This posting is based mainly on a Note that critically reviews The Trade and Foreign Investment (Protecting the Public Interest) Bill 2014, drawing on my written Submission and subsequent Senate Hearings. The fully footnoted version will appear in the next issue of the CIArb's "Australian ADR Reporter" or successor Journal. Readers may also be interested in my subsequent posting to the Kluwer Arbitration Blog, followed by the Senate Committee Report (27 August 2014) which agreed that the anti-ISDS Bill should not be enacted. Significant extracts from that Report will also be added and analysed in my draft paper at http://ssrn.com/abstract=2483610, with an introduction incorporating a version of the Note below.

This work is part of an Australian Research Council Discovery Project (DP140102526) funded over 2014-2016 jointly with Dr Shiro Armstrong and Professors Jurgen Kurtz and Leon Trakman, which was acknowledged in the Senate Bill hearings and final Report. The topic of ISDS will also be discussed at the Law Council of Australia’s 2014 International Trade Law Symposium, 18-19 September, Canberra, and will be the focus of an ABC National Radio broadcast on 14 and 16 September (with transcripts here).

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[This is an un-footnoted manunscript version of my review, forthcoming in the Journal of Contract Law, of:

Long Term Contracts, Kanaga Dharamananda & Leon Firios (eds)

Federation Press, Sydney, 2013, ISBN 987 186287 915 7, xxxviiii + 419pp, A$225.

The volume, derived from a conference held in Perth in 2012 and edited by a senior counsel with a junior solicitor from Western Australia (WA), adds a useful combination of theoretical and practical papers to the growing literature on long-term contracts (LTCs), especially for Australian and other common law jurists. With a focus on resources and energy contracts, the book is a welcome in-depth addition to more commercially-orientated publications on the subject. It is particularly topical given attempts by buyers in countries such as Japan, which takes 75% of Australia’s exports of liquefied natural gas (LNG), to renegotiate its long-term supply contracts with Australian sellers.

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Requirements or inducements for (especially listed) company boards to adopt a minimum number or proportion of "independent" directors (IDs), who are not executives as well as free from other relationships that might impede their capacity to exercise independent judgement on behalf of the company as whole, are spreading through the Asian region. This is rather curious, as many countries (including in fact Australia) have a tradition of large non-institutional blockholders, which typically have the capacity and incentive to exercise shareholder rights to extract information and influence the management and direction of the company. The need for IDs is therefore reduced, compared to countries with more dispersed shareholders, such as the US and especially the UK. However, blockholders can take advantage of dispersed shareholders, so the latter (or policy-makers more generally) may still press to have more IDs on boards. Yet blockholders can be expected to lobby to resist such measures, and anyway the impact of IDs on corporate performance may be less in such jurisdictions.

This backdrop may explain the difficulties in introducing requirements for IDs into Japan, despite calls for more IDs in the wake of corporate failures (such as Olympus) and the enactment of the Companies Reform Act on 20 June 2014 (after extensive deliberations). But it is also consistent with the history and reality of IDs in Australia's listed companies. Below is the Abstract for a detailed draft paper comparing Australian developments, co-authored with my colleague Fady Aoun, for the Berlin conference / book project on "IDs in Japan and other Major Asian Jurisdictions" (click here for a PDF of our Powerpoints), as well as the third joint research conference for USydney, UGeneva, Harvard and Renmin Law Schools (hosted in Beijing over 11-12 July: click here for an audio file of my 13-minute presentation by video link).

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The Australian Network for Japanese Law (ANJeL) successfully hosted the Cairns Symposium on Japanese Law on Friday 16 May, with special thanks to ANJeL member and James Cook University Associate Professor Justin Dabner.

The Symposium's primary theme was 'Japanese Law and Business Amidst Bilateral and Regional Free Trade Agreements', which was a timely coincidence, in light of the conclusion of negotiations for the Japan Australia Economic Partnership Agreement on 7 April 2014. However, presentation proposals dealing with other Japanese Law topics were also welcomed, and topics discussed included agricultural land law and policy, corporate law reforms, insolvency law and practice, long-term contracting, cross-border investment dispute resolution, tax treaties, emissions trading schemes and political participation rights. Please see here for previously published abstracts and see here for the conference program.

The list of presentations topics and speakers, and where possible, their presentation slides appear below.

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Indonesia recently announced that it would review its 67 bilateral investment treaties (BITs). Shortly beforehand, it had unsuccessfully challenged the jurisdiction of an ICSID arbitral tribunal in a claim for expropriation and other violations brought by the Australian subsidiary of a UK coal mining company (Planet Mining v Indonesia).

The tribunal’s decision found that consent to jurisdiction existed under the coal mining licences given by Indonesian authorities, but not under the wording of the 1992 Australia-Indonesia BIT. It found that the countries had only given a “promise to consent” rather than full advance consent to ICSID jurisdiction, meaning that Indonesia could still refuse consent subject to potential review through an inter-state arbitration procedure separately provided under the treaty. Further, as both countries remained party to the framework 1965 ICSID Convention facilitating enforcement of arbitral awards, another BIT provision for ad hoc investor-state arbitration (ISA) was also unavailable to investors.

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There has been a flurry of media attention paid to Australia-Japan relations this week. For example, I was asked to appear on “The Wire” radio on 7 April, on the eve of the conclusion of 7 years of negotiating this major bilateral Free Trade Agreement (transcript here). At that stage, the inclusion of Investor-State Dispute Resolution (ISDS) protections for foreign investment in the treaty was still a real possibility, but I argued that there was no need to panic. Japanese investors have never experienced major problems with Australian government authorities illegally interfering with their investments, and indeed have never directly invoked ISDS (especially arbitration) procedures already provided by Japan’s treaties with around 30 countries.

Both governments subsequently announced key features of the Japan-Australia FTA, which ultimately did not include ISDS – unlike the Korea-Australia FTA concluded in December 2013 (and formally signed this week in Seoul). On this blog and then the East Asia Forum, I argued that this presumably meant that the Australian negotiators were happy enough with market access commitments offered by Japan, especially for agricultural products. This may be true but it is hard to be sure, and he argued that omitting even a weak form of ISDS in the FTA with Japan may complicate Australia’s ongoing regional and bilateral FTA negotiations (including with India and Indonesia).

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Australia and Japan finally concluded a bilateral Free Trade Agreement on 7 April 2014. Some Australian media outlets had prior inklings that negotiations had achieved significant breakthroughs, especially for agricultural market access into Japan, but a frequent assumption was that Australia must have “given up” something major in return. Concerns were expressed that this included measures favouring Japanese investors into Australia, especially protections from investor-state dispute settlement (ISDS, especially arbitration) provisions [listen to my radio interview here]. These provide an extra avenue for foreign investors to enforce the substantive treaty rights limiting a host state’s capacity to illegally interfere with foreign investments (eg through expropriation). They add to the (more politicised) inter-state arbitration procedure invariably included in investment treaties, as well as any rights under domestic law available through the host state’s court system – particularly problematic in developing countries, such as Indonesia.

ISDS provisions had been added to the Korea-Australia FTA concluded in December 2013 by the Abbott Government, which also declared that it was reverting to a case-by-case approach to ISDS. This contrasted with the position taken by the 2011 Gillard Government Trade Policy Statement, which had reversed Australia’s longstanding treaty practice by declaring that it would not agree to any forms of ISDS in future treaties – even with developing countries. The 2012 Malaysia-Australia FTA omitted ISDS, although that was meaningless in practice as ISDS remains available to enforce similar substantive rights under the 2009 ASEAN-Australia-NZ FTA. Curiously, however, the new Australia-Japan FTA ultimately omitted ISDS provisions as well. Why is this, and what are the broader implications?

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Japanese Law in Asia-Pacific Socio-Economic Context
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