Palmer threatens to use foreign investor rights to sue the Australian government after moving assets to Singapore

August 26, 2020: The Melbourne Age has reported that Clive Palmer’s Singapore-based company, established in 2019, could use foreign investor rights in the Singapore-Australia free trade agreement to claim billions in compensation because the WA government passed legislation terminating a legal dispute over an iron ore project, which had been running since 2012.

Palmer had attempted to claim billions in compensation from the WA government in the WA legal system.

He is now reported to be threatening to claim that he is a foreign investor from Singapore in order to use the Investor-State Disputes Settlement (ISDS) provisions in the Singapore-Australia FTA. ISDS enables foreign investors to sue national governments if they can claim that a change in law or policy at any level of government reduces the value of their investment, known as ‘indirect expropriation’. The disputes are heard by international tribunals of practising investment legal advocates, which are not independent judges and have no systems of precedents or appeals, meaning their decisions can be inconsistent.

This is the same tactic, known as forum shopping, that was used by the Philip Morris tobacco company when it sued the Australian government for billions of dollars over Australia’s plain packaging law.

Philip Morris was a US-based company but community campaigning meant that the Howard government did not agree to include ISDS in the US Australia FTA. Philip Morris lost its bid for compensation in Australia’s High Court. It found an obscure Hong Kong-Australia investment agreement which did include ISDS, shifted some assets to Hong Kong and used ISDS to claim billions in compensation from the Australian government. The international tribunal took nearly five years to decide that Philip Morris was not a Hong Kong company, and another two years to decide that the Australian government had to pay half of its $24 million of legal costs.

So even when governments win these cases, it costs years and millions of dollars to defend them.

The reported Palmer case exposes again the unfairness of the ISDS system. The Singapore-Australia FTA ISDS provisions have clauses which are intended to safeguard against forum shopping, but the Australian government would have to argue that the case not proceed, incurring legal costs. The lack of precedents means there is no guarantee that the tribunal will decide in the government’s favour.

This is yet another example of why ISDS should be excluded from all trade agreements.