Investor-State Arbitration: The Roadmap from the Multilateral Agreement on Investment to the Trans-Pacific Partnership Agreement
| Author | Ling Ling He,Razeen Sappideen |
| DOI | 10.22145/flr.40.2.4 |
| Published date | 01 June 2012 |
| Date | 01 June 2012 |
| Subject Matter | Article |
INVESTOR-STATE ARBITRATION: THE ROADMAP
FROM THE MULTILATERAL AGREEMENT ON
INVESTMENT TO THE TRANS-PACIFIC PARTNERSHIP
AGREEMENT
Razeen Sappideen and Ling Ling He
ABSTRACT
Capital exporting countries have attempted to protect t he overseas investments of their
multinational corporations (MNC) against host nation governments expropriating
these investments, li miting the right to repatria te profits, or subjecting t he withdrawal
of their investments to heavy penalties. The aborted Multilateral A greement on
Investment (MAI) of the mid-1990s was an attempt at transferring these co ncerns to a
settled legal framework between nations. Some limited expression of this is found in
the provisions of the World Trade Org anisation (WTO) Dispute Settlement Understanding ,
while more substantive assertions are fo und in the investor-state dispute set tlement
(ISDS) provisions of bilateral trade and investment agreements entered into betwee n
developed and developing economies. However, recent legal challenges and
associated public relations campaigns by MNC directed at Public Law and Health
measures have caused governments to reassess the situation. A classic example of this
has been the cha llenge by tobacco companies against the plain cigarette packaging
legislation introduced by the Canad ian and Australian governments. The Australian
Government's response to this through its statement of position in respect of future
bilateral agreements and its Tobacco Plain Packaging Act 2011 (Cth)
1
is equally path
breaking. This article exa mines the dramatic turnar ound in perspective of States in
respect of Investor -State arbitration, and its impact on the Trans-Pacific Partn ership
Agreement (TPP) currently being negotiated.
________________________________________________________________________________
Professor of Law, University of Western Sydney. The author can be contacted at
r.sappideen@uws.edu.au.
PhD Candidate in Law (University of Western Sydney); LLM, LLM Hons (University of
Western Sydney); LLB (Zhongnan University of Economics and Law, China). The author
can be contacted at l.he@uws.edu.au.
1
The constitutional validity of the Act has been upheld by the High Court of Australia in its
decision released on Wednesday 15 August 2012. However, the Court's reasons for making
this decision have not yet been released. See High Court of Australia 'JT International SA v
Commonwealth of Australia; British American Tobacco Australasia Limited & Ors v
Commonwealth of Australia [2012] HCA 30' (Judgment Summary, 15August 2012).
208 Federal Law Review Volume 40
____________________________________________________________________________________
INTRODUCTION
Countries compete with each other to attract foreign investment for a number of
reasons. In addition to the economic benefits that an infusion of new capital brings into
the country's economy and the prospect of new employment opportunities, foreign
investment also results in the introduction of new technology and with it increased
competition into a nd out of the economy. Prior to the 1994 WTO Agreements, cross-
border investment was mainly by developed world capital exporting countries such as
the United States, United Kin gdom, Germany, France, and Japan. Their main concern
was protection of the capital investments made by their multinational entities from
expropriation, as well as their ability to repatriate profits against laws enacted by
developing country host nations. Partly prompted by this, the WTO agreements
provide for dispute settlement through a process of consultation, mediation , and
arbitration outside the framework of home and host country laws. Alongside the WTO
agreements, developing countries also entered into many regional trade agreements at
the behest of the advanced western ec onomies. These new regional trade agreements
also provided for trade disputes to be settled through the arbitration process outside of
national courts. However, the accompanying benefits of trade have at the same time
enabled larger developing world economies such as Brazil, Russia, India, and China
(BRIC) to a lso become capital exporters, some of it into developed economies, thereby
making inflows and outflows of foreign investment a two-way process. The latter,
alongside the realisation that multinational entities of whatever ilk can effectively
challenge laws enacted by a host nation for the welfare of its citizens, has caused
developed and developin g nations to rethink their strategy of dispute settlement
systems outside the national legal system. This paper evaluates this journey in foreign
investor dispute settlement.
The discussion is structured as follows. Part I examines the efforts by members of
the Organisation for Economic Cooperation and Development (OECD) to set up a
multilateral investment medium through the Multilateral Agreement on Investment
(MAI) in the 1990s and its transmission through the WTO agreements to the present
investor-state dispute settlement system of bilateral trade and investment agre ements.
Part II looks at the investor-state disputes fro m 2000 to 20 10, and notes the shift from
disputes being initiated by investors from developed countries, to disputes being also
initiated by investors from newly emerging capital exporting countries against
developed country hosts. In this context, Part III examines the Australian
Government's rece nt move to discontinue the application of investor-state arbitration
provisions from its future bilateral a greements as a reassertion of its sovereignty,
signifying thereby a strong rejection of the attempted MAI arrangement empowering
MNCs. Part IV examines the Trans-Pacific Partnership (TPP) Agreement being
currently negotiated. Part V concludes the discussion.
I FROM MAI TO BILATERAL AGREEMENTS
The WTO agreements entered into in 1994, ha ve since resulted in the world economy
being much more interlinked benefiting all of its me mbers and from which the BRIC
countries have been able to benefit considerably. With the willingness of developing
economies to attract foreign investment and the desire of developed economies to
protect the investment of t heir multinational corporate investors overseas, a number of
investment treaties have emerged resulting in a complex network of bilateral
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