The globalisation of higher education brings providers in direct contact with the complex network of rules governing international trade in services and foreign investment, including multilateral, plurilateral and bilateral free trade agreements and investment treaties. One such agreement is the recently signed Trans-Pacific Partnership Agreement (TPP) is highly relevant to Australian higher education providers considering operating overseas, particularly in key South East Asian markets such as Vietnam, Malaysia and Singapore.
The TPP is a regional free trade agreement between Australia and the following 11 countries – Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States and Vietnam. The TPP contains 30 chapters dealing with a range of trade and trade-related issues. Most relevant to the education sector are the chapters dealing with investment (chapter 9), trade in services (chapter 10) and electronic commerce (chapter 14) but the chapters on government procurement (chapter 15) and labour (chapter 19) are also potentially significant.
Negotiations on the TPP concluded on 5 October 2015 and the agreement was signed on 4 February 2016. The TPP is currently working through each of the 12 signatories' domestic implementation and ratification procedures.
Although the TPP is not yet in force, Australian higher education providers should ensure they are familiar with the key changes introduced by the TPP so that they are well positioned to take advantage of increased market access and investment protection regimes once the TPP comes into force. In doing so, Australian higher education providers also need to understand the interplay between the domestic regulatory framework and their overseas activities.
The TPP does not replace existing free trade agreements with TPP countries. However, it provides new market access opportunities and deals with some contemporary issues that are not addressed in the existing body of Australian FTAs.
Cross-Border Trade in Services
Chapter 10 of the TPP contains commitments into relation to 'cross-border trade in services', defined as the supply of a service:
(a) from the territory of a Party into the territory of another Party;
(b) in the territory of a Party to a person of another Party; or
(c) by a national of a Party in the territory of another Party,
but does not include the supply of a service in the territory of a Party by a covered investment (article 10.1).
The provision of education services through online courses or various partnership arrangements with local institutions would fall within the broad spectrum of cross-border trade in services. If Australian higher education providers set up offshore campuses in foreign jurisdictions they may be classified as 'investments' and covered by the investment protection regime discussed later in this article.
The TPP includes core national treatment, most-favoured nation treatment, market access and local presence commitments. In summary, this means that:
- each TPP country must treat the services and service suppliers of another TPP country no less favourably than it treats, in like circumstances, its own services and service suppliers;
- each TPP country must treat the services and service suppliers of another TPP country no less favourably than it treats, in like circumstances, the services and service suppliers of any other country;
- TPP countries cannot impose quantitative restrictions on the supply of services (e.g. limits on the number of service suppliers) or restrict or require specific types of legal entity or joint venture through which a service supplier may supply a service; and
- no TPP country can require a service supplier of another TPP country to establish or maintain a representative office or affiliate, or be resident, in its territory in order to supply a service.
TPP countries have also committed to ensuring all measures of general application, such as accreditation or authorisation requirements, are administered in a reasonable, objective and impartial manner and to allow payments relating to cross-border services to be made freely into and out of their territories.
The TPP operates on a "negative list" basis. This means that the TPP obligations apply to the supply of all services except where a "non-confirming measure" has been specified in one of two country-specific annexes. This structure means higher education providers considering supplying services overseas need to obtain specific advice on the commitments and measures that apply to that particular foreign jurisdiction.
The TPP and online education
Chapter 14 of the TPP contains commitments relating to the free flow of information and data through the internet and is therefore relevant to Australian higher education providers delivering services through online learning platforms.
Each TPP country has committed to allowing the cross-border transfer of information by electronic means, including personal information, when the activity is for the conduct of the business of a service supplier. This commitment is subject to measures that achieve legitimate public policy objectives provided they are proportionate and do not constitute arbitrary or unjustifiable discrimination or a disguised restriction on trade.
Notably, the chapter also prohibits:
- the imposition of customs duties on electronic transmissions by TPP countries;
- requiring service suppliers to use or locate computing facilities in a country as a condition for conducting business in that country.
The Chapter provides for TPP countries to adopt certain safeguards, including for the protection of personal information.
In conjunction with the conclusion of the TPP, Australia and Vietnam have agreed to further cooperate on a pilot program under which Australian universities would deliver courses wholly or substantially online to Vietnamese students. The agreement contemplates that Australian universities wishing to submit an expression of interest to participate in the pilot would not be required to have a commercial presence in Vietnam. The pilot program is envisaged as the first step towards a guarantee that Australian providers will be able to deliver higher education and adult education training in Vietnam wholly or partially online. The agreement will come into effect once the TPP enters into force.
Investment protection for you
Australian higher education providers who set up a physical presence in a TPP country, such as an offshore campus, may be covered by the investment protection regime in chapter 9 of the TPP.
Key investment protections include:
- national treatment;
- most-favoured nation treatment;
- fair and equitable treatment, including due process in criminal, civil or administrative proceedings;
- full protection and security, including police protection;
- protection against expropriation except for a public purpose, in a non-discriminatory manner on payment of fair market compensation and in accordance with due process of law;
- free transfer of funds relating to an investment;
- prohibition on 'performance requirementsi such as local content; and
- freedom to appoint senior management positions of any nationality.
Like the services chapter, the investment regime operates on a "negative list" basis. Accordingly, it is essential for higher education providers to obtain country-specific advice in relation to any potential or existing investment in a TPP country.
Importantly, the TPP includes investor-state dispute settlement, or ISDS, provisions which allow investors to bring claims directly against foreign governments for breach of the investment obligations contained in the TPP. The TPP framework provides for investor-state disputes to be submitted to arbitration under the ICSID or UNCITRAL arbitration rules or any other agreed arbitration rules.
ISDS is a controversial feature of the TPP but it gives Australian entities investing overseas a mechanism to enforce investment protections against foreign governments without the need to seek recourse through the Australian government.
Of course, the TPP also opens up the Australian education market to foreign competition (subject to relevant carve outs). The agreement has been subject to criticism, including in relation to the rights given foreign providers operating, or seeking to operate, in Australia. However the TPP, if it enters into force, will be an important element in the globalised world of higher education. Navigating the TPP is complex, particularly given the overlapping nature of existing multilateral treaties (such as GATS) and bilateral agreements (such as Australia's existing free trade agreements with Malaysia and Singapore). Australian higher education providers with an existing presence in TPP countries and those considering expanding into these jurisdictions should closely monitor the progress of the TPP and carefully consider the application of the agreement to their activities.