Jurisdiction - Australia
Reports and Analysis
Australia – The Protection Of Foreign Investment.

28 December 2012


Legal News & Analysis – Asia Pacific – Australia – Regulatory & Compliance


Foreign direct investment into Australia is protected against certain government measures by a network of international treaties Australia has entered intowith foreign states.


Those treaties (bilateral investment treaties and other multi-national treaties) provide minimum standards which Australia has to observe when dealing with foreign investments and allow the investor to seek redress in case a violation of these standards has occurred. Foreign investors can benefit from these rights if they are a national of a state with which Australia has entered into 
such an investment treaty.


To assist with the administration of investment treaty cases and ensure the enforceability of arbitral awards rendered against states, the Convention for the Settlement of Investment Disputes Between States and Nationals of Other States (the ICSID Convention) was agreed in 1965. There are more than 140 signatory states to the ICSID Convention to date including Australia


If there is a relevant investment treaty, investors can initiate an arbitration against Australia even where there is no contractual agreement with the government of Australia. 

There are three broad categories of protections afforded by most investment treaties:


  • Absolute rights, a standard not dependent on what is given to nationals of the host state. These rights include the right of fair and equitable treatment, the right of full protection and security, and the right to be protected against uncompensated takings (ie. expropriation).
  • Contingent rights, a standard that depends upon the protection given to national investors of the host state or other foreign investors. These rights include the right to national treatment (non-discrimination in favour of nationals) and the right to most favoured nation treatment (elevating the protections afforded to the recipient to the ‘most favoured’ treatment given to other nations by the host state). 
  • The minimum standard in customary international law. This is a broad catch-all that may apply even in the absence of a specific treaty right, and includes the right to be protected against denial of justice by courts and other state bodies.

If there is a breach of a treaty right, the standard for compensation is typically ‘prompt, adequate and effective’ compensation.

However, not every foreign investor can obtain these rights, for example, if they are not a national of a state with which Australia has entered into a relevant investment treaty.

In April 2011 the Gillard Government announced that it will discontinue the practice of including investor-state dispute settlement in trade agreements. However, existing investment treaties containing these agreements, of which there are a considerable number, will continue to apply. Hence, foreign investors may still be able to benefit from the investment treaty protections within existing agreements.








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