Via Luke Peterson, I see that Australia, in a recent Trade Policy Statement, has come out firmly against investor-state dispute settlement in trade agreements:
Some countries have sought to insert investor-state dispute resolution clauses into trade agreements. Typically these clauses empower businesses from one country to take international legal action against the government of another country for alleged breaches of the agreement, such as for policies that allegedly discriminate against those businesses and in favour of the country’s domestic businesses.
The Gillard Government supports the principle of national treatment – that foreign and domestic businesses are treated equally under the law. However, the Government does not support provisions that would confer greater legal rights on foreign businesses than those available to domestic businesses. Nor will the Government support provisions that would constrain the ability of Australian governments to make laws on social, environmental and economic matters in circumstances where those laws do not discriminate between domestic and foreign businesses. The Government has not and will not accept provisions that limit its capacity to put health warnings or plain packaging requirements on tobacco products or its ability to continue the Pharmaceutical Benefits Scheme.
In the past, Australian Governments have sought the inclusion of investor-state dispute resolution procedures in trade agreements with developing countries at the behest of Australian businesses. The Gillard Government will discontinue this practice. If Australian businesses are concerned about sovereign risk in Australian trading partner countries, they will need to make their own assessments about whether they want to commit to investing in those countries.
Luke's article notes the following:
Jonathan Bonnitcha, a doctoral candidate in law at Oxford University, and the co-author of one of several dozen submissions made to the Australian Productivity Commission last year, says that it is important to note that the Australian Productivity Commission could find no compelling economic rationale for the inclusion of investor-state arbitration mechanisms in its trade and investment agreements. As reported by IAReporter last year**, a draft report of that same Commission had generated a flurry of debate as to the merits and rationale of investor-state arbitration provisions, and lead to a final report wherein the Commission concluded that there were few clear benefits, and several worrying risks, associated with such provisions.
On Bonnitcha’s view, the government’s new policy may be explained more by the Commission’s failure to find an economic justification for a core plank of Australia’s trade policy, as by concerns that Australia will be sued by foreign investors.
I found this point interesting, as it relates to my post from the other day about measuring the benefits of trade agreements. As I said there, you don't see much economic analysis of trade agreement provisions other than tariff/quota reductions. It appears that for Australia, this lack of analysis provided a reason to move away from investor-state.
