A new CIS Research Report released this week makes a strong case for ISDS provisions in our free trade agreements, helping to protect Australian investors from illegal foreign government actions.
Investor-State Dispute Settlement (ISDS) is a legal provision in international agreements that enables foreign investors to take host states to an arbitral tribunal for alleged treaty breaches. The goal of investor-state arbitration is to provide a de-politicised, unbiased and law-based adjudication forum to settle international disputes.
The report debunks the widespread and unfounded myths about investor-state arbitration, showcasing it as a beacon for the rule of law in international affairs. With ISDS provisions in 21 bilateral treaties and seven free trade agreements, investor-state arbitration has served Australia’s national interests well, promoting a better global rule of law environment along with protecting Australian investors.
Contrary to what ISDS critics claim, it is wrong to fear Australia can lose sovereignty in free trade agreements such as the Trans-Pacific Partnership, currently under intense parliamentary scrutiny. There is nothing in ISDS arrangements that cannot be found in other legal instruments and procedures, with most ISDS cases overseen either by the World Bank’s or the United Nations’ arbitration forums.
The misconceptions behind much of the recent scaremongering around free trade agreements are nothing more than myths and, at times, outright protectionist bias. At the core of ISDS protections is that no one is above the law — not even the King — which is a legal principle established since the Magna Carta some 800 years ago.
The report also proposes effective policy recommendations to address valid concerns.
First, transparency of ISDS cases should be the rule as 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.
There is nothing to fear from investor-state arbitration and much to welcome it in our international commitments. And that’s the beauty of the rule of law: those who owe nothing have nothing to fear — and much to gain.
Dr Patrick Carvalho is a Research Fellow at the Centre for Independent Studies and author of the research report Investor-State Arbitration: Debunking the Myths released this week.