In recent years, there has been a rapid increase around the world in international investment treaty claims being brought by foreign investors against host states for acts by those states which have breached standards of conduct required by international investment treaties.
International investment treaties protect foreign investors by:
- providing for certain minimum standards of protection of foreign investments (for example, fair and equitable treatment), and
- providing for investor-state dispute resolution procedures which permit investors to commence international arbitration proceedings against the foreign state in their own name (rather than having to conduct proceedings in the courts of the host state).
The benefit for states is the increased flow of foreign investment arising from a more stable and certain investment environment.
In April 2011, the Australian Government announced that it would ‘discontinue [the] practice of including investor-state dispute resolution procedures in trade agreements’. Such a measure went against the international trend which has seen a rapid increase in the number of international investment treaties (now numbering in excess of 2,500 worldwide) being implemented which include, as a core component, investor-state dispute resolution procedures.
However, in November 2011, at the summit of the APEC leaders, the negotiating states of the Trans-Pacific Partnership Agreement issued a joint statement outlining the key features of the proposed free trade agreement between the USA, Chile, New Zealand, Singapore, Australia, Peru, Vietnam, Brunei Darussalam, and Malaysia. The statement, which was endorsed by the Australian Government, announced that ‘[t]he investment text will include provisions for expeditious, fair, and transparent investor-State dispute settlement subject to appropriate safeguards, with discussions continuing on scope and coverage. The investment text will protect the rights of the TPP countries to regulate in the public interest.’
In any event, while the government worked through its policy on international investment treaties, 2011 saw the first ever international investment treaty action commenced by a foreign investor against Australia. Late in 2011, Philip Morris commenced action against Australia pursuant to Australia’s bilateral investment treaty with Hong Kong over plans by the Australian government to introduce plain packaging in Australia for tobacco products.
International investment treaty arbitrations continue to increase and despite the different statements made by the Australian Government this year, are still of importance to companies investing or considering investments in countries that are politically or economically unstable, particularly for long term or major structural investments.