The Trans-Pacific Partnership and Investor State Dispute Settlement

The Trans-Pacific Partnership (or TPP) has been under negotiation for almost seven years now, and is currently awaiting approval. If ratified and put into effect it would be the largest trade-agreement in the world.

tpp-countries-map

The TPP would include 12 countries. Source.

The TPP will apparently strengthen the economies of all member countries by reducing or removing trade-tariffs and other non-tariff barriers to trade. The plan is that this will boost trade between nations.

While this sounds beneficial, the TPP also includes a controversial investor-state dispute settlement (ISDS) provision. This would give investors the ability to sue a country’s government for introducing legislation that harms their investments.

Why should I care about ISDS?

The investor-state dispute settlement provision would leave TPP member countries exposed to expensive legal cases from multinational corporations. These cases could be over environmental, health, or public interest regulations. According to Robert French, the chief justice of Australia’s high court, and other legal experts, ISDS is an unfair legal system. It has no independent judges, no precedents, and no appeals.

“Arbitral tribunals set up under ISDS provisions are not courts, nor are they required to act like courts, yet their decisions may include awards which significantly impact on national economies and on regulatory systems within nation states.” – Chief Justice RS French

The really scary part of ISDS is that disputes would be handled by secret, extrajudicial tribunals, presided over by corporate lawyers instead of judges.

If you’re wondering what an ISDS claim could look like in practice, the German government has been the victim of two ISDS claims from a Swedish energy company called Vattenfall. The first, over restrictions implemented to protect the environment, was worth €1.4 billion and forced Germany to remove the restrictions. The second time Vattenfall took action over Germany’s decision to phase-out nuclear energy after the disaster at Fukushima, demanding €3.7 billion.

ISDS claims don’t happen infrequently either. A report from GetUp! has warned that the number of ISDS cases worldwide has been steadily increasing annually, reaching a record high in 2015. The report also reveals that multinational companies based in Canada and the US are the most litigious in the world. If the TPP is ratified Australia would be exposed to multi-million dollar ISDS cases from both, potentially facing huge litigation costs.

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The number of ISDS cases worldwide by year. Source.

Dr Kyla Tienhaara, from the Australian National University, likens the ISDS provisions included in the TPP to those included in the North American Free Trade Agreement (NAFTA) which she says led to dozens of legal cases being made against Canada by US corporations. According to PublicCitizen, a US based advocacy group, Canada has been forced to pay out over US$440 million is ISDS cases.

That could never happen in Australia, right?

Multi-billion dollar corporations suing Australia might seem unlikely, but it’s happened before. In 2011 Philip Morris, an international cigarette and tobacco company, tried to take legal action against Australia for its plain-packaging laws. They did this in a very roundabout way by shifting some assets to their Hong Kong headquarters, then using a clause from a 1993 trade-agreement between Australia and Hong Kong to sue Australia in an ISDS court.

What can I do?

If this sounds unfair to you there are a number of things you can do to stop the TPP. Sign a petition from GetUp!, join the Greens’ campaign, or even send a letter showing your concern to your local MP, the Prime Minister, or the Minister for Trade, Tourism and Investment.

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One thought on “The Trans-Pacific Partnership and Investor State Dispute Settlement

  1. The ISDS provisions do not give investors the ‘ability to sue a government for introducing legislation that harms their investments’. They can raise an arbitration dispute if they can demonstrate that the country has *breached the agreement*, thus harming their investment.

    ISDS tribunals under TPP would not, as you suggest they would, be secret.

    You mention Philip Morris’ action against Australia. Why do you not also mention that it failed?

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