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.
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.
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).
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 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 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 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.
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 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.
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.
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).
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 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.
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).
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.
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.
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.
[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 claim – Philip 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.
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.
Chulalongkorn University’s ASEAN Studies Centre will sponsor this major international conference in Bangkok over 28-29 July 2015, with collaboration from and at the downtown venue of the Department of International Trade Promotion within Thailand’s Ministry of Commerce. The key organiser is the immediate past Dean of Law at Chula, Prof Sakda Thanitcul, assisted by Prof Luke Nottage, immediate past Associate Dean (International) at the University of Sydney Law School and a visiting professor at Chula for parts of 2015. Other speakers include Professor Geraint Howells, renowned consumer product safety law expert and presently Dean of Law at the City University of Hong Kong, as well as the following other country reporters:
1. Singapore: Mr. Lawrence Teh (email@example.com)
2. Vietnam: Mr. Anh Thi Phuong Pham (firstname.lastname@example.org)
3. Cambodia: Mr. Ly Tayseng (email@example.com)
4. Laos: Mr. Sornpheth Douangdy (Sornpheth.firstname.lastname@example.org)
5. Myanmar: Prof. Dr. Khin Mar Yee (email@example.com)
6. Malaysia: Mr. Lim Chee Wee (firstname.lastname@example.org)
7. Indonesia: Mr. Riza Buditomo (Riza.Fadhli.Buditomo@bakernet.com)
8. Philippines: Prof. Emmanuel Lombos (email@example.com)
9. Brunei: Prof. Dr. Colin Ong (firstname.lastname@example.org)
Country reporters will summarise key features in their respective jurisdictions, elaborating eg from Jocelyn Kellam (ed) Product Liability in the Asia-Pacific (3rd ed 2009), but focus on new developments in private law, public regulation, enforcement and media coverage of product safety issues. The conference also draws on my research for a smaller project, focusing on free trade agreement aspects, for the Sydney Southeast Asia Centre.
[Below is an un-footnoted Submission to this Inquiry. I was subsequently invited to give oral evidence at public hearings on 5 May, with the transcript available here.]
I welcome this Inquiry and the opportunity to make a public Submission on a topic that has been addressed now several times by the Australian Parliament. As an expert in international business law, I have made several Submissions to other inquiries related to Australia’s international affairs, including Free Trade Agreements (FTAs) and investment treaties, mostly recently giving evidence to this Senate Committee’s Inquiry into The Trade and Foreign Investment (Protecting the Public Interest) Bill 2014 (the “Anti-ISDS Bill”). In that evidence I remarked that there could be improvements in how Australia approaches FTA negotiations. Due to time and space constraints I make three specific suggestions regarding (a) treaty negotiation process and (b) treaty implementation and review, since both stages are encompassed by this Inquiry’s Terms of Reference.
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.
Written by: Joel Rheuben (Herbert Smith Freehills, Brussels) and Luke Nottage
It has been almost four years since the devastating triple disaster comprising a magnitude-9 earthquake, tsunami and meltdown of the Fukushima Dai-ichi Nuclear Power Plant struck northeastern Japan on 11 March 2011. While a variety of programmes exist to clean up serious nuclear contamination and assist residents of the affected areas, it is only victims of the third of these disasters – tens of thousands of evacuees (even now) as well as many affected local businesses – who have access to a comprehensive scheme of compensation, administered by the plant’s operator, Tokyo Electric Power Company (“TEPCO”). Claimants for compensation have three options for the resolution of claims: direct negotiation with TEPCO, mediation via the specially established “Dispute Resolution Centre for Nuclear Damage Compensation” (the “Dispute Resolution Centre”), and civil action under the Nuclear Damages Compensation Law (No 147 of 1961). Each avenue is outlined in turn below, based on an unfootnoted but updated version of our article published in October 2013 at pp126-31 of the Asian Dispute Review (supported by HKIAC and several other arbitral bodies) under the main title of “Now that the (radioactive) dust has settled”.
[The following is a longer and un-footnoted draft of a third Policy Digest prepared for a Sydney Southeast Asia Centre joint research project and an ASEAN Secretariat project on consumer protection law.
A. Under-Enforcement of Product Liability Law for Small-Value Claims
Manufacturers can be incentivised to supply safe consumer goods due to market (reputation) mechanisms, public safety regulation, and/or private law (especially potential tort law liability if consumers claim compensation for harm caused by defective products). The first two mechanisms work better if there is a high probability or risk of harm, as public opinion is then easier to mobilize, although public safety regulation is usually only implemented when the potential harm from unsafe goods is also high. Product liability (PL) law is therefore particularly important to incentivise manufacturers of goods that present a lower probability of harm. However, because of costs associated with enforcing PL law – ultimately through the court system – it tends to work best where the harm and therefore compensation amounts are high. Strict liability PL regimes, increasingly common in ASEAN member states, aim to lessen the burden of proof on potential plaintiffs, who no longer have to prove negligence on the part of manufacturers. Accordingly, they can make more feasible this mechanism even for defective products that generate lower levels of harm and compensation amounts.
Nonetheless, strict liability PL law is still often difficult for consumers to invoke, even in developed countries with comparatively good access to court procedures. After all, unsafe products may often just cause consequential loss to other “consumer goods”. (Only a few countries extend strict PL law coverage to consequential losses to non-consumer goods, which tend to be more extensive. ) Even when personal injury results from the defective products, the harm suffered by each consumer may be low even if the aggregated harm is high. (Good recent examples may be Kanebo’s skin-whitening cosmetics, recently recalled throughout Asian markets, or defective foodstuffs – if consumed in small quantities. ) In such situations, each individual consumer will be reluctant to pursue claims through the court system.
Such problems are compounded in developing and even middle-income countries, where courts are under-resourced or face other generic problems, or accessing them still runs counter to prevailing social norms. This helps explain the limited impact of strict liability PL law reforms observed in South East Asia, despite some of those countries going beyond the European Union (EU) substantive law, for example by allowing consumers to claim multiple damages (i.e. more than the actual harm suffered).
The consequent under-enforcement of consumer law in this field is problematic from the viewpoint of economic efficiency as well as broader justice concerns. After all, the basic economic rationale for introducing strict liability for unsafe manufactured products is that consumers lack expertise to assess safety levels. The latter furthermore correlate only weakly with the pricing of such goods (except some that could cause catastrophic losses if risks eventuate, such as automobiles, which tend to subject to minimum public regulatory standards anyway). Even if particularly well-informed consumers are able to differentiate safety levels of various products, they may end up in the hands of third parties. The economic benefits of introducing strict liability PL law to mitigate such problems, by forcing manufacturers to “internalize” the full costs associated with putting goods into the market, is undermined if those substantive laws are inadequately enforced. This is also problematic from the perspective of justice and advancing the rule of law, a major objective particularly in developing countries and for ASEAN.
The first edition of this excellent textbook, reviewed here and written by Simon Greenberg, Christopher Kee and J Romesh Weeramantry, is forthcoming next year in a second edition that will include extra detailed comparisons from Asia-Pacific jurisdictions based on reports prepared by local experts. The second edition will be an even more valuable resource for practitioners and researchers in international commercial and treaty arbitration, given that so many countries in the region have adopted (and sometimes adapted) core international instruments like the New York Convention and UNCITRAL Model Law, including both Australia and Japan,
My former student Jim Morrison, now Senior Associate at Allens Linklaters in Sydney, has prepared with me a detailed (100+ page) report on Australia as the basis for our contribution to the second edition: available via http://ssrn.com/abstract=2514124. The report focuses on the most topical issues from a comparative perspective (as identified by those three commentators), raised in each of the 10 chapters of the Greenberg et al volume. However, the paper also provides an overview of the key provisions found in Australia’s (Model Law based) International Arbitration Act and main arbitration rules, with a particular emphasis on case law developments (including brief case notes) since statutory amendments in 2010. In addition, the paper includes a guide to other major publications related to international arbitration in Australia, especially since 2010. As mentioned in that paper, a more complete listing is provided below on this Blog (thanks to another former student, Ganesh Vaheisvaran). This should be a useful resource not only for those interested in Australia but also other Model Law based jurisdictions in the region, including Japan.
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.
Below is the manuscript version of our Preface to Leon Wolff, Luke Nottage and Kent Anderson (eds) Who Rules Japan? Popular Participation in the Japanese Legal Process (forthcoming in April 2015 from Edward Elgar), comprising:
1. Introduction: Who Rules Japan?
Leon Wolff, Luke Nottage and Kent Anderson
2. Judging Japan’s New Criminal Trials: Early Returns from 2009
David T. Johnson and Satoru Shinomiya
3. Popular Participation in Labour Law: The New Labour Dispute Resolution Tribunal
Takashi Araki and Leon Wolff
4. In Defence of Japan: Government Lawyers and Judicial System Reforms
Stephen Green & Luke Nottage
5. Administering Welfare in an Ageing Society
6. Reforming Japanese Corrections: Catalysts and Conundrums
7. Competition Law in Japan: The Rise of Private Enforcement by Litigious Reformers
8. When Japanese Law Goes Pop
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).
Do Many of Australia’s (and Some of Japan's) Treaties Not Give Full Consent to Investor-State Arbitration?
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.
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).
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?
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.
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 email@example.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.
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.
"The fundamental importance of foreign direct investment to Australia in the 21st century: Reforming treaty and dispute resolution practice"
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.
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.
On 24 May 2013 I gave a presentation by videolink to a conference on "The Roles of Psychology in International Arbitration", held in London at Brunel University, in the session related to international arbitration awards. This drew partly on Hong Kong based interdisciplinary research project on discursive practices in international arbitration, with considerable emphasis on Asia-Pacific developments. The presentation outline is below or here (download PDF file).
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:
Negotiating and Applying Investor-State Arbitration Provisions in Free Trade Agreements and Investment Treaties: Australia, Japan and the Asia-Pacific
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.
Australia is long overdue for statutory intervention in private international law (PIL), so the recent ‘Discussion Paper 1’ (DP) from the federal Attorney-General’s Department (AGD) is very welcome. From a background in comparative and transnational business law, I strongly support legislative reform, particularly for cross-border consumer transactions and/or in relation to international arbitration. This can now draw on a wealth of experience at an international level and from our major (now mostly Asia-Pacific) trading partners. Such reforms will add tangible evidence of the Government's recently declared commitment to 'Australia in the Asian Century'.
Guest blog by Paul Davis (Baker & McKenzie, Sydney/Tokyo) - "IMPORT OF US SHALE GAS INTO ASIA: THE EFFECT ON EXISTING LONG-TERM CONTRACTS FOR THE SALE OF LNG"
[A footnoted version of the following note is forthcoming on the Baker & McKenzie website. The firm supports ANJeL's 'Team Australia' law students in the INC negotiation and arbitration moot competition in Tokyo (held over 1-2 December this year), and Mr Davis is a guest lecturer in Sydney Law School's LLM courses in "Global Energy and Resources Law" and "Law and Investment in Asia". The law and practice of long-term contracts is not only of immediate practical significance for bilateral and regional trade and investment (including Australia-Japan FTA negotiations), but also more broadly for contract law reform projects now underway in both Australia and Japan.]
Current Top Concern to Asia's LNG Buyers and Sellers
The main issue exercising the minds of Asia's LNG sellers and buyers is what will happen to their current LNG sale and purchase agreements (SPAs), which are priced based upon the Japan Crude Cocktail (JCC), as cheaper (Henry Hub linked) shale gas imports start to flow into the region from North America.
Buyers will be under pressure to "close the gap." At the same time the sellers are concerned to maintain the prices based on which they made the decision to develop their LNG projects.
SPAs differ, depending upon the LNG SPA model preferred by the seller - in effect the operator of the project. However most SPAs contain two provisions of relevance to the current issue.
[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.
Abandoning all Investor-State Dispute Settlement Mechanisms Also Not Supported by the Facts (updated 17 August)
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”.
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).
International Commercial Arbitration in Japan and Australia: Addressing Australia's "Legislative Black Hole" and Comparing Caselaw
Profs Tatsuya Nakamura, J Romesh Weeramantry and myself will present a public seminar at JCAA in Tokyo on 20 July to compare recent developments in jurisdictions that have based their arbitration legislation on the UNCITRAL Model Law (respectively: Japan, Hong Kong and Australia). Below are details of a follow-up seminar on 13 September in Sydney organised by Sydney Law School and hosted by Clifford Chance, where Prof Nakamura will be the main speaker.
Prof Nakamura and I will also participate on 12 September in Brisbane in an interactive AFIA (Australasian Forum for International Arbitration) symposium hosted by Corrs Chambers Westgarth.
These events are part of our joint research 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.
Background materials for these three events include:
1. Nakamura, Tatsuya and Nottage, Luke R., Arbitration in Japan (May, 30 2012). ARBITRATION IN ASIA, T. Ginsburg & S. Ali, eds., Juris: NY, Fothcoming; Sydney Law School Research Paper No. 12/39. Available at SSRN: http://ssrn.com/abstract=2070447
2. Garnett, Richard and Nottage, Luke R., What Law (If Any) Now Applies to International Commercial Arbitration in Australia? (May 2012). Sydney Law School Research Paper No. 12/36. Available at SSRN: http://ssrn.com/abstract=2063271
The latter identifies the following serious and growing legislative lacuna that has emerged since Australia revised its framework for international arbitration from 2010:
The amendments to the International Arbitration Act 1974 (Cth) (‘IAA’) enacted on 6 July 2010 aimed to reposition Australia as a leading Asia-Pacific venue for international commercial arbitration. They also aimed to streamline and revitalise domestic arbitration by providing the new template for reforms to the uniform Commercial Arbitration Act (‘CAA’) regime, originally enacted in the mid-1980s based on a more interventionist English law tradition.
Yet the IAA amendments did not clearly indicate whether some were intended to apply to (a) international arbitration agreements, (b) specifying the seat of the arbitration to be in Australia, (c) concluded before 6 July 2010, especially if (d) the parties had expressly or impliedly excluded the UNCITRAL Model Law on International Commercial Arbitration pursuant to the original s21 of the IAA. The present authors had suggested that these amendments, especially s 21 which no longer allows such an exclusion, were not intended or presumed to have retrospective effect. The Western Australian Court of Appeal recently agreed, unlike a Federal Court Judge at first instance, although in obiter dicta in both cases.
This article restates the problems created by the IAA amendments (Part II), analyses Australian case law decided since 6 July 2010 (Part III), and then proposes a way forward – including comparisons with other Asia-Pacific jurisdictions that have recently enacted arbitration law reforms, especially Singapore and Hong Kong (Part IV). It recommends prompt further IAA amendments that: (i) clarify that at least the new s 21 does not have retrospective effect, (ii) limit a persistent tendency among some Australian courts to infer that a selection of arbitration rules amounts to an implied exclusion of the Model Law under the old s 21, and (iii) consider several other reforms addressing other issues left unclear or not covered in the IAA as amended in 2010.
The article also urges reforms to the new uniform CAA regime (including CAA legislation already enacted in NSW, Victoria and South Australia) that ‘save’ old international arbitration agreements satisfying conditions (a)-(d) above. The old CAA legislation, or at least the new CAA regime, should clearly apply to such agreements - otherwise they will fall into a ‘legislative black hole’. That problem arises because states are enacting the new CAAs to apply only to ‘domestic’ arbitration agreements, while simply repealing the old CAAs (which applied also to international arbitration agreements, especially if the parties had agreed to exclude the Model Law as permitted by the old s 21 of the IAA).
Mark D West, Lovesick Japan: Sex, Marriage, Romance, Law (Cornell University Press, Ithaca/London, 2011, viii + 259pp, hardcover US$29, e-version $18.44 via http://www.amazon.com/Lovesick-Japan-Sex-Marriage-Romance/dp/0801449472
This is the third book with “sex” in the title that has been written since 2005 by the Nippon Life Professor of Law at the University of Michigan Law School. Although it is beautifully written in a conversational style, opens up some intriguing insights, and reflects very extensive research, this work is probably the least successful of the three. This reviewer, at least, hopes that Mark West will now divert his formidable talents to examining other areas of Japanese law and society, including further research in the field that initially established his career – namely, “Economic Organizations and Corporate Governance in Japan” (Oxford University, 2004, co-edited with Curtis Milhaupt).
West’s book on “Law in Everyday Japan: Sex, Sumo, Suicide, and Statutes” (University of Chicago Press, 2005) actually did not focus much on sex. But it showed convincingly how law has played important roles in the development of the “love hotel” industry, as in many other areas of everyday life in Japan. His book on “Secrets, Sex and Spectacle: The Rules of Scandal in Japan and the United States” (University of Chicago Press, 2005) contained more sex. But this arose as part of detailed analysis of important differences – and some similarities – in the two countries’ societies and legal systems relevant to scandals, including corporate fraud, baseball cheaters and political corruption. By contrast, West’s latest book on “Lovesick Japan” is full of sex – caveat emptor (buyer beware)!
In this book West pursues the argument that “law matters” in Japan, but in unusual as well as more mundane life situations. Indeed, he argues that “Japanese judges, who have significant discretion, play a surprisingly direct role of arbiters of emotions in intimate relationships” (p9). Further, unlike his earlier works, West focuses predominantly on how Japanese judges write and reason about sex, marriage and “love” more generally, in their publically-available judgments covering a broad array of legal and social topics. He argues that a “state-endorsed judicial view” (p9) emerges not just from the way the legally relevant facts (and sometimes seemingly irrelevant facts) are presented, but also from the legal analysis – with the combination often suggesting broad problems: a “lovesick Japan”. Specifically (p8):
Love, for instance, is highly valued in Japan, but in judges’ opinions, it usually appears as a tragic, overwhelming emotion associated with jealousy, suffering, heartache, and death. Other less debilitating emotions and conditions, including “feelings”, “earnestness” and “mutual affection” appear in unexpected areas of the law such as cases of underage sex and adultery. Sex in the opinions presents a choice among (a) private “normal” sex, which is male-dominated, conservative, dispassionate, or nonexistent; (b) commercial sex, which caters to every fetish but is said to lead to rape, murder, and general social depravity; and (c) a hybrid of the two in which courts commodify private sexual relationships. Marriage usually has neither love nor sex; judges raise the ideal of love in marriage and proclaim its importance, but virtually no one in the cases achieves it. Instead, married life is best conceptualized as the fulfillment of a contract.
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.
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.
Divestment of foreign mining interests in Indonesia meets the ‘Gillard Government Trade Policy Statement’
By: Simon Butt and Luke Nottage (University of Sydney Law School)
[with a shorter version at http://www.eastasiaforum.org/]
Professor Chris Findlay recently wrote on the East Asia Forum about ‘Australia’s FDI challenges in the Asian Century’, highlighting problems reported recently by ANZ Bank and Qantas in the region. His proposals including ‘innovation in negotiating modalities’, including a possible new plurilateral agreement in the WTO that would cover all investments (not just in some services sectors). That’s a nice idea, but it’s proving hard enough to complete the current round of Doha Round negotiations. In light also of recent problems in Indonesia, the Australian government should meanwhile reconsider its abrupt policy shift last April regarding an important protection found in most of its bilateral and regional Free Trade Agreements (FTAs) and bilateral investment agreements (BITs): investor-state arbitration (ISA).
[Updated 18 April, with a shorter version also on the East Asia Forum blog.]
A few years ago I began a research project into how the Japanese government manages its public and private law cases, working with a former LLM student from Kyushu University and experienced Australian government lawyer, Associate Professor Stephen Green (now at Doshisha University Law Faculty in Tokyo). Our paper was published last year in the Asia Pacific Law and Policy Journal. The second half of the paper is also under review for a special issue of the International Journal of the Legal Profession, focusing on the remarkably under-researched field of government lawyering.
On 6 February this year I stopped over in Seoul to visit prosecutors in Korea's Ministry of Justice (MoJ), partly to begin comparing how Korea manages similar litigation. Information kindly provided in interviews and follow-up correspondence reveals considerable similarities, but also some significant differences compared to Japan. The backdrop and issues in Australia regarding government litigation services diverge even further, but there is much scope for mutual learning.
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.]
Anniversary Conference, 1-2 March 2012: "Socio-legal Norms in Preventing and Managing Disasters in Japan: Asia-Pacific and Interdisciplinary Perspectives"
The "3-11 triple disasters" that afflicted Japan on 11 March 2011 have highlighted broader regulatory issues facing countries particularly in the Asia-Pacific region, including Japan's FTA negotiation program. A few months after "3-11", the Japan Foundation established a special grant program calling for collaborative research conferences on disaster prevention and management - seeking applications by end-September, with decisions to be reached by end-October and conferences to be concluded by March 2012. An application by a consortium led by the University of Sydney Law School was successful, allowing a major international conference to take place in the new Sydney Law School premises over Friday 1 March and Saturday 2 March 2012. Other sponsors of this event are the University's Japanese Studies Department and the new China Studies Centre, the Centre for Asian and Pacific Law at the University of Sydney (CAPLUS), the Australian Network for Japanese Law (ANJeL), and the Law Faculty of Tohoku University (one of the University of Sydney's longstanding partner institutions).
The conference will commemorate the first anniversary of the 3-11 disasters, and also represents ANJeL's tenth international conference on diverse aspects of Japanese Law. It will examine regulatory issues from a variety of social science perspectives, focusing on Japan but comparing Australia (of course, especially in the wake of January's devastating floods in Queensland), New Zealand (especially issues highlighted by the Christchurch earthquake), Indonesia (the Aceh tsunami), China and the USA (especially earthquakes and nuclear power issues).
In an article published in the Zeitschrift für Japanisches Recht / Journal of Japanese Law [“Die Haftung für Nuklearschäden nach japanischem Atomrecht – Rechtsprobleme der Reaktorkatastrophe von Fukushima I” (Liability for Nuclear Damages pursuant to Japanese Atomic Law – Legal Problems Arising from the Fukushima I Nuclear Accident) (ZJapanR 31, 2011)] Julius Weitzdörfer, Research Associate with the Japan Unit of the Max Planck Institute for Comparative and International Private Law (and JSPS Visiting Researcher at Kyoto University Law Faculty), examines the legal challenges currently facing the Japanese judiciary, government and economy in the aftermath of the nuclear disaster. The article (in German along with an English abstract) can be downloaded here, and shorter summary by the author is reproduced below (from the MPI website).
Luke Nottage (also now at Kyoto University Law Faculty, as a Visiting Scholar over October-November) then adds a broader perspective on the disasters afflicting Japan since 11 March 2011, based on his presentation at Tohoku University in Sendai over 14-15 October.
[A version of this posting also appeared on the The Conversation blog (28 July 2011) and then the East Asia Forum blog (30 July 2011). The former is 'an independent source of information, analysis and commentary from the university and research sector' involving 'content support' from the Go8, including the University of Sydney.]
Prime Minister Julia Gillard was one of the first among world leaders to visit Japan, over 20-23 April, after the nation was stricken on 3 March by the ‘earthquake-tsunami-radiation triple disaster’. But the Australian government was tactful and realistic in not placing high priority on progressing bilateral Free Trade Agreement (FTA) negotiations. Talks had resumed in Tokyo over 7-10 February 2011 after stalling for almost a year, but a lack of progress - particularly over agricultural market access - had then prompted respective Trade Ministers to call for a high-level political summit to regain momentum. The ‘3-11’ disaster generated more urgent priorities for the Japanese government. Indeed, reversing a commitment to decide this question by end-June, in May the Kan administration announced it would defer any decision about whether to join with the nine nations (including Australia) now negotiating an expanded Trans-Pacific Partnership (TPP) agreement.
Nonetheless, Japan has some significant incentives to resume FTA negotiations with Australia in the wake of 3-11, although the road ahead still looks rocky.
[Slightly updated on 2 September. A shorter version of this posting appeared in a Roundtable on "The Conversation" blog (25 August 2011). It draws on research for the project, "Fostering a Common Culture in Cross-Border Dispute Resolution: Australia, Japan and the Asia-Pacific", supported by the Commonwealth through the Australia-Japan Foundation which is part of the Department of Foreign Affairs and Trade.]
Australia’s Tobacco Plain Packaging Bill passed the federal House of Representatives on 24 August, although a week before it had looked like foundering. The Bill received its second reading in the Senate today, but it should pass without further change or controversy. The Bill passed by the House has already attracted commentary, mostly lauding this admittedly well-intentioned legislation.
But the legislation stuck to the original proposal for implementation: sales will have to be in the plain packaging from 1 July 2012. So Philip Morris Asia (PMA) are likely to commence investor-state arbitration (ISA) proceedings after expiry of the 3-month “cooling off” period under Art 10 of the 1993 Australia – Hong Kong bilateral investment treaty, calculated from notification of the dispute on 27 June.
Guest Blog - "Tax Treaty Arbitration: The Next Frontier in Asia-Pacific Commercial Dispute Resolution?"
[This guest blog by Micah Burch, Senior Lecturer at Sydney Law School, draws on our joint research for the project, "Fostering a Common Culture in Cross-Border Dispute Resolution: Australia, Japan and the Asia-Pacific", supported by the Commonwealth through the Australia-Japan Foundation which is part of the Department of Foreign Affairs and Trade. We have subsequently co-authored a related paper entitled "Novel Treaty-Based Approaches to Resolving International Investment and Tax Disputes in the Asia-Pacific Region" (October 4, 2011) Sydney Law School Research Paper No. 11/66, available here.]
Much was made (in tax treaty circles, at least) three years ago when, after decades of mounting discussion, the Organisation for Economic Co-operation and Development (OECD) included in its model tax treaty a provision requiring arbitration. The controversial provision (Article 25(5) of the OECD Model Tax Convention on Income and on Capital (2003)) takes the substantial step of requiring states to arbitrate tax disputes arising under the treaty if they remain unresolved after two years of negotiation between the two competent authorities. While arbitration is a generally accepted facet of international commercial dispute resolution worldwide, including now throughout Asia, dispute resolution under bilateral tax treaties has been relatively undeveloped. But there are now signs of change.
[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)).
The Rise and Possible Fall of Investor-State Arbitration in Asia: A Skeptic’s View of Australia’s “Gillard Government Trade Policy Statement"
Downloadable here is my draft paper on this topic for various forthcoming events, beginning with a 3 August seminar hosted by Sydney Law School on "Australia's New Policy on Investor-State Dispute Settlement".
The paper draws on research for the project, 'Fostering a Common Culture in Cross-Border Dispute Resolution: Australia, Japan and the Asia-Pacific', supported by the Commonwealth through the Australia-Japan Foundation which is part of the Department of Foreign Affairs and Trade.
Treaty-based investor-state arbitration (ISA) has gradually become a more established part of the legal landscape in the Asian region. But this development is threatened by the 'Gillard Government Trade Policy Statement' announced in April 2011.
Drafting Arbitration Clauses to Minimise Costs and Delays in International Commercial Arbitration: An Asia-Pacific Perspective
[This is the outline of my presentation at the Chartered Institute of Arbitrators Asia-Pacific Conference 2011, in Sydney over 27-28 May. (A PDF version including full references and hyperlinks can be downloaded here.) It draws on research for the project, 'Fostering a Common Culture in Cross-Border Dispute Resolution: Australia, Japan and the Asia-Pacific', supported by the Commonwealth through the Australia-Japan Foundation which is part of the Department of Foreign Affairs and Trade.]
Concerns about growing delays and (especially) costs in International Commercial Arbitration (ICA) have spread from West to East:
Advantages of ICA over Cross-Border Litigation (‘East’ vs ‘West’)
Response: ‘highly relevant’ or ‘significant’(* Statistically significant at 99% confidence level)
Region of Practice: East (Ali study ‘06) West (CBU ‘94)
Forum’s neutrality 88 (%) 78 (%)
Forum’s expertise 83 76
Results more predictable 36 42
Voluntary compliance* 42 24
Treaties ensure compliance abroad 85 69
Confidential procedure* 76 56
Limited discovery 47 56
No appeal 64 58
Procedure less costly 36 20
Less time consuming* 57 35
More amicable 52 35
This is also a major and longer-standing concern about Japanese corporations, for example, which explains why they still do not contest many ICA cases (even at the JCAA) despite increasingly incorporating arbitration clauses in cross-border contracts. The ICC, which has a growing Asia-Pacific caseload, has produced a useful Report suggesting various means to manage costs and delays. Yet the ICC distinguishes itself as a ‘high-quality, high-cost’ arbitral venue, evidenced eg by the hands-on service provided by its Secretariat and its ‘Court of Arbitration’. My presentation therefore proposes measures that are often more radical, and which may be particularly suited for ICA involving Australian and Asian parties.
International Commercial Arbitration: An Asia-Pacific Perspective, by Simon Greenberg, Christopher Kee & Romesh Weeramantry, Cambridge University Press, Melbourne, 2011, 543pp + xxxvii tables: ISBN 9780521695701. Softcover A$120.
This book provides a comprehensive and in-depth overview of the law and practice of international commercial arbitration. It is the first work written by Australian experts that offers “an Asia-Pacific perspective” on a field that has burgeoned particularly in Asia and world-wide since the 1990s, following significant liberalisation of cross-border trade and investment. The book’s focus is more on “Asia” than the “Pacific”. It concentrates especially on arbitration law and procedural rules in Australia (including, briefly, the July 2010 revisions to the International Arbitration Act), mainland China and Hong Kong, India, Malaysia, New Zealand, the Philippines and Singapore, with reference also to Indonesia, Japan and the Republic of Korea. It also discusses developments in the United States, and to a lesser extent Canada, as well as in traditional “core” venues in Europe for international arbitration such as England and France.
After an “introduction to international arbitration and its place in the Asia-Pacific” (ch1), chapters cover all main areas of law relevant to drafting arbitration agreements, operating arbitration proceedings, and enforcing awards:
• “the law governing the arbitration and role of the seat” (ch2), “applicable substantive law” for the underlying disputes (ch3), formal and substantive requirements for the “arbitration agreement” itself (ch4);
• establishing or challenging “arbitral jurisdiction” (ch5), appointing or challenging “the arbitral tribunal” (ch6), “procedure and evidence” (ch7, including a helpful Table, at pp319-22, comparing approaches typically associated with civil law or common law traditions in civil procedure);
• “the award: content and form” (ch8) and its “challenge and enforcement” (ch9).
The book also adds a succinct introduction to “investment treaty arbitration” or investor-state arbitration (“ISA”: ch10). This is an increasingly important topic in the Asia-Pacific region – including Australia, where in April 2011 the “Gillard Government Trade Policy Statement” proclaimed that Australia would no longer include ISA in its investment treaties or Free Trade Agreements if this offered foreign investors more rights than local investors. This policy Statement reflects a recommendation of the Productivity Commission finalised last December, which I have criticised on this blog as well as on the East Asia Forum.
Guest Blog - Enhancing Transparency and Earlier Resolution of Trade Disputes: Australia, Japan and the WTO
[This blog by my colleague Dr Brett Williams is based on his research for our 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.]
As part of this project on possible dispute settlement provisions that could be incorporated into an Australia Japan Free Trade Agreement, Dr Brett Williams is working on papers suggesting two innovations that could be incorporated into the provisions for inter-state dispute resolution regarding alleged violations of market access commitments. Both of these innovations would enhance the transparency of the issues at stake in the potential dispute, and potentially promote earlier and more cost-effective dispute resolution.
One important further aspect of both of these possible innovations would be that they would be capable of being incorporated into the WTO dispute settlement procedure. Both Australia and Japan have long traditions of support for the multilateral trading system and both have a keen interest in being active players in enhancing and improving the system. Therefore, in suggesting these innovations for possible incorporation into an Australia Japan FTA, Dr Williams also considers whether Australia and Japan could use the FTA as a way of trialling some procedures which could later be the subject of a joint proposal by Japan and Australia to amend the WTO dispute settlement procedure. Neither of the proposed innovations are particularly contentious in their concept but there could be some contention about the practical aspects of implementing them.
[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 version was published on Australia Day by the East Asia Forum blog.]
My Sydney Law School colleague Dr Tim Stephens convincingly criticises the Sydney Morning Herald and others recently for over-sensationalising Australia’s alleged “Secret Dealing on Whale Hunts”, in reporting drawing on documents released by WikiLeaks. He also analyses reports indicating some opposition with the Australian government about the proceedings it has now initiated against Japan before the International Court of Justice (ICJ). A lively debate has emerged on the ABC’s website in response to Dr Stephens’ article entitled “A Whale of a Story”, with many more excellent points made on both sides of the whaling debate. Here is my own two yen's worth.
[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
Good for the Goose, Not Good for the Gander? Australian versus Japanese Approaches Towards Investor-State Arbitration
[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.
Fostering A Common Culture in Cross-Border Dispute Resolution: Australia, Japan and the Asia-Pacific
This is the title of a project funded by the Australia-Japan Foundation over 2010-11 for myself and Sydney Law School colleagues, Dr Brett Williams and Micah Burch, which will consider the scope for both countries to develop greater common ground in cross-border dispute resolution law and practice, to facilitate bilateral, regional and even multilateral economic integration. Australia and Japan have recently amended their Double-Tax Treaty and are now negotiating a Free Trade Agreement (FTA). Former Prime Ministers Kevin Rudd and Yukio Hatoyama floated the idea of a broader "Asia Pacific Community" or "East Asian Community", not limited to matters conventionally found in FTAs. The project will look at the possibility of adding:
(a) novel inter-state arbitration mechanisms, namely for:
(i) disputes about interpretation of Double Tax Treaties, a process triggered by taxpayer in a state (which must then obtain a decision from arbitrators binding on both states) and now envisaged since the 2005 revisions to the OECD Model Tax Treaty;
(ii) disputes about market access for goods and services (including typically some forms of investment), usually modelled on provisions set out in the 1994 Dispute Settlement Understanding of the World Trade Organization (itself under review, with considerable leadership from Australia);
(b) appropriate mechanisms for disputes involving a broader array of investments, in response to discriminatory or other illegal treatment from the host state, allowing investors to bring arbitration proceedings directly (often now provided in FTAs and bilateral investment treaties or "BITs") instead of via appeals to their home state for inter-state dispute resolution;
(c) provisions or measures to improve commercial arbitration law and practice for the resolution instead of business-to-business disputes, achieved through commitments that might also be entrenched through treaties, but potentially instead through parallel legislation in each state, or through common Rules or agreements among the main Japanese and Australia arbitral institutions).
The project will also involve Professor Tatsuya Nakamura, former ANJeL Research Visitor and General Manager in the Japan Commercial Arbitration Association, and anyone willing to share experiences or views in these three fields (particularly in Australia or Japan) is very welcome to contact me at first instance.
New Legislative Agendas, Legal Professionals and Dispute Resolution in Australia and Japan: 2009-2010
This is the title of my third paper in a series of edited and updated selections of my postings to the ‘East Asia Forum’ blog (indicated with a double asterisk in the Table of Contents below) and this partly-overlapping ‘Japanese Law and the Asia-Pacific’ blog. They mainly cover developments from mid-2009 through to mid-2010, with a focus on law and policy in Australia and Japan in a wider regional and sometimes global context. The paper is freely downloadable here.
Half of the postings edited for the paper introduce some new policy and legislative agendas proclaimed by the then Prime Ministers of Australia (Kevin Rudd, in late July 2009) and Japan (Yukio Hatoyama, through the Democratic Party of Japan [DPJ] which he led to a remarkable general election victory in late August 2009). Both had resigned by mid-2010, indicating some of the difficulties involved in implementing ambitious reforms in both countries. All the more so, perhaps, if innovative measures are to be added to both countries’ Free Trade Agreements (FTAs) in order to foster more sustainable socio-economic development in the aftermath of the Global Financial Crisis (GFC).
The remaining postings end by introducing Australia’s regime for international (and domestic) commercial arbitration enacted in mid-2010, centred on a United Nations Model Law – like Japan’s Arbitration Act of 2003. However it sets these enactments in broader context by focusing on legal professionals – lawyers, judges and specialists in Alternative Dispute Resolution (ADR) – as well as aspects of the legal education systems in both countries. Those systems will need to gel better as well for both Australia and Japan to achieve the ‘cultural reform’ needed to generate sustainable critical mass in commercial (and investor-state) arbitration activity.
Australia’s long-awaited International Arbitration Amendment Act 2010 (Cth) received Royal Assent on 6 July, after the Senate agreed on 17 June to the Bill introduced to the House of Representatives on 25 November 2009 as revised by the federal Government itself on 17 March 2010. The International Arbitration Act 1974, as thereby amended (‘amended IAA’, at http://www.comlaw.gov.au), is set in broader context by the first book devoted to this important field of dispute resolution (‘DR’) law and practice: Luke Nottage and Richard Garnett (eds) International Arbitration in Australia (Federation Press, Sydney, forthcoming October 2010: see Prelims PDF downloadable here).
This eleven-chapter work adds a Preface from NSW Chief Justice Spigelman, a powerful proponent of arbitration and broader access to justice as well as judicial exchange with Japan. It is partly dedicated to Professor Yasuhei Taniguchi, one of my inspiring former teachers at Kyoto University in the early 1990s and a Distinguished Visitor to Sydney Law School over July-August 2009. He is also renowned as a practitioner of international commercial arbitration (ICA), having served for example as arbitrator in an ICC arbitration in Melbourne, as well as a former Judge on the WTO Appellate Body.
The amended IAA brings new promise for ICA in Australia, and may offer lessons for countries like Japan. But Australia can also learn from Japan, especially the thorough way in which it goes about legislative reform.
[Adapted on 10 April for the East Asia Forum blog]
The shift since the 1990s in the self-image of many bengoshi lawyers outlined in my previous posting, underpinned also by the slowly changing nature of their work generally as well as the emergence of corporate law firms, helps explain the quite swift enactment of the 2004 Law to Promote the Use of Out-of-Court Dispute Resolution Procedures (translated here), driven also by a Judicial Reform Council (JRC) recommendation in 2001. After a slow start, the Law also seemed to be gaining some traction in promoting privately-supplied ADR services.
However, Court-annexed mediation and recent improvements in the litigation process itself leave a formidable competitor. And the conservative backlash among bengoshi in electing their new JFBA President is likely to further dampen the emergence of private ADR services and institutions. Especially now, that only seems probable if and when private suppliers develop niche markets like more facilitative (not evaluative) forms of ADR - a characteristic of ADR in Australia that has impressed ANJeL Visiting Professor Tatsuya Nakamura (see his columns in Japanese reproduced here) - and if litigation costs balloon like they have in countries like Australia.
Japanese bengoshi lawyers, as the most influential group within the legal profession, stand at a crossroads. Overall, through the overarching Japan Federation of Bar Associations (JFBA), their work and attitudes have become more amenable to collaborating with the judiciary and even public prosecutors in implementing reforms to the litigation system; to increasing the numbers allowed to pass the National Legal Examination as the gateway to careers as a lawyer, judge or prosecutor; and even to allowing Japan's many "quasi-lawyers" to expand their legal practice, as well as more promotion of privately-supplied ADR services. Reforms in all these areas were propelled by the Judicial Reform Council's final recommendations to the Prime Minister in 2001, but they were consistent with the trajectory of bengoshi as a whole. However, the controversial election of a new JFBA President may derail all this, with implications also for related initiatives such as Japan's new postgraduate "Law School" programs inaugurated in 2004.
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....
Emeritus Professor Peter Drysdale recently presented in Sydney a preview of his now-published consultancy report for Austrade, which urges (p3):
“a paradigm shift in thinking about Australia’s relationship with the Japanese economy. The Japanese market is no longer confined to Japan itself. It is a huge international market generated by the activities of Japanese business and investors, especially via production networks in Asia. It is a market enhanced by the economic cooperation programs of the Japanese government throughout the developing world, particularly in the Asian and Pacific region. And it is a market in which Japanese business now plays an increasingly important role from an Australian base in manufacturing, agriculture and services.”
The Australian Financial Review now confirms that Japan has led China and other Asian investors into Australia over the last year (“What Crisis? Asian Investors rush to our shores”, 24 September 2009). But many probably remain unaware of these facts highlighted by Drysdale’s report (pp 3-4):
“The stock of Japanese investment in Asia amounted to A$ 180 billion out of Japan’s global investment of A$ 772 billion at end-2008. The flow of export and import trade which Japanese business generates in Asia each year was US$ 690 billion in 2008. Procurements through Japanese corporate subsidiaries in Asia amount to A$ 1.2 trillion annually. In addition, Japan spent A$ 11 billion (901 billion yen) in Asia on Overseas Development Assistance programs and procurement through economic cooperation programs. Japanese business has now also established a platform for export to the region from Australia, with diversified investments across food, manufacturing as well as resources, that already delivers A$ 6 billion in Australian sales to Asian markets other than Japan. These are all large new elements in the economic relationship with Japan beyond the A$ 51 billion export trade and A$ 20 billion import trade that Australia already does each year with Japan itself.”
These pervasive economic ties are underpinned by very wide-ranging and stable relations between Australia and Japan at all sorts of levels: governmental, judicial, educational, working holidays, and so on. As pointed out in another recent report “Australia and Japan: Beyond the Mainstream”, by Manuel Panagiotopolous and Andrew Cornell for the Australia Japan Foundation, the GFC has led policy-makers as well as businesspeople to look again more favourably on relationships that combine lower risk with less return, compared to high risk/return ventures.
We can take advantage of these strong and still very profitable Australia-Japan bilateral relationships, as well as the investment and trading links each country (especially Japan) has developed in other parts of Asia particularly since the 1990s, by more actively joining Australian and Japanese partners for ventures throughout Asia. This spreads the risks typically associated with the possibility of higher returns, and also allows each partner to contribute goods or services in which that country has more of a comparative advantage. Thus, for example, Drysdale suggests (p25):
“partnership with Australian services firms in finance, legal services and engineering could be mutual productive. … In FTA talks with Japan the Rudd Government is trying to open the way for professional and financial services firms to set up in Japan, encouraging wider recognition of qualifications and the removal of barriers to obtaining licences in Japan”.
As an example of “legal and consultancy services”, Drysdale mentions that several Australian law firms have long experience in the Asian region, and gives the example of Mallesons Japan. But he concludes that “if we are serious about joining global supply chains and capturing service industry opportunities in Asia then Australian firms need to be there on the ground to capture the business”.
Professor Yasuhei Taniguchi presented a public lecture on this topic on 30 July at Sydney Law School, as part of the 2009 Distinguished Speakers series commemorating the inauguration of its new building in February. Drawing on his experience as a world-renowned civil law professor, arbitrator and WTO adjudicator, Taniguchi-sensei focused mainly on points of similarity and difference between the WTO dispute resolution system and national courts. His conclusion was a qualified "yes", despite the main challenges still afflicting trade law litigation among states through the WTO system - the topic of a one-day symposium on 14 August, also at Sydney Law School.
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.
A recent issue of the Japan Commercial Arbitration Association (JCAA) Newsletter is largely devoted to these topics (No 22, July 2009). Sydney Law School and ANJeL are privileged to host not only one of Japan’s doyens in ICA (and other cross-border dispute resolution, especially WTO procedures), Professor Yasuhei Taniguchi (over July-August 2009). We also welcome (over September – March 2010) Kokushikan University Professor Tatsuya Nakamura, a leader of Japan’s ‘new generation’ of arbitration specialists who heads JCAA’s Arbitration Department.
They have already got me Download filethinking further about Arb-Med (arbitrators encouraging parties to settle their dispute), in the context also of interesting new JCAA Rules focused more specifically on Mediation. Both developments are important for Australia, presently reviewing its legislative and institutional framework for international commercial arbitration (ICA), as well as for many other Asia-Pacific countries intensely interested nowadays in efficient mechanisms to resolve cross-border disputes.
International Investment and Commercial Arbitration in Australia and Japan: Shared Challenges, Different Solutions?
Australia and Japan face a remarkably similar challenge. Few international arbitrations have their seat in either country, despite various initiatives undertaken over the last decade or two. Both Australia and Japan probably need to adapt quite radical measures to overcome remaining barriers to attracting international arbitration activity to their respective shores. This shared problem is serious not just because their arbitrators, lawyers, institutions or local economies miss out on business – after all, at least the arbitrators and lawyers can still earn fees by deploying their skills in arbitrations further abroad. The problem is serious also because low levels of international arbitration activity in both countries limit the potential to develop domestic arbitration, ADR more generally, and indeed effective civil procedure.
Despite the shared challenge, however, quite radical solutions for each country may differ somewhat. Expedited arbitration procedures may be a particular selling point for Australia, but not Japan. Caucusing in Arb-Med may work in Japan, but not Australia. And Japan may have more scope than Australia to develop international arbitration through a ‘whole-of-government’ approach that promotes investment arbitration provisions, for example, even in treaties with other developed countries.
[This blog posting follows on from my East Asia Forum posting criticising "Australia's Lethargic Law Reform" in consumer law recently. I am somewhat more optimistic about initiatives in arbitration law reform, but Australia shares some similar problems with Japan. Japan also took its time to enact new legislation, in 2003, but hasn't seen significant increases in disputes referred to arbitration.]
On 21 November 2008, the Attorney-General’s Department (AGD) announced a Review of Australia’s International Arbitration Act 1974 (IAA). The aim was to consider whether the Act should be amended to:
* ensure it provides a comprehensive and clear framework governing international arbitration in Australia
* improve the effectiveness and efficiency of the arbitral process while respecting the fundamental consensual basis of arbitration, and
* consider whether to adopt ‘best-practice’ developments in national arbitral law from overseas.
The AGD’s Discussion Paper (DP) expressed the hope that a revised IAA would make Australia a more attractive venue for conducting international commercial arbitration (ICA), especially within the Asia-Pacific region. Unfortunately, Australia has missed that boat, with China, Hong Kong and Singapore the clear leaders now in this part of the world.
For Australia to have any chance at all, it needs a much more ambitious reform than envisaged in the AGD’s DP. Anyway, Australia needs to appreciate the more diffuse and long-term benefits of this type of reform.
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- US vs EU vs Other Models for Investment Treaties in the Asian Region
- The TPP Investment Chapter and Investor-State Arbitration in Asia and Oceania
- Publications listing - ARC Grant on International Investment & Dispute Management (2)
- New Year and New Books on Asian Law - Consumer Law and Corporate Governance
- ISDS in the Japanese Diet
- The Trans-Pacific Partnership FTA’s investment chapter: What’s next?
- The TPP Investment Chapter: Mostly More of the Same [ISDS Procedure]
- The TPP Investment Chapter: Mostly More of the Same [Substantive Commitments]
- Compromised ISDS-backed investment commitments in the China-Australia FTA
- Senate's Report into Australia's Treaty-Making Process - and ISDS Model?