Lock the gate: The Trans-Pacific Partnership and Investor-State Dispute Settlement, Submission to the Productivity Commission, the Joint Standing Committee on Treaties, and the Senate Foreign Affairs, Trade, and References Committee

Executive Summary This submission provides a critical analysis of Investment Chapter of the Trans-Pacific Partnership – focusing upon Investor-State Dispute Settlement. The National Interest Analysis provides a rosy assessment of Investment under the Trans-Pacific Partnership, arguing ‘The TPP will create new investment opportunities and provide a more predictable and transparent regulatory environment for investment.’ At one level, the National Interest Analysis argues that the Trans-Pacific Partnership preserves Australia’s regulatory autonomy in respect of foreign investment: The TPP will also promote further growth and diversification of foreign investment in Australia by liberalising the screening threshold at which private foreign investments in non-sensitive sectors are considered by the Foreign Investment Review Board (FIRB), increasing it from $252 million to $1,094 million for all TPP Parties. Under the TPP, Australia has retained the ability to screen investments in sensitive sectors to ensure they do not raise issues contrary to the national interest. All investments by foreign governments will continue to be examined and lower screening thresholds will apply to investments in agricultural land and agribusiness. This statement captures the tension within the agreement between promoting and fostering foreign investment, and protecting regulatory autonomy. On the other level, the National Interest Analysis discusses giving special rights to foreign investors under the investor-state dispute settlement regime in the Trans-Pacific Partnership: - The TPP’s investment obligations include high quality, modern rules governing the treatment of investors and their investments, balanced with robust safeguards to preserve the right of the Government to continue regulating in the public interest. Investment obligations can be enforced directly by Australian and other TPP investors through an ISDS mechanism. A number of important safeguards are built into the rules guiding ISDS, making this one of the most protective treaties in existence worldwide in terms of its protections for legitimate regulation. Procedural safeguards in the TPP provide enhanced levels of transparency in the management of ISDS claims. In addition, specific Australian policy areas are carved-out from certain ISDS claims including: social services established or maintained for a public purpose, such as social welfare, public education, health and public utilities; measures with respect to creative arts, Indigenous traditional cultural expressions and other cultural heritage; and Australia’s foreign investment policy, including decisions of the Foreign Investment Review Board. Australia’s tobacco control measures as defined under the TPP will not be able to be challenged. However, the regime presented in the Trans-Pacific Partnership does not necessarily meet such aspirations for providing ‘high quality, modern rules governing the treatment of investors and their investments, balanced with robust safeguards.’ Indeed, the agreement has been criticised for providing such a complex, unruly, distorted and unbalanced Investor-State Dispute Settlement regime – which favours interests of foreign investors above all others. Moreover, the Trans-Pacific Partnership has been widely criticised for its limited and narrow exceptions and exclusions, and lack of robust safeguards. There has been much scepticism as to whether Investor-State Dispute Settlement should be a necessary part of the Trans-Pacific Partnership. There has been grave doubts amongst policy-makers about whether Investor-State Dispute Settlement plays any positive role in attracting and retaining foreign investment. Investor-State Dispute Settlement poses significant regulatory challenges across an array of fields. RECOMMENDATIONS This submission questions the need for the inclusion of an Investor-State Dispute Settlement regime in the Trans-Pacific Partnership. These recommendations build previous submissions to Australian parliamentary committees, investigating the topic of Investor-State Dispute Settlement. Recommendation 1 - In theory, Investor-State Dispute Settlement was designed to provide a solution for rule of law problems in developing countries. However, in practice, Investor-State Dispute Settlement has been criticised for undermining the rule of law, the judiciary, the rulings of domestic courts, and the decisions of national parliaments. Chief Justice French of the High Court of Australia has expressed his deep reservations about the operation of Investor-State Dispute Settlement. Recommendation 2 - In light of the work of the Productivity Commission and other expert bodies, the Australian Government and Parliament should seek to exclude investment clauses from trade agreements and investment agreements. Recommendation 3 - There has been an international debate over the usefulness and the legitimacy of Investor-State Dispute Settlement clauses. The United Nations Conference on Trade and Development (UNCTAD) has highlighted the rise in Investor-State Dispute Settlement cases, and the significant issues relating to public regulation and government liability. A number of judges, experts, policy-makers, and nation states have been highly critical of the procedural and substantive aspects of Investor-State Dispute Settlement scheme. There has been much concern about how global law firms have expansively used the arbitration system. Recommendation 4 - The Trans-Pacific Partnership contains complex yet murky provisions on whether Intellectual Property owners can invoke Investor-State Dispute Settlement. As noted by the Law Council, there are concerns about the exact nature of the inter-relationship between the intellectual property regime and Investor-State Dispute Settlement. Recommendation 5 - Investment clauses have been used and abused by Big Tobacco (particularly in light of its hysterical fears about the impact of graphic health warnings and plain packaging of tobacco products upon its moribund business). The World Health Organization and tobacco control advocates have warned that Big Tobacco has sought to use investment clauses to challenge tobacco control measures, such as graphic health warnings and plain packaging of tobacco products, and frustrate the implementation of the World Health Organization Framework Convention on Tobacco Control. The Trans-Pacific Partnership contains some safeguards in respect of future investor action by Big Tobacco. Recommendation 6 - There has been much controversy over the Trans-Pacific Partnership, intellectual property, investment, and pharmaceutical drugs. There has been much concern that investment clauses could be deployed to challenge domestic law reforms – such as those proposed in the independent Pharmaceutical Patents Review Report. The dispute between Eli Lilly v. Canada highlights the dangers of investment clauses in this field. Recommendation 7 - UNITAID, public health advocates, intellectual property experts, and legislators have all expressed concern about the impact of investment clauses upon access to essential medicines – especially in respect of HIV/AIDS, tuberculosis, and malaria, and neglected diseases. Recommendation 8 - As highlighted by the dispute between Lone Pine Resources v. Canada, gas companies have deployed investment clauses to challenge regulations and moratoria in respect of coal seam gas and mining. This raises larger questions about public regulation in respect of land, water, and the environment. Recommendation 9 - Investment clauses could undermine and undercut public regulation in respect of the environment, biodiversity, and climate change. The investor-state dispute settlement arbitration between TransCanada and the United States Government Recommendation 10 - Investment clauses could be deployed in the field of agriculture. Big food and soda companies could question food nutrition labelling laws. Foreign biotechnology companies could challenge GM food labelling laws. Multinational agricultural companies could question Australian agricultural policies. The United Nations Special Rapporteur on the Right to Food, Olivier De Schutter, has raised larger issues about the impact of trade deals like the Trans-Pacific Partnership upon food security, nutrition, hunger, and the right to food. Recommendation 11 - In light of the work of Maude Barlow and the Council of Canadians, it is evident that Investor-State Dispute Settlement has a significant impact upon water rights. Recommendation 12 - Investment clauses could have a chilling effect upon the Digital Economy. Investor-state dispute settlement could be potentially deployed by copyright industries to challenge significant copyright reforms. Investment clauses could be invoked by IT companies, such as Apple, Adobe, and Microsoft, to challenge IT pricing reforms. Both old media and new media could rely upon investment clauses to test law reform in respect of privacy law. Recommendation 13 - Investment clauses could be invoked in relation to foreign investment in respect of confidential information, trade secrets, and data protection (particularly in respect of agriculture and pharmaceutical drugs). This could raise issues in respect of regulatory review. Recommendation 14 - Senator Nick Xenophon has raised concerns about the application of Investor-State Dispute Settlement in respect of gambling regulation. A review of the UNCTAD Investment Policy Hub reveals that there has been 10 Investor-State Dispute Settlement matters involving gambling and betting activities. There are certainly good grounds to be concerned about how Investor-State Dispute Settlement will impact upon gambling regulation. Recommendation 15 - There is a need to ensure that investment clauses are not deployed against financial regulations, particularly in the wake of the Global Financial Crisis. Recommendation 16 - Investor-State Dispute Settlement raises significant problems in respect of industrial relations, workers’ rights, and trade unions. Recommendation 17 - In light of the dispute in Metalclad v. Mexico, investor-state dispute settlement clauses could threaten local, state, and territory government laws and regulations in Australia. Recommendation 18 - In light of the Al-Jazeera dispute, Investor-State Dispute Settlement could have a significant impact upon Australian media and communications law. This raises interesting and complex questions in respect of the regulation of media ownership, diversity, and content, and foreign investment and ownership. Recommendation 19 - There have been much controversy over Investor-State Dispute Settlement in discussions between Canada and the European Union over the Comprehensive Economic and Trade Agreement (CETA). The Investor-State Dispute Settlement regime in CETA is more advanced than its counterpart to the TPP – but nonetheless, there have been concerns that it will result in similar conflicts to that under NAFTA. Recommendation 20 - There has also been great controversy in the European Union during consultations over the possible inclusion of Investor-State Dispute Settlement in the Trans-Atlantic Trade and Investment Partnership. Recommendation 21 - There has also been significant concern about the investment regime in the Trade in Services Agreement as well