ISDS allows foreign investors to sue our Government

Investor-State Dispute Settlement

ISDS pitfalls

Not a fair legal system

The tribunals consist of investment lawyers who can continue to be practicing lawyers, with obvious conflicts of interest. Australia’s High Court Chief Justice and other legal experts have said that ISDS is not a fair legal system because it has no independent judges, no precedents and no appeals. There are over 850 outstanding cases, many against health, environment and other public interest laws.

'Safeguards' wont work

Public health campaigning has resulted in a specific TPP clause to exclude future tobacco regulation from ISDS cases. This is a victory and should prevent future cases like the Philip Morris case against our plain packaging law. But the need for the specific exclusion of tobacco regulation shows that the general “safeguards” for other public interest laws are weak and will not prevent corporations from bringing cases.

Increasing numbers of ISDS cases against public interest legislation

Recent ISDS cases against health, environment and other public interest legislation include:

  • Public health: The Swiss pharmaceutical company Novartis threatened to sue the Colombian government over plans to reduce the price of a patented medicine to treat leukaemia. Read about more cases here.

  • Environment: the US Bilcon company won millions of dollars of compensation from Canada of because its application for a quarry development was refused by a local government for environmental reasons. The US Westmoreland coal mining company is suing the Canadian government because the state of Alberta decided to phase out coal-powerd energy. Read about more cases here 

  • Workers wages: The French Veolia company is suing the Egyptian government over a contract dispute in which they are claiming compensation for a rise in the minimum wage.

  • Indigenous land rights: An ISDS tribunal ordered the Peruvian government to pay $24 million to the Canadian Bear Creek mining company because it cancelled a mining license after the company failed to obtain informed consent from Indigenous land owners about the mine, leading to mass protests. ISDS rewarded the company for ignoring Indigenous land rights. 

  • Privatisation: Mexican transport company ADO has threatened Portugal with a €42 million ISDS case after it cancelled plans to privatise part of Lisbon's public transport network. 

Philip Morris tobacco company vs Australia

Even if a government wins the case, defending it can take years and cost tens of millions of dollars. For example, tobacco companies lost their claim for compensation for Australia’s 2011 plain packaging legislation in Australia’s High Court.  The US-based Philip Morris company did not accept this decision under Australian law. The company could not sue under the US-Australia FTA because that agreement had no ISDS clause. The company found a Hong Kong-Australia investment agreement containing ISDS, shifted some assets to Hong Kong, claimed to be a Hong Kong company and sued the Australian Government, claiming billions in compensation. It took over four years and millions in legal fees for the tribunal to decide the threshold issue in December 2015 that Philip Morris was not a Hong Kong company.

Although the tribunal in July 2017 eventually awarded a proportion of the legal and arbitration costs to Australia, the proportion and amount of the costs were blacked out in the tribunal’s cost decision. This is a failure of public accountability both by the tribunal and the Australian government, as taxpayers have a right to know the costs of defending ISDS cases. Community organisations called for the Australian government to reveal the costs. The government initially appealed an Australian Information Commissioner decision that it should reveal the costs, but finally revealed on July 2, 2018 that the legal costs were $39 million. The proportion of costs awarded to Australia has still not been revealed.

This confirms that, even if governments win ISDS cases, defending them takes years (in this case seven years before costs were awarded) and tens of millions of dollars. 

Learn more

Updated July 2018

Clive Palmer’s empty threat still shows dangers of foreign corporate rights to sue governments

January 23, 2019: Yesterday the ABC reported that Clive Palmer has moved ownership of his company to New Zealand, claimed to be an NZ company, and threatened to use an Australia-New Zealand trade agreement to sue Australian taxpayers for $45 billion because he claims the Western Australian government intends to pass legislation that would disadvantage his company.

The legal clause which could allow Adani to sue Australia

17 December 2018: AFTINET convener Dr Patricia Ranald writes in the Guardian on the risk that Adani could sue our government for millions through Investor-State Dispute Settlement (ISDS), should their mining licence be cancelled by a future government. 

Yet another example of why Labor should implement its policy against ISDS in all trade agreements, and remove it from current deals like the TPP.

Coal mining company uses ISDS to sue Canada for phasing out coal fired power stations

22 November 2018: Investment Arbitration Reporter has reported this week that US company Westmoreland Coal has filed a claim against the Canadian Government under the North American Free Trade Agreement (NAFTA), because they anticipate profit loss when the province of Alberta phases out coal generated electricity.

Peru FTA is first test of Labor’s new trade policy and should not be ratified says AFTINET

Media Release 8 November 2018: “AFTINET welcomes the Labor Opposition initiative to revisit the Peru-Australia Free Trade Agreement (PAFTA) because it includes foreign investor rights to sue governments (ISDS) which the Shadow Trade Minister has pledged to oppose in all trade agreements,” AFTINET Convener Dr Patricia Ranald said today.

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