MEDIA RELEASE: Australia loses no sovereignty in trade agreements with ISDS

It is wrong to fear Australia can lose sovereignty in free trade agreements such as the Trans-Pacific Partnership — currently under intense parliamentary scrutiny — new research by Centre for Independent Studies economist Dr Patrick Carvalho finds.

Investor-State Dispute Settlement (ISDS) arrangements, included in the past four trade agreements negotiated by Australia, do not breach our sovereignty, Dr Carvalho outlines in his research report Investor-State Arbitration and the Rule of Law: Debunking the Myths (being released on April 13).

Access the research summary Snapshot: https://www.cis.org.au/wp-content/uploads/2016/04/rr13-snapshot.pdf

Access the full research report: https://www.cis.org.au/wp-content/uploads/2016/04/rr13.pdf

“The first and only ISDS case against the Australian government (on tobacco packaging legislation) has been recently dismissed,” Dr Carvalho says.

“The misconceptions behind much of the recent scaremongering around free trade agreements are nothing more than myths and, at times, outright protectionist bias,” Dr Carvalho says.

“First, investor-state arbitration provisions in the recent agreements are conscious acts of sovereignty, with nothing in their arrangements that cannot be separately found in other legitimate legal instruments and procedures.

“Second, ISDS tribunals are not allowed to overturn national legislation.

“Third, ISDS simply provides the necessary means to enforce international treaty-based agreements, ensuring Australian investors are protected in overseas markets.

“Similarly, there is no truth behind the myth that ISDS benefits only the big multinationals. A great majority of ISDS claims are initiated by either individual and small-to-medium enterprises, with only 8% of companies concerned actually classified as multinational corporations.”

The report also proposes effective policy recommendations to address valid concerns.

“There are three areas that need further improvement, which fortunately are being sought in recent treaty negotiations, including the TPP,” Dr Carvalho says.

“First, transparency of ISDS cases should be the rule. Indeed, public scrutiny of ISDS rulings is critical.

“Second, ISDS provisions should also ensure a well-delimited and legitimate use of investor-state arbitration. The real challenge is to get the Goldilocks balance between proper limitations and valid coverage — for which the recent TPP investment chapter constitutes a good yardstick.

“Third, we need to pay attention for the Consistency of ISDS rulings and provisions. In particular, Australia should maintain its international efforts to implement an ISDS appellate mechanism. And, whenever possible, our previous ISDS commitments should be realigned to the latest advancements in investor-state arbitration provisions.”

The report makes a strong case for ISDS in Australia’s foreign affairs.

“In the past 30 years since Australia’s first ISDS-protected treaty, the world has become a safer place for Australian investors, with investor-state arbitration acting as a powerful and effective Sword of Damocles against unlawful foreign government acts — and in three occasions indeed providing a neutral and de-politicised forum to assert a just treatment of Australian interests overseas.

“Domestically, ISDS provides an extra check on our judicial and political systems to ensure they remain fair and expedient in the treatment of very welcome international investments.

“Further, ISDS brings little disruption to our domestic affairs, given the high standards of Australia’s rule of law culture,” Dr Carvalho says.

Dr Patrick Carvalho is a Research Fellow at the Centre for Independent Studies.