Submission to Australian Government Department of Foreign Affairs and Trade Review of Australia’s Bilateral Investment Treaties

Abstract

This paper is a submission made in response to a discussion paper issued by the Australian Government Department of Foreign Affairs and Trade in August 2020, as part of a review of Australia’s Bilateral Investment Treaties (BITs). This paper addresses concerns about specific provisions in Australia’s existing BITs, and explains alternative approaches that Australia should, in my view, consider in any renegotiation of its existing BITs. This paper addresses five key topics. Part 2 makes suggestions as to how Australia could further clarify the protection against indirect expropriation, if it chooses to include this protection in any renegotiated agreements. It highlights that provisions aimed at clarifying the indirect expropriation standard in Australia’s more recent Free Trade Agreements (FTAs) and BITs vary substantially, and these variations could have a significant effect on the regulatory space afforded to Australia. Part 3 summarizes concerns about the fair and equitable treatment (FET) provisions in Australia’s BITs and explains the options facing Australia. In summary, Australia could shift to utilizing FET provisions that contain a closed list of the categories of conduct that violate the standard, or could omit any reference to FET, and instead include an exhaustive statement of the types of conduct that are understood to violate the customary international minimum standard. Part 4 addresses general exceptions provisions, which are not included in Australia’s older BITs. It assesses the options facing Australia, including whether to utilize such provisions, and if they are utilized, additional clarifications or alternative drafting approaches that should be considered, beyond Australia’s practice in its recent FTAs and BITs. Part 5 turns to provisions that reaffirm the treaty parties’ right to regulate, which have sometimes been utilized by Australia in the investment chapters of its FTAs. It suggests that these provisions provide interpretative context that may inform how investment protection obligations are construed, and explains additional drafting options that Australia should consider, beyond its existing FTA practice, in any renegotiation of its BITs. Part 6 addresses provisions that exclude certain categories of public welfare measures from investor-state dispute settlement (ISDS), an area where Australia’s recent treaty practice, mainly in the FTA context, has been particularly innovative. It makes recommendations as to how this aspect of Australia’s treaty practice should be consolidated in any renegotiation of its BITs.