scheduled for the week of 29 September 2025 (in person or perhaps livestreamed, and via subsequent transcripts and submissions) what jurisdictional objections are raised by Australia, presumably very similar to those being raised in the first Zeph arbitration hearings (scheduled for a year earlier).

Paragraphs 1.3 and 1.4 further note in February 2024 the first Zeph arbitration tribunal had accepted Australia’s proposal to share information with the Zeph II arbitration tribunal, and that in March 2024 the parties agreed to adopt the first Zeph arbitration tribunal’s Procedural Order No 3 concerning procedures to protect any confidential information. Thus, despite there being only Prof Don McRae on both tribunals, there has been some alignment achieved and related procedural efficiencies achieved in the two parallel arbitrations. However, it seems regrettably inefficient for the same parties to hold hearings on presumably very similar jurisdictional issues in September 2024 and a year later, before partially overlapping tribunals.

In addition, Procedural Order No 2 (dated 28 March 2024) briefly notes Zeph’s withdrawal of its application for interim measures (filed 7 November 2023 before the Zeph II arbitration tribunal), on 12 February 2024. According to paragraph 2.1, that application seems largely to have requested measures similar to those sought in the first Zeph arbitration, but additionally asking the tribunal to order Australia ‘to refrain from granting any further environmental offsets or equivalent measures over land or property owned by the Claimant or its subsidiaries’. Zeph’s withdrawal, to avoid any hearing and decision, promotes efficiency as on 17 November 2023 the first Zeph arbitration tribunal dismissed or ruled premature the quite similar requests for interim measures.

Thirdly, Zeph v Australia (III) focuses on a Queensland Land Court judgment recommending against a coal mine application by Waratah Coal. This dispute includes allegations of bias on the part of its President Kingham, according to a Notice of Intention to Commence Arbitration (albeit again under SAFTA, dated 20 October 2023) that the Australian government has made public. There is otherwise little public information available yet about this case, including when the actual Notice of Arbitration was filed.

Overall, it is unfortunate that Notices of Dispute or Intention to Commence Arbitration and Notices of Arbitration, let alone Responses from Australia, are not uniformly made public. Such documentation, very important to understand the key factual and legal issues in the cases, is not mentioned in the Procedural Orders on transparency in the first two Zeph arbitrations, but those Orders do reason that the starting principle underlying AANZFTA is transparency.

In addition, it is noteworthy that the Zeph II arbitration webpage does not contain Terms of Appointment of the arbitrators, as for the first arbitration. There is also no decision on the seat in the Zeph II arbitration, but its Procedural Order No 3 ends by noting that it is Geneva. Perhaps Australia agreed to that after the first Zeph arbitration tribunal ruled as such in favour of Zeph, or a the second Zeph tribunal so ruled but did not give any reasons for the decision on the seat (as the UNCITRAL Rules, in Article 34(3), only require reasons for awards).

















“Rule-based International Traceability of Critical Raw Materials Supply Chains”

Written by: A/Prof Jeanne Huang & Prof Luke Nottage

This is the theme for our project (with Jeanne Huang as one Chief Investigator) funded recently by the University of Sydney, jointly with institutional partner Fudan University (Shanghai). The sub-theme is “Climate and Environmental Justice between China, Australia, and Other Selected Countries”, including Japan. It is part of series of research projects aimed at advancing the UN’s Sustainable Development Goals (SDGs), and involves also from our Sydney Business School Prof Hans Hendrischke (specialist in China). The other Chief Investigator from the Fudan University side is A/Prof Ping Jiang, assistant director of the Department of Environment Science and Engineering.

Abstract: “The US Inflation Reduction Act and the EU Digital Product Passport both underscore the urgent need for enhanced Environmental, Social, and Governance data traceability across Australian miners, Chinese processors, and US/EU regulators and consumers of critical raw materials (CRM) like Lithium. Addressing this need, this project explores how to establish a rule-based traceability framework to foster sustainable CRM supply chains between Australia, China, the US, and the EU. It adopts a multifaceted approach, incorporating law-business-engineering interdisciplinary research, interviews, case studies, conflict-of-law concepts, and comparative law methodology to address cross-border legal and ethical tensions and promote circular economy within CRM supply chains. It aims to use traceability to enhance transparency, visibility, and trust in CRM supply chains, and promote responsible sourcing and consumption, crucial for global digitalization, electric vehicles deployment, energy transition, and ultimately achieving the UN Sustainable Development Goals.”

The first of many planned research outputs planned through to mid-2025 is our presentation (slides here) on 12 July 2024 at the “Law and Sustainability” conference at the University of Sydney, co-organised with Singapore Management University and Hong Kong University (program and other details here). We look forward to feedback as we develop our presentation, “Private International Law and Sustainable Development: Establishing International Traceability of Critical Raw Materials Supply Chains” into a full paper that assesses and adapts models particularly from international dispute resolution (arbitral award and judgment recognition) and other international treaty regimes to facilitate recognition of CRM certificates in cross-border supply chains.

Consumer Law Compared and Refreshed

[Update of 4 December 2024: in my presentation tomorrow at the annual Australasian Consumer Law Roundtable, hosted by Deakin U in Melbourne’s CBD, I will present an updated version of my 2024 CCLJ article with Prof Souichirou Kozuka comparing consumer law administration, contracts and product safety. This will mention my Submissions (linked below) to three recent federal Treasury-led public consultations (perhaps prompted by a general election due by May 2025!) into (i) facilitating the Australian government adopting foreign standards for minimum safety of specific goods, (ii) adding civil pecuniary penalties for consumer guarantee remedies not provided by suppliers (including regarding safety, as an aspect of “acceptable quality” for goods), and (iii) a generic unfair commercial practices prohibition. Japanese consumer law has none of these features, but each raises interesting issues. Update of 6 January 2026: on the last-mentioned, see also my media commentary here.]

Yesterday (28 June 2024) I enjoyed attending the ACCC National Consumer Congress in sunny Sydney (program here). This annual invitation-only event provides an excellent opportunity to discuss cutting-edge law and policy issues with new and old colleagues working in Australian state and federal governments, consumer NGOs, businesses and academia (more limited, but I am pictured here with QUT’s Nicola Howell [expert in consumer credit, co-convenor of the academic-focused annual Consumer Law Roundtable] and Dr Catherine Niven [expert in product safety regulation, major contributor to my ARC Discovery Project on child product safety begun before the pandemic- with our last research output published in 2023 here] and Monash Em Prof Justin Malbon [co-author of my 2019 book on ASEAN Consumer Law Harmonisation, with UMelb Prof Jeannie Paterson who had to attend the Congress virtually this year]). It would be good to see more such events bringing together such stakeholders in Japan (compared with in my recent CCLJ article with Souichirou Kozuka), ASEAN and other Asian states.

The first session was on “Buying in Australia – Are We Safe?”. The answer was “No” from panellists including Catherine (except perhaps one speaker). The opening speaker gave a moving account of how long and traumatic the process was to secure a mandatory product safety standard around button batteries, which were fatally ingested by her infant Bella. Another early fatality involving Britney was highlighted in my 2020 piece for The Conversation (leading to an ABC radio interview). That related also to my then Journal of Consumer Policy article arguing that the Australian Consumer Law did need to add an EU-style “general safety provision” (GSP) to fill gaps so suppliers switched to a more pro-active approach to risk assessments to ensure only safe consumer products were put onto the market, rather than waiting for accidents or risks to be identified and then conduct “voluntary” recalls of unsafe goods (mainly then only to avoid potential product liability claims for compensation and/or adverse reputational effects). In my comments at the Congress, I mentioned that after Canada added such a requirement in 2010, its recall rates went down; and when Singapore added a partial GSP (requiring all products to comply with EU, specified American or ISO standards) there were immediately fewer unsafe toys on their market. Yet the Treasury-led Consultation in 2020 into adding a GSP has led nowhere.

As alternatives, it seems, we find from late 2021 a further Consultation about allowing foreign standards to be adopted into the ACL (which I commented was a no-brainer) and another Consultation into allowing civil penalties for suppliers not providing remedies to consumers from defective – including unsafe – products under mandatory consumer guarantees (which I suggested was rather broad-brush and indirect, compared to ex ante regulation).

I also mentioned that unfortunately the written Submissions made by myself and others to all three Consultations have still not been made public. This is also true of the 2023 Consultation into adding to the ACL a general unfair trading prohibition (as under EU, US or Singaporean law). That would go beyond existing ACL prohibitions on misleading or unconscionable conduct to better address eg “dark patterns” facilitated by new technologies (such as “subscription traps” that the ACCC CEO reiterated at the Congress remain a concern). There were moves to make public Submissions to that Consultation (including mine, reproduced here for convenience and giving as an example such a subscription trap laid by The Economist magazine) and they were disclosed from 28 June (the day after the ACCC Congress) noting “79 submissions were received for this consultation, including 8 confidential submissions”. But in principle I believe such consumer law reform consultations should automatically make public submissions unless confidentiality is requested. That is now common good practice across Australian law reform bodies, including the Productivity Commission. In the same vein, Australia’s consumer law reform agencies should publicise at least a short report stating whether and why they may not be proceeding with ACL amendments.

I ended my comments by alerting Congress attendees to new developments in the EU that intersected with concerns raised by the panelists. The new General Product Safety Regulation requires suppliers to document product risk assessments (and implement traceability measures), notify regulators of progress on recalls, set up a public complaints portal (as the US has had for over a decade, but was not recommended in the 2017 ACL Review report) and make mandatory for online platforms some requirements (like responding within set time frames to complaints about unsafe products) that larger firms had adopted voluntarily under the 2018 EU Product Safety Pledge (mirrored by Australia’s 2020 Pledge). The EU Product Safety Pledge has itself been updated, and existing firms have re-signed it, to allow eg regulators to have access to the platforms’ portals to better monitor them for unsafe products.

The EU’s Product Liability Directive, which was adopted in 1992 has also recently been revised to better address new technologies and trends. For example, Article 7 makes an online platform jointly liable for harm if it suggests to an average consumer that products are provided either by the online platform itself or by a recipient of the service who is acting under its authority or control. However a recent comparative law article that Jeannie Paterson co-authored (and I helped with) noted a risk that platforms will avoid this liability potential by website and other disclaimers about exercising control over the suppliers. The article contrasts Californian cases against Amazon and other legal concepts that go further in imposing shared liability on such platforms, including pros and cons of such initiatives.

The second Congress session was on “Justice delayed: strengthening consumer dispute resolution in Australia”. Panellists highlighted persistent problems of access to justice, focusing initially on (prolific) defective vehicles and National Disability Insurance Scheme services. Although Prof Kozuka and I also highlight problems in Japan, I think Australia can do better in various ways. For example, because of the evidentiary issues raised in tribunals or magistrates’ courts, regulators should first more pro-actively use their ACL powers since 2010 to bring representative actions against suppliers who claim for example that cars or other complex products comply with the consumer guarantee of acceptable quality, such as reasonable durability. They can also support consumer NGOs who could run such test cases (eg to to determine how long a mid-value washing machine should last) and then publicise the outcomes, to help facilitate future negotiations and settlements.

Secondly, the NSW Office of Fair Trading should actually use its powers (added before the COVID-19 pandemic) to order suppliers to compensate consumers for up to $3000 in harm caused by products not complying with consumer guarantees, and publicise this among suppliers and consumers. Other jurisdictions should add such powers too, especially as the ACL is supported to be uniform across Australia. It is true that some suppliers may contest such orders. But they will also likely do that if and when the ACL adds powers for all consumers regulators to order civil pecuniary penalties for major failures, as mooted in late 2021 Consultation (paralleled by the Productivity Commission’s recommendations from an inquiry into Rights to Repair). Decisions from tribunals and courts, even at lower levels, will help clarify the meaning of general terms like reasonable durability.

Thirdly, we should introduce effective public complaints registers across Australia. Most jurisdictions lack them. And for example the NSW register does not differentiate by sales volumes or other measures of scale, making it hard for consumers or their advisors to determine if one supplier is really better or worse than others. These and other questions were raised in a 2017 Report by the Productivity Commission and should be revisited to improve access to consumer redress (and indeed informed purchasing decisions).

The third Congress session was on “Regulating for real people: understanding consumer behaviour to drive effective markets”. In his thought-provoking introduction (kindly shared now here), Consumers Federation of Australia chair Gerard Brody highlighted observed limits even with “nudges”, for example regarding electricity contract switching, and asked why suppliers shouldn’t just promise or be required to automatically put customers on the best plan. The CEO of (peak NGO) Consumers NZ pointed out that past consumption patterns may not be a good guide. I also wonder about handing over so much power and data to suppliers, and making consumers too passive (which is partly why for unfair contract terms regulation the price and subject matter cannot be impugned: consumers are assumed to be able at least to investigate and consider those, provided these items are not presented in a misleading way). A better solution might be electricity bills that say “if you switched to our Plan B you would save $XXX dollars” and then the customer could opt-in. [Update of 4 December 2024: after a recent problem with my electricity company in NSW, which had stated something like this on their bills but in a confusing way, I now am more amenable to Gerard Brody’s suggestion for an automatic “upgrade”.]

The Consumers NZ CEO provided an update on the progression of a private Member’s Bill to introduce a right of repair for New Zealand, including around spare parts availability, and likely mandatory labelling about durability (as recommended also by the Productivity Commission’s Right to Repair report). Again, I would add that the EU provides some good lessons for the antipodes (and say Japan). In February 2024 the EU institutions reached provisional agreement to enact the Right to Repair Directive, as part a larger environmental initiative aiming to extend a product’s life cycle and support a circular economy. Relevant features compared to the ACL regime (which for example allows the supplier not consumer to chose between repair and replacement):

“The Directive will require producers to carry out repairs outside of the legal guarantee for products covered by repairability obligations under certain EU ecodesign regulations listed in an Annex … [likely beginning with] certain white goods (including household washing machines, dishwashers and refrigerators), vacuum cleaners, electronic displays, and mobile phones and tablets (among others)

… [requirements for] information on certain spare parts to appear on a website, making them available to all parties in the repair sector and preventing certain practices that can hinder repair – including contractual clauses or certain software- and hardware-related barriers

… [seemingly] loan devices to be provided to consumers while they wait for repair in certain cases and to enable a consumer to opt for a refurbished unit as an alternative

… Under the existing Sale of Goods Directive, the seller is liable to the consumer for any lack of conformity which exists at the time when the goods were delivered and which becomes apparent within two years of that time. In the event of non-conformity, the Sale of Goods Directive sets out a hierarchy of remedies, allowing consumers to initially choose between repair and replacement … to encourage consumers to choose repair over replacement, the legal guarantee under the Sale of Goods Directive would be extended by 12 months following a repair …”.

This EU development also intersects with greenwashing, and the hot topic of the last Congress session – “Lightbulb moments: bold ideas to help consumers play a meaningful role in the green transition”.

Corruption and International Treaty Developments in Asia

Written by: Luke Nottage (University of Sydney) and Nobumichi Teramura (Universiti Brunei Darussalam)

[Ed. Note: Our related new book (open access through Springer) was launched by the Attorney-General of Brunei at a symposium held there on 28 May 2024 (as reported here). A follow-up seminar and local re-launch by former Chief Justice of Western Australia Wayne Martin (pictured below with other book contributors/speakers), including some new research emerging from the book, was held at USydney Law School on 1 August (further details here, with Nobu Teramura’s presentation/overview Powerpoints also for LSA conference presentation here). Many thanks to all involved in this book project, including for funding from the Centre for Asia-Pacific Law at the University of Sydney (CAPLUS), Universiti Brunei Darussalam, and the University of Wollongong’s Transnational Law and Policy Centre.

A version of the Blog posting below, re-titled “Corruption Control Needs a Clean-Up in Asia”, was published on 18 July 2024 by the East Asia Forum – thanks to their editors and an anonymous reviewer.]

Corruption remains a serious problem in most parts of Asia. The economic effects are serious, regionally and globally, and the COVID-19 pandemic sometimes made the situation worse. Emergency measures for government procurement and management of the economy expanded opportunities for graft and impacted adversely on enforcement activities.

This problem has persisted for many years despite many new legal instruments aimed at or potentially impacting on corruption, as explored also in our recent book (open-access, so PDFs freely downloadable).

First, the OECD Convention (signed from 1997), prompted by the US enacting the Foreign Corrupt Officials Act two decades earlier, focused on the ‘supply side’. Developed economy member states (including Japan and Korea in Asia) committed to criminalising at home the bribery of foreign officials. Secondly, the UN Convention (signed from 2005, by almost all Asian states) covered bribery of both domestic and foreign officials, including also the ‘demand side’ (solicitation and receiving bribes).

However, the commitments under these multilateral treaties are often quite general, not setting for example any minimum criminal penalties for bribery. As Anselmo Reyes elaborates in his co-authored chapter, both treaties also leave open the possibility of allowing ‘facilitation payments’ – smaller ‘grease money’ payments to expedite routine government transactions like permits. Canada disallowed these under 2017 legislation but Australia’s 2024 amendments retain this possibility – perhaps reflecting the arguments of some economists (investigated in our book by Ahmed M Khalid, Bruno Jetin and others with econometric studies) that such low-level bribery in fact may be efficient.

In addition, even for the core commitments under both treaties, there is not much incentive for transparent and effective enforcement by member states. This is especially true in developing economies with less media freedom and/or democratic accountability – also under pressure. Scrutiny of enforcement under these treaties relies mainly on ‘peer review’ mechanisms that take years to implement, and recommendations on member states for improvements are not binding.

Some states have created new anti-corruption agencies and even courts, as in Indonesia and Thailand, but have faced political backlash. Others, like Vietnam and China, have sometimes vigorously enforced anti-corruption laws (including through the death penalty), but some suspect this is done selectively for political purposes.

A few Asia-Pacific states (such as Thailand and now in Australia) have followed the lead of the UK’s Anti-Bribery Act 2010, which specifically sanctions firms that do not take reasonable measures to introduce anti-bribery compliance schemes. This makes mandatory a feature of the opt-in UN Global Compact scheme that (larger) companies have started to sign up to. They may anyway be conscious of pressures from investors influenced by environmental, social and governance (ESG) considerations.

This slow and sporadic transition towards taking corruption more seriously is also evident in provisions found in free trade agreements (FTAs) entered into by developed countries and regions: the EU, the US, Canada and (notably in Asia) Japan. These treaties also commit member states to both enact and enforce anti-bribery laws. They are reflected in some ‘mega-regional’ FTAs like the Regional Comprehensive Economic Partnership (Chapter 17) and in more detail the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (Chapter 26), but curiously not in the recently signed Second Protocol to the ASEAN Australia New Zealand FTA (except regarding government procurement: Chapter 17).

Typically, however, these treaties too are broadly worded, and corruption-related enforcement issues are not subject to their inter-state dispute settlement provisions that help make the commitments more credible. This limitation also seems to apply to the new  WTO Investment Facilitation Agreement (although its text is not yet public).

Corruption issues have been cropping up also increasingly, especially from around 2010, in investor-state dispute settlement (ISDS) arbitrations initiated under FTA investment chapters or standalone bilateral investment treaties (BITs). Occasionally under such international investment agreements (IIAs), a foreign investor claims compensation because host state officials solicited a bribe in contravention of the ‘fair and equitable treatment’ commitment under the IIA.

More often, the host state raises as a defence against an ISDS claim that the allegation that the foreign investor made a bribe when making the investment, so it is not covered under the IIA. If the arbitral tribunal agrees, it may decline jurisdiction, so the investor loses all treaty rights under international investment law and is left to the vagaries of host state law and court procedures. This typically arises where the IIA specifies expressly that it only covers investments made ‘in accordance with host state law’. Such outcomes may indeed incentivise foreign investors to avoid any form of bribery.

However, what evidence will prove such bribery, especially given that arbitrators (unlike anti-corruption agencies or courts) lack powers vis-à-vis third parties (like banks)? What if the alleged corruption is minor, vigorously solicited by public officials, commonplace and/or systemic in the host state? And what if it leads to the perverse incentive of the host state deliberately seeking a bribe, never enforcing sanctions against the official, but keeping evidence of the bribe as a ‘get out of jail free card’ if ever the foreign investor brings an ISDS claim after the host state discriminates or otherwise violates substantive commitments given under the IIA to encourage inbound investment? Focusing on East and South Asia, we and other authors in our book focus on possible more nuanced solutions for such scenarios, under existing or revised IIAs.

Overall, addressing corruption requires a careful assessment of its various manifestations, some much worse than others (as argued for China, for example). But it should also carefully consider the procedural mechanisms under both national law and international treaty law that help ensure appropriate enforcement of substantive commitments made by states.

Australia’s Anti-ISDS Approach Again: AANZFTA Protocol To Be Ratified

Around 21 May 2024, after I had presented a submission and oral evidence at a public hearing late March, the Australian Parliament’s Joint Standing Committee on Treaties (JSCOT) issued its Report 215 agreeing that the Australian government should proceed to ratify the ASEAN Australia NZ Agreement for a Free Trade Area (AANZFTA) Second Protocol. This is despite the Labor Government in November 2022 declaring that it will not agree to any form of investor-state dispute settlement (ISDS), relevantly arbitration, in future treaties; and will approach counterparties seeking to remove or otherwise revise ISDS provisions under existing treaties. The Protocol includes a Work Program to review the ISDS provisions, within 18 months of coming into force, which will proceed largely in parallel to a review of the investment chapter also in the Regional Comprehensive Economic Partnership (RCEP) FTA, which might involve adding ISDS provisions, as it includes the same 12 states party but also three big FDI exporting economies that have generally favoured ISDS: Japan, Korea and China.

In the JSCOT inquiry into ratifying the AANZFTA Second Protocol, the Australian Council of Trade Unions (ACTU) and a small NGO (the Australian Fair Trade and Investment Network, AFTINET, which has persistently objected to ISDS in IIAs in parliamentary inquiries) recommended against ratification due to the Second Protocol retaining ISDS for at least the next few years. My Submission recommended ratification, explaining some of the context for ISDS (along the lines and other cited writings mentioned above) and appending my 2020 Submission to DFAT’s review of old IIAs (reiterating where the Second Protocol’s work programme might make some further drafting improvements around ISDS, especially to further enhance transparency and efficiency). We three were then invited to give (concurrently) oral evidence to JSCOT on 25 March 2023.[1]

The ACTU and AFTINET presented a very broad (and curiously similar) definition of ISDS:  a procedure giving corporations additional rights to sue governments for compensation if they can argue a change in law or policy will harm or impinge on their future profits. They also both highlighted the three claims recently brought under AANZFTA against Australia by Zeph (a Singapore-incorporated company controlled by Australian mining magnate and politician Clive Palmer) and more generally the risks of regulatory chill to sovereign states particularly from fossil fuel investors, as well as the costs of defending claims even when states prevail. (Similar arguments were presented in the Open Letter from Australian academics and lawyers opposing ISDS, circulating from May 2024.[2]) AFTINET also asserted that there was no good evidence that ISDS-backed IIAs promoted FDI flows and that recent IIAs were omitting ISDS – including supposedly for India and New Zealand, but also the EU and Brazil.

My own evidence countered that ISDS claims require additionally proof of violation of substantive commitments offered by host states, that the Zeph claims face difficulties and anyway Australia does not close down its courts due to occasional aggressive litigants, while its outbound investors also protect their investments abroad through ISDS claims – particularly against states with governance issues. I also reiterated that there is some evidence ISDS-backed IIAs promote cross-border FDI, developing economies are failing to attract sufficient FDI to support the global energy transition,[3] and many states (including also eg Indonesia, India and Vietnam) are still offering ISDS in IIAs despite experiencing some inbound claims.


[1] The transcript of this Evidence is at ‘Second Protocol to Amend the Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area (ANAZFTA) Public Hearings’, Parliament of Australia (Transcript) <https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Treaties/AANZFTASecondProtocol/Public_Hearings> and the video-recording is at https://www.aph.gov.au/News_and_Events/Watch_Read_Listen/ParlView/video/2299575.

[2] Open Letter on ISDS (May 2024) <https://docs.google.com/forms/d/e/1FAIpQLSddWDUB2NzZAHYlGJDOxg0DiA-JySOGEE7f_09ZdwQNhryr3g/viewform>.

[3] ‘World Investment Report 2023’, United Nations Conference on Trade and Development (Report) <https://unctad.org/publication/world-investment-report-2023>.

When JSCOT’s Report 215 was issued, contrary to my expectation and curiously as this departs from her party’s past practice where a treaty includes ISDS, the Greens Senator for Western Australia Dorinda Cox did not issue a dissenting report – nor even seemingly attend either parliamentary hearing. The Report’s summary emphasised that:[1]

“Notably, Australia successfully negotiated a review of the existing ISDS provisions in [… marking] an instalment of the Government’s commitment to review ISDS provisions in agreements where they already exist, while ensuring Australia does not agree to ISDS mechanisms in new agreements.”

The Report’s Conclusions added (after noting my call for transparency around this ongoing Work Program):[2]

“Considering the significant interest in this issue demonstrated by a range of stakeholders in this and previous JSCOT inquiries, the Committee will seek an update on the progress of the ISDS review work program commitment in due course, and in any case would expect the Department [of Foreign Affairs and Trade: DFAT] to draw any notable developments to the Committee’s attention.”

The Report also quoted evidence given by DFAT that it “will obviously be coming to government to seek a mandate for the positions that we take into that review’ of ISDS under the Work Program”.[3]

Interestingly, the Report did not specifically mention the Zeph claims, although it stated:[4]

“At the public hearing submitters to the inquiry pointed out that there are currently ISDS actions afoot, some of which involve arrangements between Australia and ASEAN nations. The Committee inquired as to the cost of these legal actions to the Australian taxpayer. The Attorney-General’s Department (AGD) said ‘the Attorney-General and the Prime Minister have instructed us to vigorously defend those matters and we are in the process of doing so, and that does accrue cost.

In addition, after recording the opposition to ISDS and hence treaty ratification from the ACTU and AFTINET, the Report noted my concerns about relying solely on more politicised inter-state dispute settlement or arbitration agreed under individual investment contracts, before observing:[5]

The Committee sought clarification as to the recent trend away from ISDS. Professor Nottage said, ‘I think that’s a good thing—that we try something; it has an effect; we realise some of its problems, so we try to fix the problems […] and come up with a new compromise solution’.

My quoted statement in fact followed more specifically from my observation about the question of a ‘retreat from the high water mark of pro-ISDS approaches’.[6] The Committee also did not go on to mention my point immediately following in evidence that the EU has not abandoned direct claims by foreign investors altogether, but come up instead with the investment court compromise. I had suggested that this model could be considered by Australia (and regional states) in future treaty practice even when not negotiating with the EU, for example in the ongoing review of ISDS under AANZFTA’s Second Protocol and RCEP. (Subsequently I developed this proposal in a letter dated 10 April to the Trade Ministers of Australia and New Zealand.)

Furthermore, the Report did not mention my written Submission urging again specific improvements, including restrictions on ‘double-hatting’ and compulsory mediation before arbitration.[7] Overall, therefore, it seems that parliamentary interest and scrutiny around the specifics of ISDS or possible alternatives remains quite limited, deferring largely to the executive branch of government.


[1] Report 215: AANZFTA Second Protocol, available at Parliament of Australia <https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Treaties/AANZFTASecondProtocol/Report>, xv.

[2] ibid, para 2.95 (and 2.79).

[3] Ibid, para 2.74.

[4] Ibid, para 2.75. This level of generality may reflect a compromise reached between the Labor and Greens members (who might have preferred to mention Zeph and Clive Palmer specifically) and the Coalition members in drafting the joint Report.

[5] Ibid, para 2.80.

[6] Idem.

[7] Available at Parliament of Australia, <https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Treaties/AANZFTASecondProtocol/Submissions>.

Compromise way forward on investment treaty/FTA (re)negotiations

[On 10 April 2024, following my submission and then oral evidence given to the Australian parliament inquiring into the AANZFTA Second Protocol ratification, I wrote as follows to the respective Trade Ministers of Australia (Hon Don Farrell) and New Zealand (Hon Todd McClay). The latter’s response dated 29 April, quite non-committal, is below and here. I also had (confidential) discussions with DFAT officials on 23 May 2024 regarding my proposal.]

I am a New Zealander working in Australia since 2001, specialising in international business law including international and domestic investment law and dispute resolution.[1] I have provided many submissions to Australian parliamentary inquiries into ratifications of bilateral investment treaties or investment chapters of Free Trade Agreements (FTAs), including giving related evidence on 28 March 2024 urging ratification of the Second Protocol to the (ASEAN+2) AANZFTA.[2] Representatives from the Australian Council of Trade Unions and AFTINET (Australian Fair Trade and Investment Network) opposed ratification of the Protocol especially as it retained investor-state dispute settlement (ISDS) provisions, albeit to be revisited in a Work Program. The latter will run largely in parallel to negotiations to consider instead adding ISDS to the ASEAN+5 Regional Comprehensive Economic Partnership (RCEP), which FTA also involves Australia and New Zealand.

Australia’s Labor Government from November 2022 has reverted to its stance, when in power over 2011-13, to opposing ISDS in new treaties, but seemingly does not extend this position to protocols to existing treaties like AANZFTA. The Labor Government also will approach counterparty states to review past treaties. Until losing the general election in October 2023, New Zealand’s Labor Government from 2018 had similarly opposed ISDS in new treaties. However, the new Coalition Government may revert to a more flexible approach towards ISDS provisions.

As a compromise way forward for both countries, with significantly shared economic and geopolitical interests, I proposed in the AANZFTA parliamentary inquiry that in that FTA’s Work Program as well as the parallel RCEP (re)negotiations concerning ISDS, serious consideration be given to substituting an EU-style “permanent investment court” hybrid form of dispute resolution to underpin the substantive commitments (like non-discrimination and fair and equitable treatment) offered in such treaties. Unlike ISDS, the foreign investor complainant does not nominate an arbitrator. Instead, the investor’s home state and the host state counterparty select in advance a panel of “judges”, who are then selected to decide the claim (albeit following arbitration rules and issuing awards). The model also provides for a second-tier review, by other adjudicators selected from the panel, for any serious error of law or fact. Such features make this investment court model sufficiently different from ISDS, in my view, to not conflict with the anti-ISDS policy of the current Australia’s Labor Government or the previous New Zealand Labour Government. Yet it still allows for foreign investors to initiate a claim, without having to lobby its home state to press for initiation of an inter-state arbitration. The latter mechanism is also provided in investment treaties, but is rarely used where the more direct ISDS route is available and is much more subject to (geo-)political vagaries – as we observe also with WTO inter-state adjudication.

Further, this compromise investment court model was developed in the EU almost a decade ago after extensive consultation with legal experts and other stakeholders there, and it has since been accepted in FTAs notably concluded by Canada, Singapore and Vietnam.[3] The model is also promoted by the EU in ongoing UN deliberations on reforming ISDS multilaterally. It is in the EU’s negotiating mandate for the FTA being negotiated with Australia, and if it is not accepted then that FTA unfortunately will not include provisions on investment protection (only instead on preferential market access for agreed investments, underpinned solely by inter-state arbitration). That was also the outcome in the FTA between the EU and Japan, which preferred to retain instead ISDS-backed protections for its investors into many individual EU states under older treaties. The New Zealand-EU FTA similarly does not include any provisions on investment protection, yet New Zealand’s outbound investors lack such BITs with individual EU member states. New Zealand’s new Coalition Government might now consider adding a protocol on investment protection, agreeing after all with the EU’s court mechanism, to encourage more cross-border investment flows.

Greater consideration by both New Zealand and Australia to the investment court model would also be useful as each continues to negotiate FTAs with the other non-EU counterparties, including across Asia (such as the Australia-India negotiations to conclude a treaty going beyond trade in goods). It would also open up space for greater bipartisanship with each country and therefore speed up FTA negotiations.

In fact, in late 2017 I wrote to your respective predecessors as Trade Minister with Dr Amokura Kawharu (then a professor at University of Auckland, now President of the New Zealand Law Commission). Drawing on recent research (which I have updated[4]), we urged even then Australia and New Zealand to consider the EU-style investment court model and coordinate more in progressing investment treaty negotiations, including for RCEP.[5] That FTA could then have been more easily and quickly agreed upon, and indeed included India which in 2019 withdrew from negotiations. Closer joint consideration of the investment court model deserves renewed attention from both Australian and New Zealand governments, as they look to (re)negotiate various investment treaties, including still AANZFTA. The investment court model may not be perfect but nothing ever is, and it promises a better way forward than the current flip-flops in each country around traditional ISDS.

I would be happy to confer with you or relevant staff to discuss this further, or provide additional information.

Yours sincerely

Luke R Nottage


[1] Profile and CV at https://www.sydney.edu.au/law/about/our-people/academic-staff/luke-nottage.html. My father (Richard Nottage) was former Secretary of Foreign Affairs in New Zealand and my brother (Hunter) was later Senior Trade Law Advisor with MFAT.

[2] See transcript and Submission via https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Treaties/AANZFTASecondProtocol

[3] For details see eg Moritz Keller (ed) EU Investment Protection Law: Article-by-Article Commentary (Beck/Hart, 2023).

[4] See eg, on the evolving studies on the impact of ISDS provisions on cross-border FDI, my submission in 2020 to DFAT’s review of Australia’s bilateral investment treaties (available at https://www.dfat.gov.au/trade-and-investment/discussion-paper-review-australias-bilateral-investment-treaties), summarised eg in my chapter “Rebalancing Investment Treaties and Arbitration in the Asian Region”, in Mahdev Mohan and Chester Brown (eds) The Asian Turn in International Investment(Cambridge University Press, 2021) 379-398.

[5] Our 2017 letters can be found at https://japaneselaw.sydney.edu.au/wp-content/uploads/2017/11/2017KawharuNottageTurnbullGovt_Combined_LN01.pdf, via https://japaneselaw.sydney.edu.au/2017/11/nz-renounces-isds-deja-vu/

“Corporate Environmental Responsibility in Investor-State Dispute Settlement” by Tomoko Ishikawa

[This is my draft review – for the Manchester Journal of International Economic Law – of an excellent new book (Cambridge University Press, 2023, ISBN 978-1-316-51397-2) by one of Japan’s leading international investment law and dispute resolution scholars, Professor Tomoko Ishikawa of Nagoya University’s Graduate School of International Development. She was previously Associate Professor at Tsukuba University and Assistant Professor at Waseda University. Unusually for a Japanese academic, Prof Ishikawa also served as a judge of the Tokyo District Court (2002-5) and working on international law matters in the Ministry of Foreign Affairs (2010-12). She has been appointed to the Panel of Conciliators by the Chairman of ICSID over 2017-23. Her research intersects with my current book project with Nobumichi Teramura and Bruno Jetin on corruption and investor illegality in Asian investment arbitration.]

This thought-provoking, extensively researched and well-argued book combines two hot topics for international economic law experts as well as the general public: corporate environmental responsibility, comprising both hard law and voluntary Corporate Social Responsibility (CSR) and investor-state dispute settlement (ISDS). It is highly recommended for scholars, practitioners and policy-makers, including national delegates, observers and the Secretariat of the United Nations Commission on International Trade Law (UNCITRAL) engaged in ongoing multilateral reform deliberations on ISDS since 2019.

Chapter 1 outlines how ISDS arbitration reinforces substantive protections offered through international investment agreements (IIAs) to foreign investors typically going beyond customary international law, notably against discrimination, uncompensated indirect as well as direct expropriation, and violation of fair and equitable treatment (FET) including denial of justice in national courts and administrative procedures. Yet burgeoning IIAs and ISDS cases have highlighted how foreign investment can adversely impact the environment and often related human rights in host states. The book’s key concern is how the ISDS system, which seems “asymmetrical” in only allowing foreign investors to claim against host states, also does or can significantly allow counterclaims by host states to offer relief against environmental degradation.

Professor Tomoko Ishikawa’s well-structured book (pp17-21) devotes the first part of chapter 2 (pp 24-48) to the challenges of regulating and pursuing the responsibility of transnational corporations (TNCs) in domestic legal orders (including poor governance capacity and access to impartial justice), but also the persistent lack of effective general mechanisms internationally. Ishikawa examines the paucity of customary and treaty-based international law obligations and enforcement mechanisms, recent attempts to expand the international human rights obligations of corporations, and some “soft law” instruments to promote corporate social responsibility (including private initiatives involving CSR). The second part analyses 1000 randomly selected IIAs and Model IIAs (pp 49-55). There is a trend especially over 2010-19 to add express provisions reinforcing the host state’s general “right to regulate” (such as “no lowering of standards” or general exceptions clauses). Yet very few IIAs (39) set express investor obligations (plus six out of 56) Model IIAs), although somewhat more (54) refer to voluntary CSR in the preamble or especially main text (plus 11 Model IIAs), and both types of provisions have also emerged particularly over the last decade or so.

Chapters 3-5 delve into the procedural mechanism of counterclaims potentially under IIAs. Chapter 3 outlines the benefits compared to pursuing investor responsibility under domestic law (pp 60-65). These include problems with the rule of law (such as judicial corruption, mentioning some notable cases) and cross-border enforceability, which I would add are essentially the flipside of problems faced by foreign investors without (especially ISDS-backed) IIAs.

In addition, Ishikawa deals with a fascinating and little-discussed issue, pointing out that in some cases the actual victims of environmental harm may not benefit from the host state proceeding with a counterclaim. A primary conclusion is that ISDS arbitral tribunals should be able to rule it inadmissible based on due process concerns (as a general principle of international law) if allowing the counterclaim “would result in effective deprivation of remedy for the victims” (p84). One factor in this determination will be the host “state’s representation of the interests of its people” (p84), presumed if it has representative democracy but rebutted for example if the host state colluded with the investor in causing the damage. A second suggested factor is doubts about the distribution to victims of compensation potentially awarded. Nonetheless, Ishikawa rightly concludes that in proving such matters, the investor faces “a difficult task. After all, there is a strong presumption that the host state acts on some public purpose, and tribunals would be very reluctant to interfere with internal political affairs by second-guessing the issues of representation and fair distribution” (p85, footnotes omitted).

Chapter 4 first deals with jurisdiction or consent to counterclaims. Again, Ishikawa makes good use of her empirical dataset. She agrees with some other commentators that treaties’ (typical) “absence of reference to the host state’s right to file a counterclaim, which is already responsive to the principal claim, is a logical choice and does not necessarily indicate the parties’ intention to exclude counterclaims” (p97, footnote omitted). She argues this conclusion is buttressed because 706 IIAs out of the 1000 sample contain seemingly narrow locus standi provisions (only expressly mentioning the investor’s right to claim) but 263 go on to provide narrow definitions of investment disputes and claims (pp 98-99). Only the latter subset of treaties, Ishikawa contends, impede tribunals taking jurisdiction over counterclaims because such IIAs allow only for disputes and claims over host state obligations assumed under the treaty. She further argues that a narrow applicable law clause (not expressly referring to domestic law, but only international law: 140 IIAs and 12 Model IIAs) does not imply exclusion of domestic law in ISDS as tribunals “always possess the incidental jurisdiction to apply domestic law to questions that cannot be answered by international law” (p101).

Nonetheless, the second half of Chapter 4 investigates whether tribunals, despite taking jurisdiction under (most) treaties, should rule counterclaims as inadmissible (pp 104-115). Ishikawa argues that there need only be a factual not legal nexus between the principal claims and counterclaims. More complicated is whether a parent’s counterclaim for damage caused by its subsidiary should be inadmissible due to the principle of limited liability. Ishikawa concludes otherwise, noting for example that investment treaties often allow conversely for parent companies to bring claims on behalf of local companies they control or (more controversially nowadays) have shareholdings in. She further concludes that “the question of whether the parent company directly owes a duty of care or is shielded from liability in a particular case must be considered at the merits stage, in accordance with a careful interpretation and application of the relevant domestic law” (p115). This sub-topic, and perhaps the arguments about jurisdiction presented in this Chapter, nonetheless will likely generate some significant divergences among other commentators and tribunals.

Chapter 5 turns to assessing the merits to be considered by tribunals for counterclaims (pp. Ishikawa first elaborates quite compellingly the argument that tribunals generally can and should apply aspects of domestic law, including those imposing responsibility for environmental harm. Concerns about the legitimacy of international adjudicators applying such laws can be addressed by them adopting a “domestic jurisprudence” approach (like the Permanent Court of International Justice), considering a wide range of domestic law sources (pp 128-9) and more use of local legal experts (although very few sampled treaties provide expressly for tribunals to appoint ex curia experts, and only for factual issues: p 131).

The second half instead considers counterclaims based on international law (pp 135-56). An interesting but ambitious argument is that for some instruments imposing liability on TNCs but not expressly providing for remedies or others not yet implemented into national laws, host states might seek to fill that gap through tribunals applying domestic law (as for example in some US case law). Ishikawa also argues that violation of proliferating CSR commitments through treaties (as well as national laws, evolving corporate practices and representations) might generate civil tort claims under at least some domestic laws.

Having considered an investor’s environmental responsibility as a ground for the host state’s counterclaim, Chapter 6 discusses the effects of such responsibility in assessing the investor’s principal claims. Problems usually arise with environmental harm during the performance phase, and Ishikawa argues that misconduct at that stage will usually have only a limited impact on a tribunal’s jurisdiction and even admission of the claim (pp 159-66). However, when considering the merits, host state liability for lack of FET (especially “legitimate expectations”) can arguably be obviated by the investor’s performance-phase misconduct as part of the principle’s balancing exercise and (more controversially) the evolving notion of a corporation’s “social licence to operate” (pp 166-191). More commonly found in investment arbitration and other international law for a is the application of contributory fault to reduce relief awarded, although Ishikawa urges sufficient reasoned explanation over percentages applied by ISDS tribunals (pp 191-98).

Chapter 7 concludes with “implications for reform”. Although the book mainly argues that there is already most scope for counterclaims under many IIAs than most have appreciated, Ishikawa suggests that more explicit rights to counterclaims in treaties would be useful. Substantively, moreover, treaties should expressly provide obligations on investors to comply with host state laws, but if and when extra international standards are set they should be “clearly specified so as to constrain the interpretative discretion of tribunals” (pp 204-5) and provide secondary rules determining consequences for breach (rather than tribunals having to invoke domestic law).

By contrast, a reform option of requiring exhaustion of local remedies before ISDS claims is unclear concerning the extent this “would contribute to advancing the victims’ interests” given “the known cases suggesting corruption and a lack of political independence in the judiciary in the context of TNCs’ misconduct” (p206). Ishikawa also suggests that the most drastic reforms, allowing host states and affected third parties to initiate claims against TNCs (rather than responding with counterclaims) is better pursued outside the IIA regime (eg through the 2019 Hague Rules on Business and Human Rights Arbitration). Otherwise, the regime including its legitimate interests for investors could unwind: “ISDS reform should strike a careful balance between the need to keep its value for the regime’s participants and the need to advance responsible investment” (p208).

The most detailed reform proposal, not really prefigured in the preceding chapters, involving promoting third party participation in investor-state mediation. This more consensus driven dispute resolution procedure has been promoted in recent years by various institutions and commentators due to growing concerns about ISDS arbitration, including its costs and delays.[1] Ishikawa interestingly highlights how some UNCITRAL reform discussions have mentioned that participation by affected third parties through mediation could allow more public interest to be represented, while some scholars support including “non-disputant” stakeholders in mediation (p213). Various suggestions are made to make this process work well for cases involving alleged environmental harms, including appointing co-mediators with relevant expertise, partially lifting confidentiality and reporting and establishing best practices through capacity building and other initiatives.

However, Ishikawa shares scepticism with some other commentators about reforming IIAs by mandating mediation before arbitration – including through a multilateral instrument retrofitting such a step to old treaties, along the lines of the UN’s 2019 Mauritius Convention on transparency (pp 214-5). She notes only a few treaties currently provide a mandatory mediation step, while acknowledging the 2019 Indonesia-Australia FTA (Art 14.23), 2019 Hong Kong – UAE BIT (Art 8), and the Investment Agreement for the COMESA Common Investment Area (Art 26(4) of the 2007 version).[2] Nonetheless, the general argument that mandating mediation goes against its consensual essence is challenged by developments in domestic legal systems (with courts often requiring some initial good faith mediation attempt) and cross-border resolution (with many contracts now committing to mediation before arbitration). Recent empirical research into investment dispute settlement patterns also challenges other concerns often expressed about mediation.[3] Ishikawa’s proposals for mediation, to involve third parties in resolving disputes involving environmental issues, could therefore be bolder on this point. Overall, this book is comprehensive, erudite and balanced, articulating many compelling insights for a variety of legal experts interested in counterclaims and other mechanisms to reassess ISDS and the IIA system. It richly deserves to inform ongoing debates on ISDS reform in UNCITRAL and other fora internationally and domestically, treaty negotiators, future academic research, and investment arbitration practice – even if some of Ishikawa’s more innovative arguments do not prevail among investment tribunals.


[1] See also eg Claxton, James and Nottage, Luke R. and Williams, Brett G. and Williams, Brett G., Mediating Japan-Korea Trade and Investment Tensions (December 3, 2019). in Nottage, Luke; Ali, Shahla; Jetin, Bruno; Teramura, Nobumichi (eds), “New Frontiers in Asia-Pacific International Arbitration and Dispute Resolution”, Wolters Kluwer, (2021), https://ssrn.com/abstract=3497299 (with an earlier version in Journal of World Trade).

[2] The relevant provision in the latter treaty, as revised in 2017, is Art 34(4)). Ishikawa also refers to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (Art 9.18) but that does not mandate mediation (emphasis added): “(1) … the claimant and the respondent should initially seek to resolve the dispute through consultation and negotiation, which may include the use of non-binding, third party procedures, such as good offices, conciliation or mediation”. See further: Ubilava, Ana and Nottage, Luke R., Novel and Noteworthy Aspects of Australia’s Recent Investment Agreements and ISDS Policy: The CPTPP, Hong Kong, Indonesia and Mauritius Transparency Treaties (March 4, 2020). in Nottage, Luke; Ali, Shahla; Jetin, Bruno; Teramura, Nobumichi (eds), “New Frontiers in Asia-Pacific International Arbitration and Dispute Resolution”, Wolters Kluwer, (2021) https://ssrn.com/abstract=3548358; and (with James Claxton) http://arbitrationblog.kluwerarbitration.com/2020/09/05/pioneering-mandatory-investor-state-conciliation-before-arbitration-in-asia-pacific-treaties-ia-cepa-and-hk-uae-bit/ (updated and elaborated in Volume XIII of the Indian Journal of International Economic Law (2022) via https://ijiel.in/volume-xiii).

[3] Ubilava, Ana, Amicable Settlements in Investor-State Disputes: Empirical Analysis of Patterns and Perceived Problems (March 13, 2019). Journal of World Investment and Trade, Vol. 21, 2020, pp. 528-557, https://ssrn.com/abstract=3352181; incorporated into her PhD thesis based book (2022) https://brill.com/display/title/63844?rskey=uPsqiO&result=6.

“Crisis as an Opportunity for Development of Japanese Law”

Following on the inaugural ANJeL-in-Europe symposium organised by Prof Giorgio Colombo for UPavia in late 2019, Dr Wered Ben-Sade and other attendees or associates are participating online in this law-related session on the first day of the Sixth Bi-Annual International Conference of the Israeli Association for Japanese Studies (15-17 November 2022).

Chair: Wered Ben-Sade Bar-Ilan University, Israel

CRISIS AS AN OPPORTUNITY FOR DEVELOPMENT OF JAPANESE LAW
Chair: Wered Ben-Sade
Crises create new opportunities for development, particularly when traditional perceptions and customs (or habits) are questioned and reexamined. Similarly as “Necessity is the mother of invention” (Plato), crises push us out of our comfort zone while simultaneously lowering the risks of change, thus motivating us to operate differently in order to solve them or improve our response. This is true both at the micro, personal level, and at the macro level of society. Understanding this mechanism at the macro level can facilitate us when we encounter a personal crisis and inspire us to search for the opportunity that is encapsulated within.
Five presentations will examine how crises serve as an opportunity for the development of Japanese law, both in the past (from the second half of the 19th century) and now. Some of the most debated challenges that Japan and the world are currently facing, such as inclusiveness of women, legal education, Covid19 impact and sustainability (in the context of corporate governance), will be discussed.

Béatrice Jaluzot Lyon Institute for Political Sciences & Lyon Institute for East Asian Studies
Crisis as an opportunity for development from a historical perspective: The choice of a positivist legal system following the signature of the Unequal Treaties
In the second half of the 19th century, Japan experienced the collapse of a thousand-year-old culture based on the Chinese model and the emergence of a society inspired by Western models. The disappearance of the old regime, caused by the imperialist movements of the time, gave way to a country that was profoundly renewed in all its fundamental structures. Among them, the country’s legal system was one of the essential novelties and one of the main achievements of the new leaders. They were thus able to set up institutions that are still largely those of today. The aim is to present how this legal system is the result of this brutal overthrow of the regime, but also to understand how the accelerated transition from which it emerged took place. This rupture gave rise to the powerful and efficient structures we know today.

Makoto Messersmith University of Hawaii at Manoa, USA
Insights on the possibility of inclusiveness of women in law studies of Japan
When we look at the status quo and history of female law professors in the U.S. and Japan, it shows that unlike the U.S., Japan has not experienced great improvement regarding inclusiveness of women into law studies, yet. Although it seems that Japan has made some efforts to encourage more women to enter the field of law, women in law studies are still facing unique challenges. For instance, in many universities, female law professors are still less than 20%. In my talk, I will explore their challenges and discuss how we can encourage more women to be included in law studies.

Luke Nottage University of Sydney, Australia and Ken’ichi Yoneda, Kagoshima University, Japan
Introducing ICT into Japanese Legal Education:
The Postgraduate Law School Movement and Covid-19 as Cornerstones
This report explains the evolution of online legal education in Japan, particularly in its universities. Three phases can be discerned: before and after the introduction from 2004 of a new postgraduate Law School system to improve and expand core legal professionals, as part of a wider justice system reform program, and a more dramatic expansion prompted by the COVID-19 pandemic since 2020. The Law School reforms had trickled down somewhat to undergraduate legal education, building on and linking to wider nationwide and university-sector initiatives in Information and Communications Technology. This fortunately positioned Japanese legal education quite well for pandemic-related challenges, although the transitions have not been easy.


Ying Hsin Tsai College of Law, National Taiwan University
The Development of Shareholder Activism following the COVID-19 Pandemic
The development of shareholder activism in Japan, thanks to the COVID-19 pandemic, creates new opportunities. The Japanese company law designs assorted ways by which shareholders can participate in shareholders’ meeting, even if they cannot attend in person (e.g. proxy, written voting and electronic voting). Due to the pandemic, the shareholders’ meeting could not be held in-person, and instead these other ways were gradually put to use. In this presentation I will discuss the practical merits and legal drawbacks surrounding these ways. The overall picture that emerges is that while providing a variety of ways for shareholders to participate in the shareholders’ meeting itself can certainly enhance the practice of shareholder activism, how to design these ways in a manner which overcomes the legal issues remains a challenge.


Kozuka Soichiro Faculty of Law, Gakushuin University, Japan
Introducing Sustainability into the Japanese Corporate Governance
Japan’s corporate governance practice is making rapid developments towards engaging with sustainability. Japan has already the largest number of companies in the world, which have announced support for the TCFD (Taskforce on Climate-related Financial Disclosures) framework. The development towards sustainability will probably continue, induced by the external global crisis of the need for sustainability, and by the internal pressure of the institutional investors. In this presentation I will evaluate the current and expected developments. The Japanese nuances in both regulation and practice of corporate governance will also be discussed.

Guest Blog: ‘Exporting Japanese Legal Ideas to the Mekong Subregion of ASEAN’

Written by: Asst Prof Nobumichi Teramura (for MPI Hamburg Festchrift conference, 1-2 September 2022) [for the full paper, not just Part I below, you may try checking his webpages or contacting him]

[Abstract] Japan has long been a successful importer of western legal systems. The country has also exported its law to the rest of Asia for many years. Japan’s national ODA agency – the Japan International Cooperation Agency (JICA) – has been offering legal technical assistance projects since the 1990s. These initiatives have impacted the development of legal systems in Central and Southeast Asian countries. In particular, the outcome of the projects in the countries along the Mekong River is allegedly outstanding in terms of their comprehensive influence on the private laws of Vietnam, Cambodia and Laos. The projects have arguably helped these host countries establish and reform a significant number of private law frameworks. Nevertheless, the extensive work by Japanese legal experts has been struggling with a low profile and a lack of international recognition, most likely due to a lag in anglophone scholarship that delivers a sufficiently detailed examination of the current private laws of those host countries and their operation in practice. This paper intends to address the gap by providing a critical (albeit preliminary and succinct) evaluation of how Japan’s legal technical assistance has led Japanese legal ideas to form part of the legal pluralism in the Mekong Subregion of ASEAN. It also encourages Japanese and local law experts to undertake further actions to re-assess the influence of Japanese law in these countries.

Part I. Introduction: Exporting Japanese Law to the Rest of Asia

Japan has long been perceived as a successful example of legal transplantation based on western models such as the legal systems of Germany, France and the US.[1] However, Japanese law has rarely treated as a source of legal ideas that are applicable outside Japan.[2] When it comes to Japan as a source of legal influence, commentators tend to focus on the country’s role in disseminating a modern German-style legal system to its neighbouring countries, but not on how Japanese law itself has influenced legal thinking in those countries.[3] Moreover, little attention is paid to how these countries are inspired by specific aspects of Japan’s success in importing western legal concepts because commentators are inclined to attribute the success to the specific institutions, culture and environment of Japan, perceiving Japan’s experience as inapplicable to other countries.[4] Those commentators writing in English appear to confine Japanese law and its legal institutions to Japan’s domestic domain.

However, Japanese law has extended its reach to Southeast Asia, as pointed out by several scholars in the last few decades. For instance, Tamura refers to Dr Tokichi Masao’s significant contribution to the codification of modern civil laws in Thailand during his tenure as the General Legal Adviser to the Kingdom of Siam in the early 20th century.[5] Tamura also reminds us that Thai commissioners adopted the (old) Japanese Civil Code as the foundation for their reception of the German Civil Code into the 1925 Revised Civil and Commercial Code of the Kingdom of Siam.[6] Moreover, Taylor highlights the importance of reviewing Japan’s legal technical assistance since the 1990s in the Association of Southeast Asian Nations (ASEAN) and beyond, suggesting that it reveals ‘ongoing tension between a western/globalized vision of rule-of-law assistance and the political imperatives at the national/local level’.[7] Along with Taylor’s thesis, this paper advocates for the need to examine the impact of Japanese positive law through the technical assistance in a recent hotspot for the global economy and comparative legal studies – the Mekong Subregion of ASEAN.[8]

These days, countries along the Mekong River, such as Vietnam, Cambodia and Laos, have been gaining new economic prominence and increased global attention because of geopolitical tensions brought about by the COVID-19 pandemic and the US-China trade war.[9] Many multinationals have been relocating their factories from China to those countries in the Mekong Subregion for cost reduction and risk aversion,[10] being attracted to the competitive labour costs, liberal economic policies, trade openness, social stability and growth potential of those countries.[11] Those foreign investors and experts working on the field of international business are so interested in the legal environments of the host states that much has been written about the legal and judicial systems of the countries along the Mekong River.[12]

Japan’s national ODA agency, the Japan International Cooperation Agency (JICA),[13] has since the 1990s been committing to the modernisation of law in the Mekong Subregion (and other countries) through its legal technical assistance projects.[14] Especially, Japanese legal advice provided through the assistance projects have heavily influenced the private laws of Vietnam, Cambodia and Laos, according to Japanese commentators[15] and mainstream media.[16] Nevertheless, we can rarely find corresponding observations or relevant discussions in anglophone scholarships or official documents issued by the governments of English speaking countries.[17] Thus, this paper critically and succinctly evaluates how Japanese legal ideas have shaped part of the legal pluralism in Vietnam, Cambodia and Laos, calling for further research to assess the influence of Japanese private law in these jurisdictions. It also discusses whether and how such research may help Japanese legal studies and local legal practice overcome challenges they have faced.


* Assistant Professor of ASEAN and Asia-Wide Integration, Universiti Brunei Darussalam; Affiliate, Centre for Asian and Pacific Law in the University of Sydney (CAPLUS); ANJeL-in-ASEAN Convenor, Australian Network for Japanese Law. The author acknowledges […]. Note that this paper is based on the following articles written by this author: Nobumichi Teramura, ‘Japan as a Source of Legal Ideas: A View from the Mekong Subregion of ASEAN’ (2021) 13 New Voices in Japanese Studies 19; and Nobumichi Teramura, ‘JICA and Regional Soft Power: Japan’s Legal and Judicial Development Project in Vietnam, Cambodia and Laos since 1996’ (2022) IAS Working Paper Series <https://ias.ubd.edu.bn/wp-content/uploads/2022/05/working_paper_series_69.pdf> .

[1] Michele Graziadei, ‘Comparative Law, Transplants, and Receptions’ in Mathias Reimann and Reinhard Zimmermann (eds), Comparative Law, Transplants, and Receptions (Oxford University Press 2019) 449; Mathias Siems, ‘The Power of Comparative Law: What Types of Units Can Comparative Law Compare’ (2019) 67 American Journal of Comparative Law 861, 865.

[2] Veronica Taylor, ‘Spectres of Comparison: Japanese Law through Multiple Lenses’ (2001) 6 Journal of Japanese Law 11.

[3] Chen Lei, ‘Contextualising Legal Transplant: China and Hong Kong’ in Pier Giuseppe Monateri (ed), Methods of Comparative Law (Edward Elgar Publishing 2012); Uwe Kischel, Comparative Law (Oxford University Press 2019) 55, 689, 699, 728–35; Graziadei, ‘Comparative Law, Transplants, and Receptions’ 450.

[4] Stephen Givens, ‘The Vagaries of Vagueness: An Essay on “Cultural” vs. “Institutional” Approaches to Japanese Law’ (2013) 22 Michigan State International Law Review 839; Giorgio Fabio Colombo, ‘Japan as a Victim of Comparative Law’ (2014) 22 Michigan State International Law Review 731.

[5] Shiori Tamura, ‘The Role of the Japanese Civil Code in the Codification in the Kingdom of Siam’ in Yuka Kaneko (ed), Civil Law Reforms in Post-Colonial Asia: Beyond Western Capitalism (Springer 2019) 54-55.

[6] Ibid 57ff.

[7] Veronica L Taylor, ‘Rule-of-law Assistance Discourse and Practice: Japanese Inflections’ in Amanda Perry Kessaris (ed), Law in the Pursuit of Development Principles into Practice? (Routledge-Cavendish 2009) 164.

[8] The Mekong Subregion consists of Vietnam, Cambodia, Laos, Myanmar and Thailand: Shawn Ho and Kaewkamol Pitakdumrongkit, ‘Can ASEAN Play a Greater Role in the Mekong Subregion?’, (The Diplomat, 20 January 2019) <https://thediplomat.com/2019/01/can-asean-play-a-greater-role-in-the-mekong-subregion/>.

[9] Nobumichi Teramura, Shahla F Ali and Anselmo Reyes, ‘Expanding Asia-Pacific Frontiers for International Dispute Resolution: Conclusions and Recommendations’ in Luke Nottage and others (eds), New Frontiers in Asia-Pacific International Arbitration and Dispute Resolution (Wolters Kluwer 2021) 356.

[10] John Boudreau and Nguyen Dieu Tu Uyen, ‘Rural Vietnam Booms With Jobs From Apple-Led Move in Supply Chains’, (Bloomberg, 26 October 2020) <https://www.bloomberg.com/news/newsletters/2020-10-26/supply-chains-latest-apple-shift-means-boom-in-rural-vietnam>; John Reed, ‘Vietnam Prepares for Supply Chain Shift from China’, (Financial Times, 28 December 2020) <https://www.ft.com/content/e855b706-e431-4fc5-9b0a-05d93ba1bcbe>

[11] See, eg, Swiss Re Institute, ‘De-risking Global Supply Chains: Rebalancing to Strengthen Resilience’ (2020) <https://www.swissre.com/institute/research/sigma-research/sigma-2020-06.html> ; OECD, ‘Trends in Foreign Investment and Trade in Lao PDR’ in OECD (ed), OECD Investment Policy Reviews: Lao PDR (OECD Publishing 2017).

[12] See generally The MLS Academic Research Service, ‘Southeast Asian Region Countries’ Law’ (Melbourne Law School, 2022)  <https://unimelb.libguides.com/asianlaw> accessed 29 June 2022.

[13] JICA is an independent administrative institution under the Ministry of Foreign Affairs (MOFA) of Japan.

[14] Luke Nottage, ‘The Development of Comparative Law in Japan’ in Mathias Reimann and Reinhard Zimmermann (eds), The Oxford Handbook of Comparative Law (2nd edn, Oxford University Press 2019) 204-207; Zentaro Kitagawa, ‘Development of Comparative Law in East Asia’ in Mathias Reimann and Reinhard Zimmermann (eds), The Oxford Handbook of Comparative Law (Oxford University Press 2006) 254-256; MOJ, ‘Legal Technical Assistance Activities by the International Cooperation Department ~Contributing to the World Is Japan’s Strength!~’ (n.d.)  <https://www.moj.go.jp/EN/housouken/houso_lta_lta.html> accessed 29 June 2022.

[15] Yuka Kaneko, ‘Japan’s Civil Code Drafting Support for Socialist Reform Countries: Diversity of Normative Choice’ in Yuka Kaneko (ed), Civil Law Reforms in Post-Colonial Asia: Beyond Western Capitalism (Springer 2019) 155.

[16] Shuichiro Sese, ‘Japan’s Judicial Diplomacy at Crossroads as Laos Enacts Civil Code’, (Nikkei Asia, 21 May 2020) <https://asia.nikkei.com/Politics/International-relations/Japan-s-judicial-diplomacy-at-crossroads-as-Laos-enacts-civil-code> (noting that ‘Laos became the third country in Southeast Asia, after Vietnam and Cambodia, to introduce a civil code with Japanese support’).

[17] See Section 4 below.

“The Interface of Inquests and Consumer Law and Policy: 2021 NSW Coronial Inquest Findings into the 2017 Death of a Honda Driver from a Takata Airbag”

Abstract: A coronial inquest is an inquisitorial fact-finding investigation into causes and manner of deaths that are eg violent, unusual, or from unknown causes. The coroner may also make recommendations to improve health and safety related to the death investigated.[1] Sometimes such inquests attract considerable media and public attention, although usually not as much as say a royal or other commission of inquiry. As such, inquests could influence the implementation or enactment of consumer product safety law. Yet there is very little research into this interface. An interesting recent case study comes from a New South Wales coronial inquest over 2019-2021 into a tragic death in July 2017 associated with Australia’s largest-ever vehicle recall, which uncovered poor practices by the manufacturer (Honda Australia) as well as the regulators.

The recall ultimately involved 3 million vehicles in Australia originally affected due to defective airbags manufactured by Japanese firm Takata, which started to explode and kill or injure drivers abroad from 2015 and ended up being subjected to a mandatory recall order issued in February 2018 by the Australian Competition and Consumer Commission (ACCC). By March 2021 the ACCC reported that these 3 million vehicles had been successfully recalled by manufacturers, although: “around 312,000 vehicles have been deemed to be compliant with the recall although they have not had their airbags replaced … vehicles which have been scrapped, stolen or unregistered for more than two years, or where consumers did not respond or were not contactable after repeated contacts through different channels. Globally, these Takata airbags have been associated with over 350 serious injuries and 33 deaths. This includes one death in Sydney in July 2017 and one serious injury in Darwin in April 2017. Two injuries were also reported following an accident in Sydney in August 2020.”[2]

Many problems had been increasingly highlighted by local media and consumer experts or groups[3] concerning the Takata airbag recalls process in Australia. There were also some media reports towards the start[4] and during some hearings[5] of the NSW coronial inquest into the death of Mr Huy Neng Ngo in July 2017, killed by a Takata airbag that had still not been replaced by Honda Australia.[6] Curiously, however, there has been almost no media reporting of the findings and recommendations for avoiding further deaths, released on 19 November 2021 by NSW Deputy Coroner, Magistrate E. Truscott.[7] I became aware of the extensive report recently as I had been asked by the NSW Crown Solicitors’ Office in mid-2019 to provide a witness statement to the inquest. Essentially, the report finds that the specialist regulator (DIRD transport ministry) but also the ACCC were rather asleep at the wheel in scrutinising Honda Australia’s inadequate recall notices sent out from 2015 until his death. Regulators should have done more and earlier, partly due to failures in inter-agency coordination. They and Honda Australia only seem to have started lifting their game after Mr Ngo’s death, the first in Australia.

* * *

After submitting my written statement, I was not called for oral examination at the inquest. However, the inquest findings (at pp149-53) show how I had alerted senior ACCC officials back in late 2015 that Honda Australia was sending out recall notices that I considered misleading by only referring vaguely to a “precautionary” recall and without highlighting the serious risks, even though by that stage some like myself knew that Takata airbags had caused multiple injuries and deaths abroad. (By chance, I had been following the Takata recall saga abroad as part of my longstanding research in comparative consumer product safety law and practice, and had purchased a second-hand Honda so when I got these recall letters from Honda Australia I realised they were problematic.) The deputy coroner noted eg (at p188-9):

“… The content of the consumer recall letters at least until March 2017 effectively failed to convey to the consumer the importance of the need to replace the airbag. The recall strategy failed to bring to the attention of the consumer the risk or danger that the airbag posed. That this approach continued well past the publication of the Blomquist report and that none of Honda Australia, DIRD or the ACCC sought to widen the recall strategy at this time is regrettable. Moreover, as already discussed at paragraphs [256]-[286], it is regrettable that Honda Australia, which had the primary responsibility for its voluntary campaign, did not identify that it should change its consumer recall letter and strategy well before March 2017.

645. It was a failure that the ACCC did not itself or seek DIRD to intervene in Honda Australia’s campaign approach when the opportunity arose, such as in 2015 with the NRMA and Professor Nottage communications or indeed [from 2016] in the Takata Airbag Working Group meetings.”

It was only a month after Mr Ngo’s death from the exploding Honda airbag that (pp 202-203):

“… in August 2017 the ACCC reviewed manufacturers’ language in recall notices on the PSA website, as well as more broadly in consumer communications, and took steps to develop model language to be used in connection with voluntary recall measures for Takata airbags. Although, at this point, there was not yet any compulsory recall on foot, Mr Grimwade [from the ACCC] said that “we took it upon ourselves to ensure that the language on our website was reflecting the risks as we understood them, and as they were emerging in the investigation”. Mr Grimwade accepted that ACCC officers could have, prior to 13 July 2017, usefully exchanged views in relation to the text to be used in Takata recall notices, in the manner in which they did in August 2017. He agreed that this “should have been done”.

688. Mr Grimwade’s expression that the ACCC took it upon themselves to conduct this review is somewhat odd given that he said there was no lack of clarity by the ACCC as to whose responsibility the PSA [Product Safety Australia] website was – the ACCC had sole responsibility for it at all times.

689. That the 5ZV recall used the term “precautionary” in its language on the website in the first place but continued to do up until this review is concerning as there were numerous occasions which should have or at least could have given the ACCC cause to conduct such a review, namely: (i) the 2015 NRMA letter; (ii) the late 2015 Professor Nottage correspondence; (iii) the Blomquist report [for US regulators] and NHTS orders in May 2016; (iv) the April 2017 injury causing the Toyota misdeployment in the Northern Territory together with (v) the ACCC participation in the Takata Airbags Working Group meetings from June 2016 and (vi) its close working relationship with DIRD.

690. On 5 August 2017, following receipt of responses from affected vehicle suppliers, the Minister for Small Business, Michael McCormack, issued a “Safety Warning Notice to the Public” under s 129(1) of the ACL, regarding possible risks of using motor vehicles containing Takata airbags.1037 The Safety Warning Notice warned of possible risks involved in the use of motor vehicles containing Takata airbags supplied in Australia, urged consumers to check whether their vehicle had been included in a product safety recall and advised that the ACCC was investigating whether vehicles with Takata airbags will or may cause injury.1038 Mr Grimwade advised that the purpose of a safety warning notice such as this is to “bring attention to a particular hazard through the [M]inister” and that “used sparingly… they can get quite a lot of publicity and indicate the views of government in relation to a particular hazard”.1039

691. Mr Grimwade accepted that there was an opportunity, prior to 13 July 2017, for the Minister to issue a Safety Warning Notice – such as that ultimately issued on 5 August 2017 – in respect of the risks posed in relation to the voluntary recalls of Takata airbags.1040 He accepted that there was a missed opportunity on the part of the ACCC, prior to 13 July 2017, to make a recommendation to the Minister to issue a safety warning notice in relation to the Takata airbag recalls.1041

692. If the ACCC was waiting for a risk to materialise to justify a sparingly used strategy to bring to public attention the need to respond to a recall of Takata airbags, the most obvious time that the ACCC should have approached the Minister to issue a Safety Warning Notice was in April 2017 following the Northern Territory injury.”

Some more specific findings by the deputy coroner were as follows:

1. Was there a lack of clarity and substantial confusion between ACCC and DIRD as to their respective roles in the monitoring of the Takata airbags voluntary recalls generally and specifically in regard to the 5ZV recall

Essentially yes, in that eg despite an inter-agency MoU “the ACCC did not know that DIRD did not have any process of its own in regard to the suppliers’ recall strategies nor did it know that the suppliers were not submitting their recall strategies to DIRD” (para 727). Furthermore (at p219), the coroner did not accept:

“the ACCC submissions that the ACCC had no basis to challenge or question Honda Australia’s description of the defect, hazard and risk contained in the 5ZV recall notification. It should have sought to clarify whether the defect would have the same effect and risk as other Takata airbag defects – namely the “inflator rupture causing metal fragments” to strike a vehicle occupant. Without clarifying whether the 5ZV recall involved the same hazard as then known to exist with the previous recalls, given there was no evidence suggesting that there was some other hazard, it would seem that the ACCC, DIRD and the suppliers proceeded on the basis that it was the same hazard but because the recall was classified as “precautionary” or “preventative” the hazard wasn’t appropriately described. That it was not clarified or corrected resulted in a failure to ensure that the public was adequately warned of the dangers of the defective airbags. Likewise, as previously discussed, Honda Australia failed to make due inquiry with Honda Japan in this regard though appeared to be aware that Honda Japan was using the terms preventative and precautionary as discussed above.

734. Counsel Assisting’s phrase of “lack of clarity” or “substantial confusion” is a measured term and the submissions advanced by DIRD and the ACCC demonstrate rather than diminish the disparity between the ACCC and DIRD as to their understanding of their respective roles and responsibilities when there is ample evidence that such disparity existed.”

… 3. Should DIRD and the ACCC have directly raised with Honda Australia that its consumer recall letters should not include tentative language such as “preventative measure” and “precautionary action” and that the letters did not clearly refer to the nature of the defect and the risk of death or injury in 2015 and 2016.

4. Should DIRD have sought from Honda Australia the 5ZV consumer recall letters.

Again, yes (p 211):

“… DIRD should have obtained at least one of the 5ZV recall letters by following up the request made in August 2015 or preferably by specifically making a new request for the 5ZV recall. Had DIRD received the 5ZV recall consumer letter/s, it appears unlikely that DIRD would have identified and taken action in respect of the issues which were concerning to Professor Nottage in late 2015 or indeed Mr Thomas in mid-2015 in relation to the letter he received for his own Honda vehicle. Those issues should have identified and been formally raised with Honda Australia. Again, whether DIRD would have done so had it obtained a copy of the 5ZV consumer letter is questionable given its position as to DIRD’s limited role and function. At the least it should have identified that the defect and risk were inadequately described in that it did not mention that metal fragments could cause injury or death to a vehicle occupant.

741. Likewise, the issues raised by Professor Nottage in 2015 should have been formally raised with Honda Australia by the ACCC or by DIRD at the request of the ACCC. There was no process in place for DIRD to be tasked with raising it directly with Honda Australia. Raising it generically in a TAWG meeting was, in the circumstances, inadequate.”

5. Should, prior to July 2017, the ACCC and/or DIRD have taken steps to publicise the risks posed by defective Takata airbags by way of its own media announcement or by co-ordinating a media campaign with the industry.

Yes (at p222-3), with the deputy coroner accepting:

“counsel for the ACCC and DIRD’s submissions that it was for the suppliers to co-ordinate and promote an advertising campaign, and though the ACCC and DIRD could encourage a wider campaign, neither agency had power to compel one. However, rather than adopting a reactive media posture which on one view could be thought to resemble a reluctance to publicise the Takata recalls, both agencies could have adopted a pro-active media posture on their own accord as well as encouraging industry, and in this case Honda Australia specifically, to engage in a public campaign.

749. Whilst the recall was voluntary and neither agency had powers to compel the industry to adopt such a strategy (in the absence of any compulsory recall then having been commenced), a supplier’s refusal or failure to engage in such a campaign strategy could have been an escalation criteria [sic] by which the agencies could measure the progress of the recall, and which may have motivated industry to engage in such a campaign. Advertising campaign aside, the MOU allowed for the joint settling of media releases issued by the ACCC or DIRD. The only media release that was prepared related to what would be issued in the event of a misdeployment event, rather than considering how the government could bring the recalls to the attention of the Australian public, for the sake of the public safety, in advance of any such incident. As Professor Nottage wrote to Mr Ridgeway at the ACCC at the end of 2015, a government media release incurred no cost. There is no good reason why DIRD and the ACCC failed to issue such a release. Likewise, there was no good reason why Honda Australia failed to do so, particularly given the scale of the recall. 

8. If the ACCC or DIRD had not missed the opportunities to bring the defect and risk of the Takata airbag to public notice, is it likely the Ngo/Chea vehicle airbag would have been replaced earlier thus preventing Mr Ngo’s death

Yes (pp225-6):

“…Ms Chea and her family did not know about the Takata airbag recall and when in March Ms Chea did learn of it having collected the registered letter, she had, within the week, booked the vehicle into Peter Warren’s service department for recall replacement. Had she learned of the defect earlier, it would appear that she would have made an earlier appointment. Likewise, had Julie Ngo been aware of the risk of the defective airbag she would have likely insisted that it be replaced on 11 July 2017. Whilst it is not possible to conclude that any action or inaction of the government agencies did contribute to Mr Ngo’s death, it is likewise not possible to conclude any action or inaction on their part did not contribute to Mr Ngo’s death.

757. Counsel for DIRD point out that Ms Chea says that she only received the March 2017 letter. That is the one she responded to. That letter had a clearer content consistent with the Blomquist Report and correctly identified the defect, hazard and risk. Had that information been contained in an earlier letter and received by Ms Chea or a family member then it is likely the Vehicle would have been booked in at an earlier time. Had there been public announcements then other persons who had received the earlier letters may have been able to identify the importance of the recall and brought it to Ms Chea’s attention.

758. As is apparent from the foregoing responses, I agree with the position advanced by Counsel Assisting. I make the finding that due to a lack of clarity and at times substantial confusion as to the respective roles of DIRD and the ACCC, together with the lack of a documented escalation process against which to monitor and advance the progress of the recall, the ACCC and DIRD inadequately administered and monitored the Takata Airbag voluntary recalls during the period July 2015 to July 2017. The inadequacy particularly arose in that there was a failure to ensure that the defect and hazard of the Takata airbag subject to the Honda Australia 5ZV recall was properly described to the Australian public on the ACCC’s PSA website, in the Honda Australia letters to consumers, or by Australian public media broadcasts in a timely and adequate manner.”

In conclusion, the deputy coroner added multiple recommendations for better monitoring of vehicle recalls in future (p226 et seq), in the context of some legislative reforms already underway.

* * *

Despite these quite critical findings and recommendations in November 2021, as of early May 2022 there seem to be no Australian newspaper reports on them, although there was some other Takata airbag fatality news in mid-2021.[8] Perhaps the lack of mainstream Australian media reporting on the inquest findings is because Mr Ngo’s death is sadly considered “old news”, and other fatalities or accidents are more widespread or vivid (especially after several years of deaths and disruption caused by the COVID-19 pandemic). Yet it seems important that government officials and regulatory systems are held to account, and that lessons are learned and communicated from careful inquiries like inquests in order to improve consumer product safety law and practice.

Indeed, an article published online on 9 December 2021 by a smaller journalistic outlet reported that a former ACCC official allegedly lost his job in 2018 after some of his concerns went public that the Commission was not doing enough about the Takata recall:[9]

“… Three years ago an anonymous Australian Competition and Consumer Commission (ACCC) official was frogmarched out of his office — and later threatened with criminal action — after internal emails became public via a television exposé on the Takata airbag scandal.

The official was concerned the ACCC had not reacted quickly enough on the threat to public safety of the potentially deadly airbags and used its powers only after a driver was killed by shrapnel from an exploding airbag which penetrated his neck, causing him to bleed to death.

Now a coroner’s hearing has confirmed that many of the official’s warnings were on the mark. 

For one thing it means the official feels confident about revealing his identity. His name is Dean Wright. He held a senior executive level position as assistant director of the ACCC’s product safety branch and he was 52 at the time.”

“I am entirely comfortable with what I did,” Wright told Crikey. “I felt I had no choice.

“I don’t regret my part in revealing the truth about the years of dithering. I’d like to believe that the coronial court’s recommendations will save lives and prevent further horrific injuries.”

Does he feel he is owed an apology? 

“Yes. That would be the right thing to do, but more to the point the ACCC owes the public an apology for not being truthful.”

…

The ACCC said it did not propose to comment on Wright’s “actions or opinions”. It also said it had “identified and implemented a number of lessons drawn from the inquest” before the coroner’s report was released and was working on others.”

Meanwhile, perhaps in the light of the inquest, a class action brought in the NSW Supreme Court against Honda, Toyota, Subaru, Nissan, Mazda and BMW reached a mediated settlement in September 2021 for A$52m (including $15m for the plaintiffs’ lawyers!). A specialist media outlet report noted furthermore that:[10]

“In August, the Australian Competition and Consumer Commission (ACCC) launched legal action against Mercedes-Benz, accusing it of minimising the risk of serious injury of death from the faulty Takata products. The ACCC alleges Mercedes-Benz staff downplayed the risks “on at least 73 occasions,” stating the recall was precautionary in nature and “there had been no incidents, accidents, injuries or deaths … at all,” despite there already having been one fatality in Australia at that time and one serious injury recorded.”

The saga therefore continues, so there may still be scope for the wider public to learn what really went on from the Takata airbag debacle, and the lessons that can be drawn more generally for consumer law and policy in Australia and beyond. There have been longstanding concerns particularly about Australia’s lack of clarity and impact of the law on recalls (and mandatory accident reporting) and insufficient coordination or leadership from the ACCC and state/territory regulators vis-a-vis specialist regulators (as pointed out eg in 2013, prompted by a problem reported regarding Volkswagen – even before its fake diesel emissions disclosure scandal).



[1] For background into the NSW law and practice around appearing in coronial inquests, see eg https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&ved=2ahUKEwiBzo2WzdH3AhUiyzgGHT86AZUQFnoECAQQAQ&url=http%3A%2F%2Fwww5.austlii.edu.au%2Fau%2Fjournals%2FNSWBarAssocNews%2F2014%2F12.pdf&usg=AOvVaw30yvr7BIPzuS0Gx25wPu3D

[2] https://www.accc.gov.au/media-release/car-manufacturers-complete-999-per-cent-of-takata-airbag-recall

[3] See eg https://www.choice.com.au/transport/cars/general/articles/unprecendented-mandatory-recall-takata-airbags-280218

[4] https://www.sbs.com.au/news/article/nsw-inquest-into-death-of-sydney-driver-to-examine-takata-airbag-risks/n4kk69rs4 and https://www.abc.net.au/news/2019-09-23/faulty-takata-airbag-coroner-inquiry-death-cabramatta-man/11538628

[5] https://www.theguardian.com/business/2020/jun/22/regulators-knew-of-two-takata-accidents-before-a-sydney-mans-death-inquest-told

[6] https://www.smh.com.au/national/nsw/faulty-airbag-at-centre-of-recall-to-blame-for-death-of-sydney-man-20170721-gxg5yj.html

[7]  https://coroners.nsw.gov.au/coroners-court/download.html/documents/findings/2021/Inquest_into_the_death_of_Huy_Neng_Ngo_-_Findings.pdf via https://coroners.nsw.gov.au.

[8] https://www.dailytelegraph.com.au › nsw › news-story: 3 June 2021 — “The ACCC has found a third Australian was killed by a Takata airbag, raising questions about why there was not a coronial inquest.”

[9] https://www.crikey.com.au/2021/12/09/accc-whistleblower-vindicated-steps-out-of-shadows/

[10] https://www.whichcar.com.au/car-news/takata-lawsuits-in-nsw-settled-by-major-car-companies-for-52-million