The final negotiated text of the Trans-Pacific Partnership (“TPP”), a multilateral treaty still subject to ratification, has been released. The TPP is a free trade agreement among 12 Pacific Rim countries representing about 40 per cent of the global economy, including Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. Colombia is considering joining the trade bloc. Whilst China does not participate in the TPP, a separate bilateral trade and investment deal is currently under negotiation between the US and China.

Chapter 9 of the TPP sets out a legal framework for the protection of cross-border investments between the member countries and includes a related investor-State dispute settlement (“ISDS”) regime for breaches of an obligation under that chapter or for breaches of an investment authorisation or investment agreement. Chapter 9 reflects the current state of affairs in international investment law in many respects and addresses a variety of concerns that have been part of the public discourse about ISDS in recent years. Some key provisions of note are:

  • Guidance on how to compare “like circumstances” in the interpretation of two widely used comparative guarantees under international investment law: national treatment (Article 9.4) and most-favoured-nation (“MFN”) treatment (Article 9.5).
  • The scope of the substantive MFN guarantee does not extend to international dispute resolution procedures or mechanisms, or procedural guarantees (Article 9.5(3)).
  • Minimum standard of treatment should be accorded to covered investments in accordance with applicable customary law principles, including the standards of fair and equitable treatment (“FET”) and full protection and security, which are narrowly defined; the FET standard excludes the notion of legitimate expectations (Article 9.6).
  • State parties are not entitled to impose or enforce performance requirements in connection with the establishment, acquisition, expansion, management, conduct, operation or sale or other disposition of an investment of an investor (regardless of whether or not that investor is a national of a State party); for example, a State may not require an investor to achieve a certain level of domestic content (Article 9.9(1)(b)).
  • The mandatory consultation and negotiation period prior to the submission of an arbitration claim is six months (Article 9.18(1)).
  • In claims involving a breach of an investment authorisation or investment agreement, the respondent may make a counterclaim in connection with the factual and legal basis of the claim or may rely on a set-off claim (Article 9.18(2)).
  • A claimant must deliver to the respondent a notice of its intention to submit a claim to arbitration at least 90 days before submitting the claim to arbitration (Article 9.18(3)).
  • Claims can be subject to the ICSID Convention and Rules of Procedure for Arbitration, the ICSID Additional Facility Rules, UNCITRAL Arbitration Rules, or, any other arbitration rules (Article 9.18(4)).
  • There is a limitation period of three years and six months to bring a claim (Article 9.20(1)).
  • The ICSID Secretary General shall serve as the appointing authority in the event that the parties cannot agree on a presiding arbitrator (Article 9.21(2)).
  • There will be a new Code of Conduct for Dispute Settlement Proceedings (Article 9.21(6)).
  • The respondent may object that, as a matter of law, a claim submitted is not a claim for which an award in favour of the claimant may be made, or that a claim is manifestly without legal merit (Article 9.22(4)).
  • Tribunals are to publish their proposed awards to the disputing parties prior to finalising awards (Article 9.22(10)).
  • The door has been left open for an appeal mechanism to be introduced by the State parties (Article 9.22(11)).
  • The respondent shall make pleadings, transcripts of hearings and orders, awards and decisions of the tribunal available to the public, and hearings shall be held in public (Article 9.23).
  • Proceedings may be consolidated where claims have a question of law or fact in common and arise out of the same events or circumstances (Article 9.27).
  • A tribunal’s award may only be for monetary damages (and any applicable interest) or restitution of property (specific performance is not an available remedy) (Article 9.28(1)).
  • A party cannot seek enforcement of a final award until revision or annulment proceedings have been completed or 120 days have elapsed from the date the award was rendered and no disputing party has requested revision or annulment (Article 9.28(9)).
  • Factors to be considered when determining if there has been an indirect expropriation are set out at Annex 9-B.
  • There are specific provisions with regard to claims in relation to the purchase or restructuring of sovereign debt (i.e. bonds) (Annex 9-G).

The full text of the TPP is available here

State sovereignty concerns addressed

The TPP responds to concerns regarding interference with State sovereignty raised in respect of the TPP specifically and ISDS generally. Its preamble recognises the State parties’ “inherent right to regulate and resolve to preserve the flexibility of the Parties to set legislative and regulatory priorities, safeguard public welfare, and protect legitimate public welfare objectives, such as public health, safety, the environment, the conservation of living or non-living exhaustible natural resources, the integrity and stability of the financial system and public morals”. Article 9.15 safeguards a State’s right to adopt, maintain or enforce “any measure otherwise consistent with [the investment chapter] that it considers appropriate to ensure that investment activity in its territory is undertaken in a manner sensitive to environmental, health or other regulatory objectives”. The seemingly wide regulatory safeguard for the State is limited by the words “otherwise consistent with [the investment chapter]”, the precise meaning of which is likely to be contended in future disputes. 

States’ right to regulate in the public interest is further safeguarded in Annex 9-B of the TPP, which includes a “shared understanding” on what qualifies as expropriation: “[n]on-discriminatory regulatory actions by a party that are designed and applied to protect legitimate public welfare objectives, such as public health, safety and the environment, do not constitute indirect expropriations, except in rare circumstances.” The precise meaning of this provision is likely to be tested in future cases. 

In what appears to be a response to the plethora of recent renewable energy claims brought against the Czech Republic and Spain, Article 9.6(5) states that “the mere facts that a subsidy or grant has not been issued, renewed or maintained, or has been modified or reduced, by a Party, does not constitute a breach of this Article, even if there is loss or damage to the covered investment as a result”

Article 9.7(6) contains an exception to the provision that a State’s decision not to issue, renew or maintain a subsidy or grant, or decision to modify or reduce a subsidy or grant standing alone, does not constitute an expropriation. The exception applies where there is a “specific commitment under law or contract to issue, renew or maintain” a subsidy or grant. 

Jurisdictional limitations

Definition of investor

The TPP precludes “treaty shopping” by excluding so-called “shell” companies from the definition of investors eligible to invoke the ISDS mechanism in the TPP. The definition of investor states that “an enterprise of a Party means an enterprise constituted or organised under the law of a Party, or a branch located in the territory of a Party and carrying out business activities there”.

Further, Article 9.14 provides that a State may deny the benefits of Article 9 to an investor of another State if the investment is owned or controlled by a person of a State that is not a party to the TPP or of the denying State, and the investment does not involve any substantial business activities in the territory of any other State which is party to the TPP other than the denying State. 

Definition of investment 

In Salini v Morocco (ICSID Case No Arb/00/04) (Decision on Jurisdiction, 23 July 2001), the tribunal identified five criteria indicative of the existence of an investment, namely: (1) a substantial commitment or contribution; (2) duration; (3) assumption of risk; (4) contribution to economic development; and (5) regularity of profit and return. 

The definition of investment in the TPP appears to adopt the criteria from points (1), (3) and (5) above: 

“the commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk”

As to a previously disputed question of whether or not an arbitral award constitutes an investment that can be enforced via an investment treaty claim, the TPP provides that the ISDS mechanism is not available to enforce a prior judicial or administrative decision: “investment does not mean an order or judgment entered in a judicial or administrative action”. It remains to be seen whether this language covers arbitral awards. 


Once signed and ratified by all State parties, the TPP is expected to provide meaningful protection to cross-border investments across the 12 Pacific Rim countries participating in the wider trade deal. At the same time, the host States involved will enjoy increased safeguards of their sovereign rights, especially their right to regulate. All things considered, the investment chapter of the TPP offers a balanced approach to the protection of foreign investments at the level of international law, which may influence other global or regional deals being negotiated around the world.