Legal News & Analysis – Asia Pacific – Australia – Dispute Resolution

Investor-state dispute settlement (ISDS) provisions grant foreign investors the right to access an international tribunal if they believe actions taken by a host government breach commitments made under a Free Trade Agreement (FTA) or investment treaty. Under the former Australian Labour Government, ISDS provisions were not supported on the grounds that they conferred greater legal rights on foreign businesses than domestic businesses and constrained the Government’s ability to make laws on social, environmental and economic matters.

Until recently, the new coalition Government had not published its official position on ISDS provisions, despite there being some signs (e.g. the inclusion of ISDS provisions in the Korea-Australia Free Trade Agreement) that it might depart from the position adopted by the former Labour Government. However, following the recent publication of a FAQs section regarding ISDS on the Department of Foreign Affairs and Trade website, the official position of the coalition Government is now clear. ISDS provisions will be included on a case-by-case basis. They will not be included if they restrict Australia’s capacity to govern in the public interest — including in areas such as public health, the environment and the economy. However, according to the coalition Government, the rights of governments to make decisions in the public interest can be protected by the incorporation of appropriate safeguards in ISDS provisions.

Despite the shift in position, discussions are expected to continue in 2014 regarding the advantages and disadvantages of ISDS and the appropriate drafting of ISDS provisions. In particular, concerns remain regarding the effectiveness of ISDS provisions in increasing inbound foreign direct investment, and the ability of ISDS provisions to favour overseas investors.

For further information, please contact: