AFTINET | 28 February 2022
AFTINET raises alarm on risk of UK companies suing the Australian Government through the CPTPP
AFTINET has raised the alarm over the possibility that British corporations will gain the right to sue the Australian Government if the UK is granted membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
The Department of Foreign Affairs and Trade has called for submissions on the UK application to join the CPTPP.
Despite ruling out the right for corporations to sue governments in the UK-Australia Free Trade Deal (A-UKFTA), British firms may gain additional legal rights through Investor-State Disputes Settlement (ISDS) mechanisms contained within the CPTPP.
This mechanism may be used by corporations to gain compensation through an international tribunal if they can claim that a change in law or policy will harm their investment. In the past, claims have been sought on public interest regulation, including environmental protections, public health measures, and workers’ rights.
When negotiating the A-UKFTA, both governments claimed that ISDS was unnecessary because of robust legal systems in each country. On its website, DFAT has described the exclusion of ISDS as one of the benefits of the A-UKFTA.
The application of ISDS between the UK and Australia in the CPTPP would be dangerous because it would expose Australia to the disproportionate risk of many more potential ISDS cases. The UK is the second highest foreign investor in Australia, and UK companies are the third most frequent users of ISDS.
Our submission concludes that it would be inconsistent and dangerous for government to exclude ISDS from the A-UKFTA, yet enable ISDS to apply to Australia and the UK in the CPTPP.
We recommend to DFAT that Australia should insist as a condition of support for UK accession that both governments agree that ISDS provisions are not applied to each other. Australia has a similar CPTPP agreements with the government of New Zealand.