Government failure to cancel old Indonesian Investment deal leaves Australia open to being sued over tobacco regulation and other public interest laws

May 22, 2019: Legal academics have confirmed  that the recent Indonesia trade deal has no provisions to cancel the old 1993 Indonesia-Australia bilateral investment agreement, which will remain in force alongside the new agreement.

Investor-state Dispute settlement (ISDS) gives special legal rights to foreign investors, enabling them to bypass national courts and sue governments for millions of dollars of compensation in international tribunals if they can claim that a change in law or policy will harm their investment. The older versions of ISDS in bilateral investment agreements had no exceptions for public interest law. That is why the Philip Morris tobacco company chose the 1993 Australia-Hong Kong investment agreement when it sued Australia over our 2011 plain packaging law.

The failure to cancel the old Indonesian deal is exceptional because Australia has agreed to terminate earlier investment agreements upon entry into force of newer agreements with Chile, Hong Kong, Mexico, Peru, Uruguay and Vietnam. The claim is that the new deals have more safeguards and exclusions for specific public health regulation, including tobacco regulation.  Cancelling the old agreements in favour of the new ones could make it more difficult for corporations to claim compensation for these laws.

The government summary of the new Indonesia deal is misleading, because it does not mention the failure to cancel the old deal, but claims credit for more public interest safeguards in the new agreement.

The new Indonesia agreement does contain a more recent version of ISDS which claims to have more safeguards and more transparent procedures. But it only specifically excludes some areas of health regulation. These are Medicare, the Pharmaceutical Benefits Scheme, the Therapeutic goods Authority and the Gene Technology Regulator.

But curiously, tobacco regulation, which has been excluded in the TPP-11 and in other new agreements, is not specifically excluded. Indonesia has a tobacco industry, and was a party to a WTO state-to state complaint against Australia’s plain packaging law. If a future government decided to strengthen tobacco regulation, for example on vaping, an ISDS claim against it from an Indonesian-based company would not be excluded.

Other more general safeguards will not prevent ISDS cases against changes in other public interest regulation, like environmental laws to address climate change or new industrial laws

The 1993 Indonesia agreement has no exclusions at all. This means that corporations will have a choice of using ISDS in the old agreement, which has no exclusions and less transparency, rather than ISDS in the new agreement, which has some exclusions. Obviously they are likely to choose to use the old agreement, which has less defences for government. This makes a nonsense of the exclusions the government is claiming credit for. The government should own up and cancel the old agreement

The new Indonesia deal will be reviewed by a parliamentary committee soon. Labor, the Greens and Centre Alliance should implement their policies against ISDS by opposing both the old and new versions of ISDS and voting against the implementing legislation for the agreement.