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International investment treaties and investor-state dispute settlement (ISDS) are in the news again, notably in Australia and India, which are negotiating a bilateral Free Trade Agreement (FTA) as well as the Regional Comprehensive Economic Partnership (RCEP or “ASEAN+6” FTA). The possibility is emerging of a shift from US-style to contemporary EU-style treaty drafting in the broader Asian region, as a new compromise between the interests of foreign investors and host states.

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The Trans-Pacific Partnership (TPP) Agreement was signed in February 2016 by 12 Asia-Pacific economies that already account for 40% of world GDP, including the United States, Japan and Australia. If ratified, economists model significant economic growth prospects, especially for smaller and/or less developed member states, with a considerable impetus coming from greater cross-border investment. Further economic benefits are expected if others join the existing signatories, with expressions of interest already coming from leaders in several Asian states.

However, whether the treaty will be ratified and come into force remains unclear, partly because of some ongoing opposition to the TPP’s investment chapter provisions even within existing signatories, for example from some quarters within Australia (and, to a lesser extent, Japan). One focus of criticism is the extra option of investor-state dispute settlement (ISDS), aimed at more credibly enforcing the substantive protections and liberalisation commitments of host states. My paper for a conference on FTAs in Melbourne on 19 May 2016, (at http://ssrn.com/abstract=2767996 and outlined below) assesses such concerns.

A version will also be presented at the Institute for Southeast Asian Studies in Singapore on 5 August, for their interdisciplinary project on the impact of the TPP in the region. In addition, on 4 August I will present a broader paper on "Rebalancing Investment Treaties and Investor-State Arbitration in Asia and Australia" at the SMU workshop on "Regulation and Investment Disputes: Asian Perspectives".

The pros and cons of ISDS nowadays will be further addressed in another joint research conference and book project with Chulalongkorn University, funded by its ASEAN Studies Centre, at a conference in Bangkok on 18 July that compares the experiences and debates over treaty-based ISDS as well as contract-based investment arbitration across all ten ASEAN member states (including current TPP signatories, and potential additional ones like Thailand, Indonesia and the Philippines). The draft program and speakers are listed below.

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PROJECT SUMMARY
This project (funded for 2014-6) will evaluate the economic and legal risks associated with the Australian Government’s current policy on investor-state dispute settlement through multidisciplinary research, namely econometric modeling, empirical research through stakeholder surveys and interviews, as well as critical analysis of case law, treaties and regulatory approaches. The aim of this project is to identify optimal methods of investor-state dispute prevention, avoidance and resolution that efficiently cater to inbound and outbound investors as well as Australia as a whole. The goal is to promote a positive climate for investment inflows and outflows, while maintaining Australia's ability to take sovereign decisions on matters of public policy.

PROGRESS OF PROJECT
For the econometric study of the impact of ISDS on FDI inflows, CI Armstrong has completed the literature review, data assembly and coding, producing preliminary results. These have been incorporated into a paper jointly with CI Nottage on “Mixing Methodologies” for an Oslo University “Pluricourts” program book project. CI Nottage, plus CI Trakman, have completed numerous semi-structured and informal interviews on stakeholders involved or interested in international investment dispute resolution and given many public lectures individually and sometimes jointly, nationally and internationally. Drawing on interim project findings, Nottage has also provided evidence and submissions for several parliamentary inquiries since 2014 (including on 19 February 2016 for the JSCOT inquiry into ratifying the Trans-Pacific Partnership FTA, based on three recent postings on this Blog), as well as media commentary. CI Kurtz has also given many presentations drawing on his analysis of arbitral jurisprudence and commentary. All this has already generated many research publications, listed below (updating from April 2015 here).

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Happy New Year of the Monkey! I am also pleased to report that two new books will be forthcoming.

One is co-edited by Chulalongkorn University Law Faculty (and immediate past Dean) Prof Sakda Thanitcul, who like me studied for an LLD at Kyoto University (but, unlike myself, persevered and obtained the degree there, as well as another PhD from the University of Washington). Entitled "ASEAN Product Liability and Consumer Product Safety Law", this volume adds the editors' introduction plus two other general chapters to ten country reports presented and discussed at a major international conference held late July 2015 in Bangkok, funded by Chulalongkorn University's ASEAN Studies Centre and hosted at Thailand's Ministry of Commerce facilities. Thanks also to publication support from the Centre as well as the Sydney Southeast Asian Centre (SSEAC), complimentary copies of the English version will be distributed to delegates at the 2nd ASEAN Consumer Protection conference, also being held in Bangkok over 14-15 December (see here for my co-authored volume of Policy Digests & Case Studies for that conference, and Volume 1 tabled at the 1st conference in Hanoi a year earlier). In addition, the book will be translated and published in Thai in early 2016, through Thailand's leading legal publisher (Winyuchon), to reach a broader audience at reasonable cost. With priority to national and international regulators and NGOs, other complimentary copies of the English version are available on request, to assist in the important and ongoing task of harmonising and strengthening consumer law and enforcement, amidst major trade and investment liberalisation initiatives underway in the region - including now the Trans-Pacific Partnership FTA. The editors' introductory chapter is also freely downloadable via SSRN.com, and Prof Sakda will be visiting the University of Sydney in late July 2016 thanks to further support from SSEAC. Bios for all contributors to this book are listed below.*

Southeast Asia has long been known as a particularly dynamic part of the global economy. In 2007 the leaders of the ten member states of the Association of Southeast Asian Nations further agreed to accelerate the project to complete a single market or “ASEAN Economic Community” by the end of 2015. Less well known is that their blueprint also committed to improve and harmonise consumer law, to prevent a "regulatory race to the bottom". A new Committee has encouraged member states to enact strict product liability regimes (as in Australia, Japan and the EU) aimed at making it easier for consumers (and sometimes even businesses) to be compensated for harms suffered from unsafe products. ASEAN states have also introduced new or revised laws allowing regulators to set mandatory safety standards before products are put into circulation, and to enforce post-market controls such as bans and recalls of unsafe products.

The second new book is on "Independent Directors in Asia", co-edited for Cambridge University Press with ANJeL stalwarts Profs Harald Baum (MPI Hamburg), Souichirou Kozuka (Gakushuin, Tokyo) and Dan Puchniak (NUS). As previously mentioned on this Blog, contributions have been extensively workshopped at major conferences in Berlin and then Singapore, as well as by individual authors in other forums. A longer version of the chapter comparing Australia, which I co-authored with Fady Aoun, is also forthcoming in early 2016 from the University of Miami International and Comparative Law Review. Core aspects of corporate governance in Asia provides essential backdrop to firms' dealings with consumers as well as their cross-border engagement facilitated nowadays through FTAs.

* LIST OF CONTRIBUTORS to the ASEAN Product Liability and Consumer Product Safety book:

RIZA BUDITOMO

Riza Buditomo is an Associate Partner in the Corporate & Securities practice group of Hadiputranto, Hadinoto and Partners (member firm of Baker & McKenzie). He graduated from the University of Indonesia with a B.A. Law in 2004, and Accounting Diploma in 2002. With an educational background in accounting and tax as well as law, Riza focuses on corporate/commercial, trade and tax work. This includes consumer protection, export/import, food industry, and anti-dumping issues. He has also been involved in several due diligence projects for acquisitions and mergers, drafting legal due diligence reports, providing various types of legal advice and assisting major clients in a number of high profile transactions. Riza is admitted in Indonesian Courts including the Tax Court. Riza is also a certified customs consultant.

RUMONDANG SARI DEWI

Rumondang Sari Dewi is an Associate in the Corporate & Securities practice group of Hadiputranto, Hadinoto and Partners. She graduated from the University of Padjadjaran with a B.A. Law in 2009. She has been involved in assisting and advising clients in various corporate and trade matters. She also has experience assisting clients in dealing with government authorities on licenses and approvals.

SORNPHETH DOUANGDY

Sornpheth Douangdy is Associate Director in charge of both legal and tax services at PricewaterhouseCoopers (Lao) Company Limited. Prior to working at PricewaterhouseCoopers, he was the Deputy Head of the Law Research Division in the Law research and International Cooperation Institute and the Ministry of Justice in Lao; Deputy Head of the Law Research Division in the Law Research Centre at the Ministry of Justice; a member of the Civil Law Working Group to prepare the Civil law Textbook and to amend Contract Law, Tort Law, and Law on Economic Arbitration Organisation; a lecturer in Intellectual Property Law at the Law Colleges; the co-ordinator of Ministry of Justice to the UNODC; a member of the secretariat team to implement the UN Convention against Corruption; and a judge of Saysettha Court, Vientiane. Sornpheth holds a bachelor degree from the Faculty of Law and Political Science at the National University of Laos, and a post-graduate Business Law and Commercial Law degree from Curtin University of Technology, Australia.

GERAINT HOWELLS

Geraint Howells is Chair Professor of Commercial Law and Dean of the Law School at City University of Hong Kong; barrister at Gough Square Chambers, London (though not currently practising) and former President of the International Association of Consumer Law. He previously held chairs at Sheffield, Lancaster and Manchester and has been head of law schools at Lancaster and Manchester. His books include Comparative Product Liability, Consumer Product Safety, Consumer Protection Law, EC Consumer Law, Product Liability, European Fair Trading Law, Handbook of Research on International Consumer Law and The Tobacco Challenge. He has undertaken extensive consultancy work for the EU and UK government as well as for NGOs.

JOCELYN KELLAM

Dr Jocelyn Kellam has a particular interest in product liability in the Asia Pacific. Previously a partner with one of Australia’s national law firms and an Adjunct Professor of Law at the University of Sydney she holds a PhD (USydney) and LLM (Tuebingen) in comparative product liability law. Jocelyn is the general editor of a comparative text, Product Liability in the Asia Pacific (Federation Press, 3rd ed 2009), and the former general editor of the Australian Product Liability Reporter.

KHIN MAR YEE

Khin Mar Yee (LLB, LLM, PhD) is Professor and Head of the Department of Law, University of Yangon. Her teaching and research interests include international trade law, intellectual property law and the Law of the Sea.

JOHN KING

John E King is a partner in Tilleke & Gibbins, heading the firm’s Cambodia practice in Phnom Penh. He is supported by a strong team of local Khmer advisors and the international expertise of the firm’s offices across Southeast Asia to provide advice that is tailored to the franchising, life sciences, and technology sectors. John previously led the firm’s Dispute Resolution Department for several years, and he played a central role in building Tilleke & Gibbins’ Hanoi and Ho Chi Minh City offices, where he served as managing director from 2007 to 2010.

John is a US-licensed attorney, and a founding member of the Thailand branch of the Chartered Institute of Arbitrators. He earned his Juris Doctor (JD) with high distinction (magna cum laude and Order of the Coif) from the University of Minnesota, and he practiced banking and finance law at Leonard, Street & Deinard, a leading U.S. law firm, prior to joining Tilleke & Gibbins.

DYAN DANIKA LIM

Dyan Danika Lim (BS, JD) specialises in energy, gas, oil, telecommunications & public utilities litigation and alternative dispute resolution with a particular interest in domestic and international arbitration and cross border litigation. She also handles product liability cases. She is currently an Associate Solicitor at the Office of the Solicitor General of the Philippines and a Professor at the De La Salle University, College of Law. Prior to joining the government, she worked as a Senior Associate at the Litigation and Dispute Resolution department of the Angara Abello Concepcion Regala & Cruz Law Offices. She is a member of the UP Women Lawyer’s Circle and the Young International Arbitration Group.

LIM CHEE WEE

Chee Wee graduated from the University of New South Wales in Australia with LLB and BComm (Accounting) degrees. He was called to the Malaysian Bar as an Advocate and Solicitor in the High Court of Malaya in 1993 and started practising in SKRINE, where he became a partner in 2001. Chee Wee is the immediate past president of the Malaysian Bar.

Chee Wee has a broad commercial practice. He also has an established public and administrative law practice, having regularly advised and acted as Counsel for the Malaysian stock exchange and another regulator. His other areas of practice encompass banking, construction and engineering, land law, reinsurance, trusts and partnership disputes. He is listed in various international legal directories as a leading individual for dispute resolution.

LY TAYSENG

Managing Director of HBS Law, Attorney-at-law and Member of the Council of Jurists of the Council of Ministers of the Royal Government of Cambodia

NG HUI MIN

Ng Hui Min is a partner in Rodyk & Davidson LLP’s Litigation & Arbitration Practice Group. Hui Min graduated from National University of Singapore in 2006 and was admitted to the Singapore Bar as an Advocate & Solicitor in Singapore in May 2007. Hui Min is effectively bilingual in English and Chinese, and her main areas of practice encompass commercial litigation, corporate and investment disputes litigation, insolvency cases and employment disputes. She represents and advises companies and individuals on a wide array of commercial issues including commodities disputes, international sale of goods, directors’ duties, and shareholders’ disputes.

In her practice, Hui Min has represented companies on contractual disputes in the oil and gas industry as well as in the commodities industry where she has dealt with issues ranging from breach of warranty to claims under guarantees. Hui Min has also acted for companies in international arbitrations with respect to claims associated with international trade including commodities disputes. Hui Min has also acted for a variety of clients in employment matters, and possesses particular expertise in the area of confidentiality and restrictive covenants. In her insolvency practice, Hui Min has advised and acted for shareholders of companies where she has dealt with issues which include directors’ breach of fiduciary duties and deadlock between directors leading to a winding up of companies.

LUKE NOTTAGE

Dr Luke Nottage specialises in contract law, consumer product safety law, corporate governance and international arbitration, with a particular interest in the Asia-Pacific region. He is Professor of Comparative and Transnational Business Law at Sydney Law School, founding Co-Director of the Australian Network for Japanese Law (sydney.edu.au/law/anjel), and Associate Director of the Centre for Asian and Pacific Law at the University of Sydney (CAPLUS). Luke’s 11 books include International Arbitration in Australia (Federation Press, 2010), and Foreign Investment and Dispute Resolution Law and Practice in Asia (Routledge, 2011). He is an ACICA Special Associate and founding member of the Rules drafting committee, the Australasian Forum for International Arbitration council’s Japan Representative, and on the panel of arbitrators for the BAC, JCAA, KCAB and KLRCA. Luke has also consulted for law firms world-wide, ASEAN, the EC, OECD, UNCTAD, UNDP and the Japanese government, and is Managing Director of Japanese Law Links Pty Ltd (www.japaneselawlinks.com).

COLIN ONG

Dr Colin Ong is a practising member of the Brunei, English and Singapore Bars. He has acted as arbitrator or as counsel in many commercial and investment arbitrations under most major rules of arbitration governed under Civil and Common Law. He is a Chartered Arbitrator and a Master of the Bench of the Inner Temple. He is or has been a Visiting Professor at various universities, including the University of Hong Kong; Universitas Indonesia; King’s College (University of London); University of Malaya; Universiti Kebangsaan Malaysia; Universitas Indonesia; Queen Mary (University of London); Padjadjaran University (Indonesia); and National University of Singapore. He is the author of several arbitration and law books and is an editorial board member of various legal journals including Arbitration (CIArb); Business Law International; Butterworths Journal of International Banking & Financial Law; Dispute Resolution International; and Maritime Risk International.

He currently holds various positions including President, Arbitration Association Brunei Darussalam; Advisory Board, BANI (Indonesia); Board, Cambodia National Commercial Arbitration Centre; Advisor to China-ASEAN Legal Research Center; ICC Commission on Arbitration; and ICCA-Queen Mary Task Force (Costs and Security for Costs). He was a Former Principal Legal Consultant, ASEAN Centre for Energy; Panel Member (Brunei Darussalam nominee) of the ASEAN Protocol on Enhanced Dispute Settlement Mechanism; and Former Vice President of the LCIA (Asia-Pacific Users’ Committee).

PATRICIA-ANN T PRODIGALIDAD

Patricia-Ann T Prodigalidad (BS, LLB, LLM) is a Partner of the Litigation and Dispute Resolution Department of Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW). Ms Prodigalidad specializes primarily in commercial litigation (intra-corporate disputes; banking, investments and securities litigation; corporate rehabilitation and insolvency) and criminal matters relating to corporate activity (including white collar and other business-related crimes; anti-money laundering; anti-corruption and other FCPA issues), with particular focus on cross-border issues. She likewise practices extensively in the fields of international commercial and construction arbitration as well as product liability and antitrust litigation. Ms Prodigalidad also acts as an arbitrator in international commercial and domestic arbitration, both institutional and ad hoc. In 2013, Ms Prodigalidad passed the Fédéracion Internationale Des Ingénieurs-Conseils [FIDIC] Dispute Board Adjudicator Assessment Workshop sponsored by FIDIC and the Japanese International Cooperation Agency and was one of four (4) Philippine delegates accredited as a dispute board adjudicator. Leveraging on her science degree, Ms. Prodigalidad has successfully handled environmental law cases.

Ms Prodigalidad, a prolific author, obtained her Bachelor of Laws degree from the University of the Philippines, cum laude, graduating class salutatorian. She then topped (ranked 1st in) the 1996 Philippine Bar Examinations. In 2004, she obtained her master’s degree in law from the Harvard Law School. Ms. Prodigalidad is a member of various professional domestic and international organizations and serves as trustee of the Philippine Dispute Resolution Center, Inc, the UP Women Lawyers’ Circle and Harvard Law School Alumni Association. She is currently the National Secretary of the Integrated Bar of the Philippines, the countrywide organization of all lawyers in the Philippines.

LAWRENCE TEH

Lawrence Teh is a partner in Rodyk & Davidson LLP’s Litigation & Arbitration Practice Group. Lawrence advises clients and acts as an advocate in all areas of commercial law and appears regularly as leading counsel in the Singapore Courts, in arbitration and in other forms of dispute resolution. He is also appointed regularly as an arbitrator in international disputes. He has particular experience in international trade and commodities, maritime and aviation, banking and financial services, onshore and offshore construction, mergers acquisitions joint ventures and other investments, and insurance in related fields.

Lawrence is currently the Chairman of the Alternative Dispute Resolution (ADR) Committee at The Law Society of Singapore. He is a Fellow of the Chartered Institute of Arbitrators, a Fellow of the Singapore Institute of Arbitrators, and a panel arbitrator at the Singapore International Arbitration Centre. He chaired the committee that drafted the Law Society Arbitration Rules and is a panel arbitrator of the Law Society Arbitration Scheme. Recently, he was appointed the Administrator of the Comite Maritime International (CMI) in 2013, and Chairman of the Promotion Committee of the Singapore Chamber of Maritime Arbitration (SCMA). He is also a Council Member of the Legal Practice Division in the International Bar Association (IBA). He is named in numerous legal guides and directories including the Asia Pacific Legal 500, International Who’s Who for Commercial Litigation, International Who’s Who of Shipping & Maritime, Asialaw Leading Lawyers for Shipping, Maritime & Aviation and on the Guide to the World’s Leading Aviation Lawyers.

SAKDA THANITCUL

Dr Sakda Thanitcul is Professor of Law at the Faculty of Law, Chulalongkorn University, in Bangkok. He earned his LLB from Chulalongkorn University, LLM and PhD (Law) from University of Washington School of Law and also LLM and LLD from Kyoto University. He was a member of the advisory team to the chief negotiators of the US-Thailand FTA and the Japan-Thailand Economic Partnership Agreement. His recent publications include “Thailand
(co-author with R. Ian McEwin) in Mark Williams (ed), The Political Economy of Competition Law in Asia (Hart Publishing, 2011), pp 279-291, “Thailand” (co-author with R Ian McEwin) in Mark Williams (ed.), The Political Economy of Competition Law in Asia (Edward Elgar, 2013), pp 251-282, “Compulsory licensing of chronic disease pharmaceuticals in Thailand” (co-author with Matthew L Braslow), (2014) 37(3) Thai Journal of Pharmaceutical Sciences 106-120.

TU NGOC TRINH

Tu Ngoc Trinh is a licensed attorney in Vietnam and a member of the Tilleke & Gibbins corporate & commercial team in the firm’s Hanoi office. Her practice focuses on the life sciences sector as well as general corporate matters including company formation, employment, franchise activities, commercial transactions, and mergers and acquisitions. Tu is committed to helping her clients achieve sustainable success in Vietnam. She is a member of the Hanoi Bar Association and the Vietnam Bar Federation.

No, I’m not referring to the presence or otherwise of something like MSG (monosodium glutamate) in the daily food intake of the remarkably long-lived Japanese people! Rather, this brief posting will highlight a fascinating and insightful recent article by Kyoto University Professor Shotaro Hamamoto about treaty-based Investor-State Dispute Settlement (ISDS) as an additional option typically provided for foreign investors seeking to enforce substantive treaty commitments offered by host states, alongside inter-state arbitration. Professor Hamamoto is a world-renowned international law expert, and it was a great learning experience to collaborate with him on a project some years ago where we reverse-engineered both the substantive and procedural provisions of Japan’s investment treaties.

His recent article, for a JWIT special issue on “Dawn of an Asian Century in International Investment Law?”, is entitled: “Recent Anti-ISDS Discourse in the Japanese Diet: A Dressed Up But Glaring Hypocrisy”. The analysis is important and timely given the question of whether and how the expanded Transpacific Partnership (TPP) Agreement will be ratified and brought into force across the present 12 economies, including Japan, the US and Australia. One focus of public debate remains the TPP’s inclusion of ISDS-backed investment commitments (now outlined by the Australian government here, and earlier subjected to my preliminary analysis here), along with some broader doubts about the overall benefits of FTAs generally (as I discussed on a panel with economists and a journalist at a recent Lowy Institute seminar).

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by: Luke Nottage and Leon Trakman

[A shorter version of this also appears today under a different title on The Conversation blog.]

Alongside this week’s APEC leaders’ summit in Manila, US President Obama met with counterparts and trade ministers from 11 other Asia-Pacific states that agreed in October to the expanded Trans-Pacific Partnership (TPP) free trade agreement. These states, covering around 40 percent of world GDP, cannot sign it before 3 February, when the US Congress finishes its 90-day review. But Obama and others in Manila reiterated the importance of the TPP for regional and indeed global economic integration.

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The preceding analysis highlights another important feature of the Trans-Pacific Partnership agreement: its inclusion of an investor-state dispute settlement (ISDS) mechanism, especially arbitration (generating a decision binding on both disputing parties, unlike mediation – which they may also attempt under Art 9.17.1 but do not need to try first). This alternative to inter-state arbitration (found in Chapter 28, as in almost all investment treaties) emerged as a common extra option for foreign investors to enforce their substantive rights if their home states did not wish to pursue a treaty claim on their behalf, for diplomatic, cost or other reasons. This mechanism has been seen as particularly important for credible commitments by developing or other countries with national legal systems perceived as not meeting international standards for protecting investors.

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On 5 October the Trans-Pacific Partnership (TPP) FTA was substantially agreed among 12 Asia-Pacific countries (including Japan, the US and Australia), and the lengthy text was released publically on 5 November 2015. Commentators are now speculating on its prospects for ratification, as well as pressure already for countries like China and Korea to join and/or accelerate negotiations for their Regional Comprehensive Partnership (ASEAN+6) FTA in the region. There has also been considerable (and typically quite polarised) media commentary on the TPP’s investment chapter, especially investor-state dispute settlement (ISDS). The Sydney Morning Herald, for example, highlights a remark by my colleague and intellectual property (IP) rights expert, A/Prof Kimberlee Weatherall, that Australia “could get sued for billions for some change to mining law or fracking law or God knows what else”. Other preliminary responses have been more measured, including some by myself (in The Australian on 6 November) or Professor Tania Voon within Australia, and other general commentary from abroad.

Based partly on an ongoing ARC joint research project on international investment dispute management, with a particular focus on Australia and the Asia-Pacific, I briefly introduce the scope of ISDS-backed protections for foreign investors in the TPP, compared especially to the recently-agreed bilateral FTAs with Korea and China. Overall, the risks of claims appear similar to those under Australia’s FTAs (and significantly less than some of its earlier generation of standalone investment treaties). However, some specific novelties and omissions are highlighted below, and issues remain that need to be debated more broadly such as the interaction between the investment and IP chapters (as indeed raised by both A/Prof Weatherall and myself in last year’s Senate inquiry into the “Anti-ISDS Bill”). The wording of the TPP’s investment chapter derives primarily from US investment treaty and FTA practice, which has influenced many other Asia-Pacific countries (including Australia) in their own international negotiations. Yet the European Union is now actively considering some further innovations to recalibrate ISDS-based investment commitments.

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[This is the title of a well-known Australian journalist's recently published book, which provides a useful platform for comparing the law and politics of foreign investment regulation in other Asia-Pacific countries. The following is an un-footnoted version of the first part of my paper for a special issue of the NZBLQ, following the lively "FDI Roundtable" hosted in June 2015 by Amokura Kawharu at the University of Auckland.]

1. Introduction

According to the FDI (Foreign Direct Investment) Regulatory Restrictiveness Index compiled by the Organisation for Economic Co-operation and Development (OECD), Australia scored 0.13 overall in 2014 compared to an average of 0.10 across 55 countries (including all OECD and G20 countries) and the OECD average of 0.07. In terms of significant world economies, this places Australia in a group with somewhat above-average restrictiveness towards FDI, including also Korea (0.14), Canada (0.17) and Russia (0.18). Another group is even more restrictive, including China (0.42), Indonesia (0.34), India (0.26) and – intriguingly – New Zealand (0.24). At the other extreme are major economies with more permissive regulatory regimes: the Netherlands (0.01), Japan (0.05), the United Kingdom (0.06) and the United States (0.09).

The FDI Index is based on:
• foreign equity limitations;
• screening or approval mechanisms;
• restrictions on the employment of foreigners as key personnel; and
• operational restrictions (eg on capital repatriation or land ownership);
and the OECD acknowledges that: “is not a full measure of a country’s investment climate. A range of other factors come into play, including how FDI rules are implemented. Entry barriers can also arise for other reasons, including state ownership in key sectors”. Indeed, a detailed academic study shows that the screening mechanisms are conceptually similar in China and Australia, but now applied in a much more liberal manner in Australia.

Index data since 1997 shows how restrictiveness has gradually diminished, as in other OECD countries. But it is revealing to outline (in Part 2. below) the longer-term historical evolution of Australia’s regulatory controls and broader public debates over FDI. This analysis usefully sets the scene for a close analysis of a topical issue nowadays: treaty-based investor-state arbitration (Part 3 [omitted below, but discussed generally elsewhere on this Blog]). Some parallels and contrasts can then be drawn with New Zealand, its close trade and investment partner (Part 4 [omitted - but further elaborated here, also comparing Korea]).

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[Updated 2 July 2015. An abridged earlier version of this posting can be found at http://www.eastasiaforum.org/2015/07/01/compromised-investor-state-arbitration-in-china-australia-fta-2/. It forms the basis of my Submission presented to parliamentary inquiries into the FTA by JSCOT and a Senate Committee.]

Australia signed its bilateral free trade agreement with China on 17 June 2015, after announcing last November that negotiations had been concluded – including investor-state dispute settlement (ISDS) provisions. These provide another way for foreign investors to claim against host states that violate substantive commitments, if the investor's home state doesn't use the inter-state arbitration protections also given in the treaty, for political or diplomatic reasons. ISDS is especially useful when the host state’s laws and procedures do not meet commonly-accepted minimum international standards.

ISDS variants are included in most of the treaties concluded by Australia as well as many by China. In fact, as it emerges as a major capital exporter, China’s recent treaties have expanded the scope of protection reinforced through ISDS provisions. Australia has instead become more cautious, like other countries after being subjected to an initial ISDS claimPhilip Morris Asia’s claim in 2011 regarding Australia’s tobacco plain packaging law, still pending along with WTO claims. Indeed, the Gillard Government Trade Policy Statement (2011-13) went as far as eschewing ISDS in any future treaties. Since September 2014, however, the Abbott Government has reverted to including ISDS on a case-by-case assessment. It was incorporated into the (long-stalled) FTA signed with Korea last year, but not the FTA with Japan. Relevant factors seem to be whether the counter-party presses strongly for ISDS and offers enough in return during negotatiations, and whether Australia may have concerns about investor protections available through the counter-party’s local courts.

Australia’ reversion to pre-2011 treaty practice has not stilled public debate. It has escalated, particularly given negotiations for an expanded Trans-Pacific Partnership agreement (including also Japan and the US, but not China). A Greens Senator introduced an “Anti-ISDS Bill” last year to prevent ISDS being included in future agreements, but even Labor Senators on the Committee agreed that this encroached too far on the executive branch’s constitutional responsibility to negotiate treaties. Labor parliamentarians initially opposed ratification of the Korea FTA, raising ISDS concerns, before agreeing in October 2014 to vote for legislation implementing tariff reductions, even in the Senate where the Abbott Government lacks an absolute majority. This year the Greens and others highlighted ISDS again in a broader Senate inquiry into the role of the legislature and public consultation in Australia’s treaty-making process. Parliament will now inquire into the China FTA, including of course ISDS, and there is a (small) chance that Labor Senators will vote against tariff implementation legislation to prevent ratification and the treaty coming into force.

Against this backdrop, Australia’s major newspapers reflect and encourage polarized views over ISDS. The Sydney Morning Herald (like The Age in Melbourne) is consistently opposed, as explained below.

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On 25 June 2015, the federal Senate's Foreign Affairs, Defence and Trade References Committee tabled its Report on its Inquiry (initiated 2 December 2014) into the "Commonwealth’s treaty-making process, particularly in light of the growing number of bilateral and multilateral trade agreements Australian governments have entered into or are currently negotiating". The Terms of Reference included "j. exploration of what an agreement which incorporates fair trade principles would look like, such as the role of environmental and labour standard chapters". This opened the door to many of the 95 public submissions discussing an issue more related to the contents or substance of trade and investment agreements: the investor-state dispute settlement (ISDS) mechanism. These are typically included nowadays as an extra avenue for foreign investors to claim for violations of host state commitments (such as Australia's Free Trade Agreements reached last year with Korea and China, but not with Japan).

Out of 14 organisations and individuals (including myself) invited to give evidence at public hearings in May 2015, based on their written submissions, nine volunteered opinions on ISDS and a further three were questioned on it by Greens Senator Peter Whish-Wilson. He initiated an "Anti-ISDS" private member's Bill last year, although the Coalition and Labor Senators on the Foreign Affairs, Defence and Trade References Committee recommended against enactment.

In the present Inquiry, the three (out of six) Committee members presented an extensive majority Report, entitled "Blind agreement: reforming Australia's treaty-making process". Senator Whish-Wilson presented a short Dissenting Report urging more wide-ranging reforms to enhance public participation and parliamentary scrutiny of the negotiation and implementation of trade agreements. The (two) Coalition Senators also issued a short Dissenting Report, arguing for the adequacy of the present system of public consultation by current government politicians and officials as well as scrutiny by the Joint (house) Standing Committee on Treaties, conducting an inquiry and making recommendations to Parliament after the treaty is signed and tabled but before Australia takes binding treaty action (ratification etc).

The majority Report noted that "While a number of issues specific to individual trade agreements, such as inclusion of [ISDS] clauses and intellectual property ... and copyright chapters, are controversial and the subject of public debate, they are only considered in this report to the extent that they shed light on the treaty-making process" (para 1.7). However, the majority Report did later mention ISDS and indeed recommended that Australia develop a model investment treaty or chapter including indicative provisions.

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As part of our joint ARC-funded research project on investment treaty dispute resolution, also involving Shiro Armstrong (ANU) and Leon Trakman (UNSW), Jurgen Kurtz and I have completed a note on Australia's recent policy and political debate over investor-state arbitration, which ultimately was not provided for in the Australia-Japan FTA signed last year (as explained here).

The complex and ongoing saga in Australia may also impact on pending negotiations for an expanded Trans-Pacific Partnership Agreement and (ASEAN+6) Regional Comprehensive Economic Partnership FTA, each of which involves Japan as well as Australia.

Our paper will be published in early 2015 in the ICSID Review, with a longer version also at http://ssrn.com/abstract=2561147. Below is an outline.

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The second stage conference for the book project critically comparing and assessing "Independent Directors in Asia" is hosted by co-editor A/Prof Dan Puchniak at the National University of Singapore Law Faculty over 26-27 February 2015. In addition to comprehensive reports from different countries in the region, including one co-authored by myself and Sydney Law School colleague Fady Aoun regarding Australia), the project will include a chapter comparing significant case studies from various jurisdictions, based on short (1000-word) contributions from experts in various jurisdictions. Below is the (unfootnoted) text of Mr Aoun's contribution on a very significant corporate collapse in Australia in 2001.

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My public lecture on this topic, bringing together two research fields of contemporary public interest, was presented on 24 September 2014 as part of Sydney Law School's Distinguished Speakers Program.

The session was kindly introduced by my colleague Prof Chester Brown, and ended with a commentary by NUS Asst Prof Jean Ho who kindly arrived straight from Sydney airport after her flight from Singapore.

The audio file of my presentation and Chester's introduction are available via Sydney Law School's podcast channel (specifically here), my Powerpoint slides are here (as a PDF), and a related short paper is here. Below is the abstract (with further hyperlinked references available here) and speaker/commentator bios.

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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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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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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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I am pleased to provide this Submission on The Trade and Foreign Investment (Protecting the Public Interest) Bill 2014. I specialise in international and comparative commercial and consumer law, and have produced extensive academic publications and media commentary on treaty-based investor-state dispute settlement (ISDS). My interest is in the policy and legal issues associated with this system; I have never provided consultancy or other services in ISDS proceedings.

The Bill simply provides, in clause 3, that:

“The Commonwealth must not, on or after the commencement of this Act, enter into an agreement (however described) with one or more foreign countries that includes an investor-state dispute settlement provision.”

The Explanatory Memorandum provides no guidance as to the background to this proposal, or its pros and cons. However it seems to be aimed at reinstating the policy shift announced by the April 2011 “Gillard Government Trade Policy Statement”. That is no longer found on Australian government websites and is inconsistent with the present Government’s policy on ISDS, which allows for such provisions on a case-by-case basis (as evidenced by the recent Korea-Australia FTA).

The Bill, like the previous Trade Policy Statement in this respect, may be well-intentioned, but it is premature and misguided. Treaty-based ISDS is not a perfect system, but it can be improved in other ways – mainly by carefully negotiating and drafting bilateral investment treaties (BITs) and free trade agreements (FTAs). This may also have the long-term benefit of generating a well-balanced new investment treaty at the multilateral level, which is presently missing and unlikely otherwise to eventuate.

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"Save the date" for this international conference organized by the:
Max Planck Institute for Comparative and Private International Law
Japanese-German Center Berlin (JDZB)
German-Japanese Association of Jurists (DJJV)

[For the latest Program, see http://sydney.edu.au/law/anjel/documents/2014/independent_directors_berlin_program.pdf (as of 9 April) or via http://sydney.edu.au/law/anjel/content/anjel_events_up.html (also for registration details etc)]

Date: 17–19 July 2014

Format: 2-day conference open to public, plus half-day closed session for editors and authors of a conference volume

Venue: Japanese-German Center Berlin (JDZB)

Sponsors: Fritz Thyssen Foundation

Publication: edited by Harald Baum, Souichirou Kozuka, Luke Nottage & Dan Puchniak

Further details will be provided via http://sydney.edu.au/law/anjel/content/anjel_events_up.html

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The Australian Network for Japanese Law (ANJeL) will host the Cairns Symposium on Japanese Law on Friday 16 May, with special thanks to ANJeL member and James Cook University Associate Professor Justin Dabner. Registration should be completed by emailing your name and institution to anjelinfo@gmail.com; registration costs $60 for non-speakers (to cover lunch and teas) and can be paid on the day of the conference (please inform in advance if a receipt is required).

[Updated 26 April] The Symposium's theme is 'Japanese Law and Business Amidst Bilateral and Regional Free Trade Agreements' - by happy coincidence, in light of the conclusion of negotiations for the Japan Australia Economic Partnership Agreement on 7 April 2014 (see media commentary here). However, presentation proposals dealing with other Japanese Law topics were also welcomed, as in previous ANJeL conferences held since 2002. As indicated by Abstracts below, speakers will cover fields including 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.

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Australia’s Coalition Government, dominated by the Liberal Party and led by Prime Minister Tony Abbott, recently completed a rocky first 100 days in power. Diplomatic rows with China and Indonesia are only part of the story. The Government stands accused, for example, of sending ‘conflicting messages’ to the business sector. At the Business Council of Australia’s 30th anniversary dinner on 4 December, Abbott reiterated his election-night declaration that Australia was ‘once more open for business’. Yet five days earlier, his Treasurer had taken the rare step of blocking a major foreign direct investment (FDI) – a $3.4 billion bid by US firm ADM for GrainCorp.

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The (federal government's) Australian Research Council has provided $260,000 to support this project over 2014-6 (DP140102526), in collaboration with Prof Leon Trakman (lead-CI, former Dean of Law at UNSW), A/Prof Jurgen Kurtz (Melbourne Law School) and Dr Shiro Armstrong (ANU Crawford School of Public Policy, co-editor of the East Asia Forum blog). Below are parts of our original project application to the ARC; an updated and edited version is available at http://ssrn.com/abstract=2362122.


[Abstract]
"This project will evaluate the economic and legal risks associated with the Australian Government’s current policy on investor-state dispute settlement through multidisciplinary research, namely econometric modeling, empirical research through stakeholder surveys and interviews, as well as critical analysis of case law, treaties and regulatory approaches. The aim of this project is to identify optimal methods of investor-state dispute prevention, avoidance and resolution that efficiently cater to inbound and outbound investors as well as Australia as a whole. The goal is to promote a positive climate for investment inflows and outflows, while maintaining Australia's ability to take sovereign decisions on matters of public policy."

[Aims] Foreign direct investment (FDI) has become essential to global economic development, with FDI flows exceeding US$1.5 trillion in 2012 (UNCTAD 2012). Australia’s treaty making practice, especially its current policy with respect to investor state dispute settlement (ISDS), may be sub-optimal, in that it is not entirely based on sound economic cost-benefit data and supporting econo-legal research. Australia can potentially increase its share of the global FDI pool by adopting a more efficient approach to formulating policy with respect to ISDS.

This project aims to develop a key policy framework and devise salient institutional structures and processes that take account of two competing pursuits: the cost-benefit advantages of promoting Australia as an FDI destination; and the need to ensure that these advantages are considered in light of competing policy objectives that are not explicated exclusively on economic grounds (as explained in the Background section). This project is valuable and innovative because it identifies significant gaps in the current Australian policy framework and uses interdisciplinary research to address them.

The overall purpose is to ensure that Australia attains its optimal share of the global FDI market in the context of competing policy objectives. As such, the project will evaluate the economic and legal risks associated with the Australian Government’s current policy on ISDS through multidisciplinary research, namely econometric modeling, empirical research through stakeholder surveys and interviews, as well as critical analysis of case law, treaties and regulatory approaches. The general aim is to identify optimal methods of investor-state dispute prevention, avoidance and resolution that efficiently cater to inbound and outbound investors as well as Australia as a whole. The specific purposes therefore are: (1) to investigate policies that underpin Australia’s approach to negotiating international investment treaties, with particular emphasis on its policies on avoiding, managing and resolving investment disputes; (2) to identify and analyse links between these policies and the investment practices of both inbound and outbound investors; and (3) to propose recommendations on alternative approaches to investment policy, so that, through a carefully framed cost-benefit analysis, Australia can retain appropriate sovereignty over public policy issues (such as health and the environment) while promoting a positive economic climate for investment inflows and outflows.

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It remains to be seen whether the new Coalition Government will revert to Australia's longstanding treaty practice prior to the 2011 'Gillard Government Trade Policy Statement'. That declared that Australia would not include investor-state arbitration (ISA) protections in future investment treaties - including investment chapters of Free Trade Agreements - even with developing countries.

The new Prime Minister, Tony Abbott, has declared that he is keen to conclude FTAs which Australia has long been negotiating with Japan, Korea and China respectively. The Gillard Government's stance on ISA adding to delays experienced in finalising these treaties - see comments, including some of my own in The Australian on 21 September 2013. It also complicates negotiations for regional agreements like the Trans-Pacific Partnership (TPP) agreement and the Regional Comprehensive Economic Partnership (RCEP).

The ISA system is far from perfect, but there are many ways for Australia to draft provisions in investment treaties - old and new - to balance public and private interests effectively. Examples that attract varying degrees of support, from experts in international investment law, are provided in my paper co-authored with Chris Campbell and Sophie Nappert, forthcoming in a special issue of the Transnational Dispute Management journal. It and some of my other recent papers relevant to this topic, uploaded on SSRN.com, are listed with their Abstracts below.

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I was recently interviewed on this topic by NHK World Radio's principal program director, Yutaka Konishi. His main questions and some of my points in response are outlined below. Some of our interview was broadcast on "Radio News in English" on 9 May 2013, at http://www3.nhk.or.jp/nhkworld/english/radio/program/), the transcript of the full interview is here (download PDF file), and my own notes are reproduced below.

Later I was also interviewed in Sydney by TV Asahi specifically about investor-state arbitration (and other ISDS) provisions in the expanded Trans-Pacific Partnership (TPP) negotiations, which Japan has now officially joined. The 14-minute special feature from their "Hodo Station" evening news on 24 May is also available on YouTube, and a video-clip of my edited comments (from 7m30s to 8m5s) can also be downloaded here (11MB .mov file). In the longer interview in Sydney, I reiterated that there is ample scope for this new FTA to include innovative ISDS provisions that appropriately balance the interests of host states (in regulating for the public interest) and private investors (seeking minimum and internationally-accepted legal standards before committing long-term investments). Em Prof Mitsuo Matsushita (former WTO Appellate Body judge) and especially Mr Shigeaki Koga (a former METI official) also emphasised this point in their comments for the Hodo Station special feature. As the TV Asahi website overview pointed out, this topic is now attracting considerable interest in Japan:

TPP検証『ISD条項』

TPP=環太平洋経済連携協定について考える。今回は、『ISD条項』について。国が制度を変えることによって、投資をしている企業が損をした場合、その企業が賠償金を求めて国際機関に訴えることができる仕組みだ。そもそも、ISD条項は、企業が安心して途上国への投資を行えるよう作られた制度で、これまでに提訴された国をみると、アルゼンチンやベネズエラ、メキシコなど、投資に関する法整備が遅れている国が目立つ。日本も、これまで結んだ投資協定のうち、ほぼすべてにISD条項が盛り込まれているが、実際に訴えられたケースはない。しかし、近年、先進国が訴えられるケースも増えている。メキシコ、アメリカ、オーストラリアの現場を取材。ISD条項をめぐり、各国が火花を散らすなか、日本はどうするのか。

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The 10th Asian Law Institute (ASLI) conference will take place in Bangalore at the National Law School of India University (NLSIU) over 23-24 May 2013. The following is an accepted panel proposal drafted primarily by Dr Dan Puchniak, ANJeL-in-ASEAN Convenor (NUS):

In autumn 2009, the progressive coalition led by the Democratic Party of Japan (DPJ) achieved a historic victory in the general election and came to power, expelling the Liberal Democratic Party (LDP), which had been in power continuously since its establishment in 1955 (except for a very brief break in the early 1990s). The new DPJ-led coalition intended to make the policy-making process more transparent and more strongly controlled by politicians, as well as to make the policy orientation of the Japanese government more progressive. After three years, the polls showed significant discontent among the public with the DPJ’s achievements, and power reverted to the LDP in the December 2012 general election.

It is timely for legal academics to examine whether, and in which sense, the DPJ-government affected law reform over the last three years. In this context, Nottage and Kozuka will explain how—perhaps, quite unexpectedly—the historic political turnover in Japan (“macro-politics”) has had a limited influence on important reforms that are taking place in the field of Japanese contract law. In contrast, however, the process of contract law reform has been substantially influenced by the politicking of lawyers and professional bureaucrats (“micro-politics”) who have a personal stake in the reform process. Ultimately, based on this experience, Nottage and Kozuka suggest that micro-politics is more important than macro-politics in Japan’s legal reform process.

Matsunaka will continue the discussion of politics and legal reform by analyzing the new round of corporate law reform, which was initially driven by the strong policy agendas of several DPJ members. As the corporate law reform deliberations progressed, however, the debates increasingly became dominated by elite academics and MOJ officials and, ultimately, the reforms now appear to reflect little, if any, of the DPJ’s core values. Matsunaka’s analysis of this “watering-down” of the DPJ’s policy based reforms provides an interesting perspective on Japan’s legal reform process and contributes to the broad literature on the politics of corporate governance law reform.

Kozuka will then extend on Matsunaka’s analysis by examining Japan’s recent reform of its broadcasting regulation, which was one of the most important agendas for the DPJ when it first came to power. Again, Kozuka’s findings suggest that the more extreme policy based positions of the DPJ gradually faded in the process of law reform, with the final result being more technical and modest deregulatory reforms in the new Broadcasting Law of 2010.

Puchniak will conclude the discussion by examining the recent introduction of the business judgment rule into Japanese corporate law. At least based on conventional wisdom, the fact that the business judgment rule—which is of critical importance in corporate law—was introduced into Japanese law purely through judicial precedent (without any mention of it in Japan’s codified/statutory corporate law) is astounding. Puchniak’s analysis of this unanticipated source of law reform in the DPJ era will shine a light on a substantial blind-spot in both the current understanding of Japanese legal reform and the more general comparative corporate law literature.

In sum, these four presentations offer a good opportunity to discuss the relationship between the political process and law reform, policy choice through the judiciary and the determinants of the role of law in a post-industrial society in Asia.

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My recent Sydney Law School Research Paper No. 12/84, forthcoming in a special issue 119 (9&10) Hogaku Shimpo (Chuo University) for Professor Satoru Osanai, is an edited and updated collection of postings over 2012 on this 'Japanese Law and the Asia-Pacific' blog (and/or the East Asia Forum blog) dealing with investor-state arbitration (ISA) and other forms of investor-state dispute settlement.

The topic has become particularly controversial for Australia, given its ongoing Free Trade Agreement negotiations with Japan. Japan is also considering joining negotiations underway among Australia and 10 other states (including the US) for an expanded Trans-Pacific Partnership Agreement, and both are also interested in the more recent 'Regional Comprehensive Economic Partnership' (RCEP) initiative (ASEAN+6). Both Japan and Australia have almost always included ISA protections in their investment treaties, but Australia omitted them in investment treaties with the USA and New Zealand, and recently declared that it will no longer accept ISA in future treaties – even with countries with less developed legal systems and economies.

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On 22 October Sky News ‘Late Agenda’ interviewed me and Rick Wallace (Tokyo-based correspondent for ‘The Australian’) following an interview with Michael Woodford, former CEO of Olympus in Japan (click here and then here for 200-MB mp4 video-clips). Corporate governance in Japan is important for Australia, given the countries’ strong trade and investment relationship and recent pressure to finalise a bilateral Free Trade Agreement, as well as from broader regional and theoretical perspectives.

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[A version of the second half of this Comment, on the potential impact of Australia's new policy against treaty-based Investor-State Arbitration provisions on the pending FTA negotiations with Japan, appears also on the East Asia Forum - cited by Rowan Callick 'Arbitration Hitch Holds Up FTAs' The Australian (2 November 2012, p10).]

The remarkably well-attended and interactive 50th Anniversary Australia Japan Joint Business Conference took place in Sydney over 8-9 October. It was hosted by the Australian Committee, established in 1962 and comprising Australia-based firms involved with Japan. But the conference program was developed with its counterpart in Japan, which hosts there a Joint Conference in alternate years. This cooperative arrangement has become unusually close, and provides an inspiration for other bilateral business community centred relationships. (By contrast, for example, the Australia China Business Council hosts its own main events quite independently of those organised by its Chinese counterpart, comprising firms interested in doing business in Australia.) The Australia-Japan Committees’ arrangement is also very longstanding: the first joint conference took place in 1963 at the Tokyo Chamber of Commerce, with the second in 1964 at the Australian National University.

As ANU Emeritus Professor Peter Drysdale reminisced in his keynote address at this year’s conference in Sydney, this cooperative arrangement – and indeed the entire bilateral relationship between Australia and Japan – proved to be an unexpected success. After all, both countries were bitter foes during World War II. For several ensuing decades Australia maintained concerns about engaging with Asia, as well as trade liberalisation and inbound foreign investment more broadly, with Japan also habouring mercantilist tendencies.

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I am glad the High Court of Australia rejected today the argument by major tobacco companies that Australia’s plain packaging legislation is an unconstitutional “acquisition” of their rights. I dislike those companies’ products, their marketing and their litigation strategies, and I support the plain packaging legislation. I’ve also made numerous submissions to the Australian government since 2005 seeking to improve safety regulation for general consumer goods – partially achieved in the 2010 “Australian Consumer Law”.

But I hope that the ongoing arbitration claim of “expropriation”, initiated by Philip Morris Asia under the 1993 Hong Kong – Australia bilateral investment treaty, does not feed into blanket rejection of any forms of investor-state dispute settlement (ISDS) in investment treaties. Although that system has flaws, it also has benefits, and there is ample scope to draft treaties to provide clear and appropriate mechanisms to balancing private and public interests. With others familiar with international investment law, I provide further examples of the most promising substantive and procedural law reforms in an Open Letter dated 28 July 2012, in response to a recent OECD Public Consultation on ISDS.

My comment will therefore address points made recently on The Conversation blog by Dr Kyla Tienhaara, who remains completely opposed to any form of ISDS. In fact, she urges the Gillard Government to try to excise ISDS from all Australia's existing FTAs and investment treaties (dating back to 1988), in addition to eschewing them for future treaties – as the Government seems to be attempting, pursuant to its policy shift on ISDS announced in the 2011 Trade Policy Statement (TPS). An alternative is for the Government to approach Hong Kong authorities to seek agreement on amending the 1993 treaty to suspend PMA’s pending claim. More generally, Australia should consider including ISDS provisions in future treaties but expressly reserve its right to agree with the treaty partner to suspend particular types of claims, for example regarding public health issues. This compromise approach is already essentially found in investment treaty practice where the claim involves allegations of “expropriatory taxation”.

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Some are concerned about treaty-based Investor-State Dispute Settlement (ISDS), especially binding Investor-State Arbitration procedures in investment treaties and Free Trade Agreements. One response includes public calls for states to eschew such procedures completely in future treaties, for example in the expanded Trans-Pacific Partnership Agreement presently under negotiation. This approach would essentially leave foreign investors to approach local courts if host states illegally interfere with their investments, or to encourage their home states to activate an inter-state dispute resolution process, or to try to negotiate individualised arbitration agreements with host states.

An alternative approach is to identify and address more specific concerns with treaty-based ISDS. An example is the scoping paper and Public Consultation on ISDS generated by the Organisation for Economic Cooperation and Development, over 16 May – 23 July.

As a constructive contribution to this debate, we created an online form asking for views on whether ISDS should be left as is, abandoned completely, or adapted in various listed ways. As explained below, no respondents favoured eschewing ISDS completely. Yet that position represents the policy shift announced by Australia in the "Gillard Government Trade Policy Statement" (April 2011), resulting in ISDS being omitted from the Australia-Malaysia FTA (May 2012) but difficulties in negotiating other bilateral treaties (with Korea, and Japan) and the TPPA. Implications and other topics related to the TPPA negotiations will be discussed at a Roundtable in Canberra on 8 August, hosted by the Crawford School of Public Policy (ANU College of Asia and the Pacific).

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

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

Another oddity about the "Open Letter" is that it refers generically to "Investor-State Dispute Settlement" (ISDS) and ends by calling on "all governments engaged in the TPP [Trans-Pacific Partnership FTA] negotiations to follow Australia’s example by rejecting the Investor-State dispute mechanism and reasserting the integrity of our domestic legal processes". ISDS incorporates both ISA (where the parties agree to be bound by the arbitrators' decision) and investor-state mediation ("ISM") or conciliation procedures (where the parties agree to negotiate a settlement but are not obliged to accept any proposals made by the third-party neutral mediator). At least the rest of the "Open Letter" indicates that the primary objection is to binding ISA.

By contrast, the "Gillard Government Trade Policy Statement" (April 2011) simply eschews ISDS in Australia's future treaties, including the TPP. Perhaps the Statement meant only ISA, which allows greater inroads into host state sovereignty, given that overall it draws on the Productivity Commission's recommendations from a 2010 Trade Policy Review report. But, by seemingly eschewing all forms of ISA, the Statement seems to go beyond the Commission's recommendation on ISA itself.

Hopefully the Australian government, other states involved in FTA negotiations (such as the TPP) and those who wish to improve the ISA system (such as myself) or abandon it altogether (as do some signatories to the Open Letter) will not simply transpose their objections over to ISM too. There is significant scope for mediating investor-state disputes, and indeed the Draft Rules on ISM published recently by the International Bar Association (IBA) are a valuable guide to conducting mediation more effectively. Below I set out some preliminary analysis of those Draft Rules, prepared for the Law Council of Australia but representing my own personal views - particularly regarding the scope for arbitrators to adopt them as a means of settling ISA claims earlier and more effectively (ie 'Arb-Med'). A fully-footnoted version of my views is available on request, and I encourage feedback.

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Written by Fady Aoun & Luke Nottage, Sydney Law School

[This is an earlier manuscript version, without footnote references, of our review published in the (March 2012) special issue 34(1) of the Sydney Law Review, on Asian investment and finance law. The final and complete version, along with eight articles and an introduction by the guest editors (Vivienne Bath and Luke Nottage), can also be downloaded here.]

Dan W Puchniak, Harald Baum and Michael Ewing-Chow (eds) The Derivative Action in Asia: A Comparative and Functional Approach (Cambridge University Press, 2012), 434pp, ISBN-13: 9781107012271

A decade or so ago, in the aftermath of the Asian Financial Crisis (1997), international institutions like the World Bank saw corporate governance as deeply problematic in many parts of Asia — contributing to so-called ‘crony capitalism’ and economic instability. The proposed solution was often reform based on Anglo-American models, aimed at promoting more transparent securities markets by, for example, protecting minority shareholders. Some Asian jurisdictions made changes in that direction, at least according to the ‘law in books’, but they varied in scope and impact. Within a decade, moreover, large-scale corporate collapses in the West — particularly in the United States — and the Global Financial Crisis (2008) had called into question some fundamental assumptions and prescriptions of the Anglo-American approach to corporate governance. Intellectually, therefore, it is timely to revisit the situation in Asia from a broader comparative and historical perspective. Analysis of corporate governance in Asia also has obvious and immediate practical merit, given the region’s strong economic growth relative to Europe and the US, and especially in light of burgeoning cross-border investment flows arguably needed to sustain ‘the next convergence’ of developing and developed economies.

This book therefore represents an admirable and successful step towards a better understanding of what many commentators have proposed as an important potential contributor to minority shareholder protection and effective corporate governance: namely, the derivative suit brought by a shareholder on behalf of the company.

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Written by: Simon Butt, Luke Nottage and Brett Williams
with special thanks (but no responsibility attributed) to Vivienne Bath and Chester Brown (University of Sydney Law School)

[Updated 18 April, with a shorter version at http://www.eastasiaforum.org/]

Indonesia’s new Mining Law regulation requiring divestment of majority foreign investments is unlikely to generate many formal investor-state arbitration (ISA) claims against Indonesia, based on existing bilateral or regional free trade agreements (FTAs) or investment treaties. But that assessment is based primarily on immediate pragmatic considerations. This situation leaves considerable scope for the international investment law framework to begin unraveling, risking complex adverse effects on cross-border investment particularly in the rapidly evolving Asia-Pacific region.

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By: Simon Butt and Luke Nottage (University of Sydney Law School)

[with a shorter version at http://www.eastasiaforum.org/]

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

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Allens Arthur Robinson and Sydney Law School are pleased to invite you to celebrate the launch of Foreign Investment and Dispute Resolution Law and Practice in Asia. Edited by Professors Vivienne Bath and Luke Nottage of Sydney Law School, the book critically assesses the laws and policies affecting investment flows in major Asian economies. It brings together valuable insights from some of the region's leading practitioners and academics about investment treaties and foreign direct investment regimes in Asia. Foreign Investment and Dispute Resolution Law and Practice in Asia will be launched by Professor Michael Pryles, Chairman of the Singapore International Arbitration Centre. [A recording of his 13-minute speech is available via Sydney Law School's Youtube channel here.]

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[Updated 3 August 2011]

Justice Oliver Wendell Holmes famously remarked in Northern Securities Co v United States 193 US 197 (1904) that:

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

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

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[This is based on research for the project, 'Fostering a Common Culture in Cross-Border Dispute Resolution: Australia, Japan and the Asia-Pacific', supported by the Commonwealth through the Australia-Japan Foundation which is part of the Department of Foreign Affairs and Trade.]

The Australian Government’s Productivity Commission (PC) released on 13 December its Research Report on Bilateral and Regional Trade Agreements (BRTAs). Recommendation 5 of the Draft Report in July had suggested that BRTAs (including International Investment Agreements or IAAs) should include Investor-State Dispute Resolution (ISDS) only if Australia’s counterpart country has a relatively underdeveloped legal system, and more generally only if foreign investors did not obtain more expansive protections than domestic investors. Following criticism of some factual errors and various arguments included in the Draft Report, the PC convened a policy workshop for officials, academics (including myself) and other stakeholders. Some views expressed there are partly reflected in the longer and somewhat better-argued section on ISDS now found in the final Report (at Part 14.2, pp265-77). Unfortunately, however, there remain serious problems with the analysis, which includes the following Findings by the PC:

'1. There does not appear to be an underlying economic problem that necessitates the inclusion of ISDS provisions within agreements. Available evidence does not suggest that ISDS provisions have a significant impact on investment flows.

2. Experience in other countries demonstrates that there are considerable policy and financial risks arising from ISDS provisions.'

Below I focus on the implications of this approach. They are particularly acute for Australia’s present negotiations for a Free Trade Agreement (FTA) with Japan, for accession to the Trans-Pacific Partnership Agreement (TPP, which Japan is also interested in joining), and for developments more generally within APEC and at the multilateral level

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[This is based on research for the project, “Fostering a Common Culture in Cross-Border Dispute Resolution: Australia, Japan and the Asia-Pacific”, supported by the Commonwealth through the Australia-Japan Foundation which is part of the Department of Foreign Affairs and Trade. An edited and updated version is also on the East Asia Forum.]

The Productivity Commission (PC) released on 16 July a Draft Report for its Review of Bilateral and Regional Trade Agreements, commissioned by the Assistant Treasurer to reconsider the Australian Government’s policy in negotiating Free Trade Agreements (FTAs). It acknowledges the inefficiencies of preferential agreements compared to multilateral approaches. However, given the persistent impasse in WTO negotiations, the Report pragmatically suggests various means to maximise benefits in the short-term, which may also lead to longer-term multilateral solutions. Unfortunately, that ideal is unlikely to be achieved – risking perverse implications throughout the Asia-Pacific, where Australia has concentrated its FTA activity – if the PC’s Final Report ends up including all these suggestions in its Draft Recommendation 5:

1. “Where the legal systems of partner countries are relatively underdeveloped, it may be appropriate to refer cases to third party dispute settlement mechanisms.
2. However, such process should not afford foreign investors in Australia or partner countries with legal protections not available to residents.
3. Investor-state dispute settlement procedures should be subject to regular review to take into account changing international best practice and the evolving legal systems in partner countries.”

As explained in my Submission to the PC (reproduced here), I have no great difficulty with the last point, although I suggest that one way to achieve that goal would be for Australia to develop and update a Model Bilateral Investment Treaty (BIT). I have much more difficulty with the PC’s second recommendation, but I focus now on problems with the first as it is particularly relevant to Australia’s policy position in regard to the Asia-Pacific, and especially now Japan.

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Do Toyota's woes indicate, as some have argued, the last nail in the coffin of the mass production based export model that had served the Japanese economy so well at least through to the 1980s? In other words, does Japan need to wind down even high-tech goods manufacturing and further expand its services sector? Are consumer product safety expectations both within Japan and abroad just too demanding nowadays? Or is Toyota similar to Mitsubishi Motors, an aberrant company which for years conducted clandestine recalls - taking consumers and regulators for a ride - until an employee blew the whistle in 2000 ... almost destroying the Mitsubishi brand name? And does the Toyota saga suggest that Japan's gradual transformation in corporate governance is, well, TOO gradual?

For one view on that last point, and to encourage public comments on any of these questions or others that have been raised by Toyota's saga, I am pleased to reproduce (with permission) the following posting by an American ANJeL member on JURIST, the University of Pittsburgh's blog:

JURIST Guest Columnist Professor Bruce Aronson of Creighton University School of Law says that Japanese automobile manufacturer Toyota's current safety crisis - now the subject of Congressional hearings - should prompt the company to address its seriously flawed system of governance more than just its public image....

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Happy New Year of the Tiger!

Registrations are now open for the 2nd ANJeL Australia Japan Business Law Update seminar: Saturday 13 February 2010 2-5.30pm at the Kasumigaseki building of Ernst & Young in Tokyo (http://shinnihon.vo.llnwd.net/o25/image/aboutus/eytax_access_mapE.gif).

Learn about post-GFC financial markets reg and (yes) the amended Australia-Japan double tax treaty. And even get 3 MCLD/PLD credits. Just A$200 – with no GST chargeable! At least some of us will follow up with an informal (PAYG) dinner.

For more details and registration please visit: http://www.usyd.edu.au/news/law/457.html?eventcategoryid=39&eventid=5139

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Peter Drysdale’s weekly editorial for the East Asia Forum, along with related postings to that blog and enormous media attention in Australia and elsewhere, focuses ‘on the continuing detention of Rio Tinto executive, Stern Hu, in Shanghai on allegations of espionage’. Drysdale signposts some future analysis of ‘the legal framework under which Hu’s detention has taken place’. He also emphasises that we need ‘a cooperative framework—bilaterally, regionally and globally‘ for ‘China’s authorities to avoid damage to the reliability of markets and for Australia to avoid the perception of investment protectionism’. The most pressing legal (and diplomatic) issues concern China’s criminal justice system, especially when ‘national security’ is allegedly involved. But we need already to consider some broader ramifications, including how we think about FDI legislation and (increasingly intertwined) investment treaty protections.

In short, most agree that the Chinese government got annoyed when Australia itself invoked national security interests to restrict Minmetals bid for OZ Minerals back in March 2009. Then it got really annoyed when Chinalco’s bid for Rio Tinto fell through, even though the Australian government wasn’t directly involved. And so, one story goes, Stern Hu has been arrested to send a message – in the hope that Australia (and other potential host states) will be think twice before invoking national security exceptions to restrict future FDI from China. The China-watchers are better placed to decide whether this is really the motivation behind his arrest. My point here is rather that we should not be surprised that host states may be increasingly tempted to invoke exceptions to limit FDI at the outset, which in turn generates risks of (over-)reactions by home states, as we may be witnessing in Hu’s case. And the initial temptation may arise due to proliferating investor-state arbitration provisions in investment treaties, because those later restrict their room to invoke national security or other limits once the FDI has been approved.

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All my blogs over July-October 2008, posted originally with full hyperlinks at http://eastasiaforum.org/author/lukenottage/], have been edited and updated as:

Nottage, Luke R., 'Economics, Politics, Public Policy and Law in Japan, Australasia and the Pacific: Corporate Governance, Financial Crisis, and Consumer Product Safety in 2008' (November 3, 2008) Sydney Law School Research Paper No. 08/134, Available at SSRN: http://ssrn.com/abstract=1295064 (and forthcoming, early 2009, in Ritsumeikan Law Review)

Some of the individual topics focused more directly on Japanese Law, asterisked below, are also available on this USydney blog:

* 1. Taking the Australia-Japan FTA negotiations to new levels
* 2. Whaling: What can law add to science, economics, ethics and politics?
3. Australia also should ‘Rail at Australian’s Tabloid Trash’ about Japan
* 4. Consumer over-indebtedness in Japan, Australia and the US
* 5. Dodgy foods and Chinese dumplings in Japan
* 6. FDI and corporate governance in Japan
* 7. Investor-state arbitration for Indonesia, Australia and Japan
8. Rivals: China, India and Japan – economic, not Olympic?
* 9. The politics of Japan’s new Takeovers Guidelines
* 10. Tables turned in Japanese and US financial markets
* 11. Lessons from Japan for the US financial crisis
* 12. The financial crisis - and loansharks in Japan and NZ
* 13. Consequences of melamine-laced milk for China, NZ, Japan and beyond
14. Political dynasties in Japan, the US, Australia … but not NZ?
* 15. A New Consumer Agency for Japan?

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[Originally posted, with full hyperlinks, at http://eastasiaforum.org/author/lukenottage/]

As outlined in FDI and Corporate Governance in Japan, in the context of growing inbound FDI and M&A activity, Japan is developing a hybrid approach to setting parameters for hostile takeovers. It is worthwhile taking a closer look at a third Report recently from a Study Group playing a major role, along with the courts, in elaborating Guidelines on permissible defensive measures. The Group’s membership seems to be changing, and differences are emerging compared to both the Anglo-Australian and American approaches to substantive rules on takeovers as well as the process for defining them.

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[Originally posted, with full hyperlinks, at http://eastasiaforum.org/author/lukenottage/]

Interesting responses by Andrew MacIntyre and others follow Peter McCawley’s recent posting on the East Asia Forumblog, throwing light on Indonesia’s electricity crisis. Further to my subsequent posting on burgeoning FDI into Japan, yet the recent blocking of an English fund’s bid to expand shareholdings in the J-Power wholesaler, I wonder what Indonesia’s overall experience has been in attracting foreign investment into power projects. From Wells and Ahmad, Making Foreign Investment Safe (OUP, 2007), I do know of three major investments that resulted in arbitrations after Indonesia suspended many projects following the Asian Financial Crisis a decade ago. These already involved some involvement from Australia and especially Japan. Hence the question: why and how should we provide for investment arbitration in the Australia-Japan FTA or in ASEAN+ agreements?

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[Originally posted, with full hyperlinks, at http://eastasiaforum.org/author/lukenottage/]

With Non-Performing Loans finally under control and economic recovery underway since 2002, Japan has also experienced a revival in FDI outflows. Many commentators focus on the large stocks built up in China, but there has also been steady interest in investing in Australia. Rather than tourism and property developments, Japanese firms have been quietly investing in infrastructure projects, and Nomura is reported recently as a possible buyer of the Australian investment banking arm of ABN AMRO.

A more remarkable development is the expansion of inbound FDI, particularly under the former Koizumi government. Fueled by a broader boom in M&A world-wide, Japan’s inflow rebounded to US$22 billion in 2007, and foreign investment stocks doubled over the last five years. But flows and stocks are still low by OECD standards relative to GDP, especially compared to the US, the UK and now Australia.

The Fukuda government has also sent more mixed messages recently. The Transport Ministry tried to include a blanket one-third cap on foreign shareholdings in Japanese airports. But others including the Financial Services Agency objected that this would choke off other inbound FDI, so this provision was dropped in March. The government is now considering the introduction of measures that more directly regulate the understandable security concerns arising from operating airports. Macquarie Airports Management Ltd, which already owns 19.9 percent of Haneda Airport, will be following this ongoing debate especially carefully.

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Japanese Law in Asia-Pacific Socio-Economic Context
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