East India Forum | 19 May 2025
Australia’s Port of Darwin move risks ISDS arbitration with China
by Tianqi Gu & Luke Nottage
Attention on China’s 99-year lease over the Port of Darwin re-emerged in the run-up to Australia’s 3 May 2025 federal election. Given the re-elected Labor government’s pledge to reclaim the lease, Australia’s looming divestment move risks triggering an international arbitration claim by the Chinese-owned Landbridge Group under Australia–China investment agreements.
In 2015, the Northern Territory government awarded a 99-year lease of the port to Landbridge Group, the Australian subsidiary of a Chinese private energy and infrastructure conglomerate.
Then-federal treasurer Scott Morrison had no legal authority to review or block the lease, as acquisitions of urban land directly from governments were exempt from scrutiny under the later-repealed Section 12A(7)(a)(b) of Australia’s Foreign Acquisitions and Takeovers Act 1975 (FATA).
The port’s proximity to Australian naval facilities and US–Australia joint military operations have provoked bipartisan criticism of the lease to Landbridge.
In the lead-up to the 2025 federal election, Prime Minister Anthony Albanese flagged a possible buyback or federal intervention, with similar pledges made by former conservative opposition leader Peter Dutton.
A divestment order against Landbridge appears inevitable.
A 2020 amendment to FATA and 2022 amendments to the Security of Critical Infrastructure Act 2018 provide legal grounds for forced divestment.
Canberra may invoke its divestment powers under section 79B of FATA, permitting the treasurer to order divestment on national security grounds, or intervene on the basis that the Port of Darwin represents ‘critical infrastructure’ as defined under the Security of Critical Infrastructure Act 2018.
As Landbridge has refused to exit the Port of Darwin lease voluntarily, it may, if compelled to divest, seek recourse under China–Australia international investment agreements through investor–state dispute settlement (ISDS) arbitration.
In late 2022, the Albanese government ruled out ISDS provisions in future agreements. Though they also announced a review of other aging investment treaties, neither the China–Australia Bilateral Investment Treaty (CABIT) nor the China–Australia Free Trade Agreement (ChAFTA) has been revised. Both still provide potential avenues for Landbridge to challenge Australian measures through ISDS.
A forced divestment order may be challenged as violating Article 8 of CABIT.
A federal government acquisition of the lease would amount to direct expropriation under the Australian federal constitution. Any government-facilitated commercial transfer could constitute indirect expropriation under established ISDS practice. It would substantially deprive Landbridge of its leasehold rights.
Expropriation’s legality under CABIT is subject to several conditions, including that it be non-discriminatory. This may be difficult for the Commonwealth to satisfy, given that bipartisan commitments to return the port to Australian hands strongly suggest that the divestment is driven by Landbridge’s foreignness.
A divestment also requires compensation, whether through a commercial transaction or direct expropriation. CABIT limits ISDS arbitrability to disputes over the amount of compensation. Tribunals have diverged on whether this extends to determining the existence of unlawful expropriation. At a minimum, arbitrators could assess compensation based on the valuation formula in CABIT Article 8.2, which may differ from Australian domestic legal standards.
Under ChAFTA, Australia promises Chinese investors equal treatment to Australian investors. Only disputes arising from this obligation are arbitrable under ISDS. Landbridge could invoke this aspect of the commitment.
Canberra’s efforts to find a trusted Australian buyer for the port suggest differential treatment.
ChAFTA Article 9.5 may offer Australia a safeguard by exempting non-conforming measures listed in Annex III, including those adopted under FATA and any future amendments, provided they do not reduce the measure’s conformity with the agreement. Given this condition, Australia’s 2020 FATA reforms may weaken this safeguard.
Article 16.3 of ChAFTA — incorporating WTO-like national security exceptions — may offer Australia protection. Traditionally, such clauses have strictly applied to measures involving fissionable materials, arms logistics and actions taken during international emergencies. WTO panellists add that they should at least be invoked in good faith. As shown by the 2025 trade wars, the concept of national security has broadened and some ISDS tribunals have allowed compensation despite finding the exception applied.
Accordingly, the viability of any national treatment claim brought by Landbridge under ChAFTA remains uncertain.
ChAFTA included a work program committing to negotiations for a comprehensive investment chapter, potentially incorporating CABIT and expanding ISDS coverage. Landbridge may have had a stronger legal basis to challenge an implemented divestment. But the negotiations never occurred. Discussions over the Regional Comprehensive Economic Partnership — which, though subject to another work programme, omitted arbitration — may have affected that development.
China regards its global port footprint as a core instrument of strategic influence. Chinese state-owned enterprises, significantly reformed by Chinese President Xi Jinping, operate strategic ports across the Indian Ocean to secure maritime chokepoints and support Beijing’s regional ambitions — a controversial strategy known as the ‘String of Pearls’.
In March 2025, Asia-based conglomerate CK Hutchison Holdings announced plans to sell 43 port assets across 23 countries to a consortium led by US-based BlackRock. Beijing condemned the deal as a betrayal of national interests which caused it to be suspended pending a Chinese antitrust review.
China is urging firms to defend overseas assets through international arbitration. Canberra’s bipartisan resolve to force Landbridge out of the Port of Darwin makes an ISDS claim against Australia more likely than ever, which may deepen strategic ruptures in Australia–China relations.
Tianqi Gu is Yong Pung How Research Fellow at Singapore Management University and Teaching Fellow at the Faculty of Law and Justice, the University of New South Wales (UNSW).
Luke Nottage is Professor at the University of Sydney Law School, founding Co-Director of the Australian Network for Japanese Law and Associate Director of the Centre for Asian and Pacific Law, the University of Sydney.
