Clive Palmer’s claims to be a Singaporean company and sue the Commonwealth expose the absurdity of ISDS
December 18, 2020: The Guardian reports that Clive Palmer’s Singapore-based company, established only in 2019, has acted on his threat to sue the Commonwealth Government for billions of dollars using the Investor-State Dispute Settlement (SDS) clauses in the Singapore-Australia free trade agreement.
Palmer is claiming compensation from the Commonwealth because the WA government passed legislation terminating a legal dispute over an iron ore project, which had been running since 2012.
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 who are not independent judges, and have no systems of precedents or appeals, meaning their decisions can be inconsistent.
Regardless of the merits of the WA law, it is clear that the original WA dispute was with an Australian-based company, and it is absurd that Palmer can claim to be a Singaporean investor.
Palmer is using 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 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 will have to argue before a tribunal that the case not proceed, and so will still incur 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.