Newsroom | 3 November 2017
NZ ambassadors pushing for ISDS change
By Sam Sachdeva
The Government is enlisting its ambassadors in a last-minute bid to win changes to the TPP’s controversial investment clauses, Trade and Export Growth Minister David Parker says.
Parker has confirmed the Government is pursuing individual side letters with the other TPP countries, agreeing to suspend the Investor State Dispute Settlement (ISDS) clauses on a bilateral level.
Prime Minister Jacinda Ardern announced this week the Government would “do our utmost” to amend the ISDS provisions in the TPP, and had told trade negotiators to oppose ISDS in future agreements.
The ISDS provisions, which allow foreign investors to take action against a TPP country if they believe it has breached its investment rules, were questioned by all three parties in the new government while in opposition.
Parker said trade officials at the latest round of TPP talks in Japan this week had been instructed to reverse the Government’s previous position on ISDS clauses and oppose them.
“Our underlying view of that is that multinational companies should not have more rights to sue the New Zealand government when investing in New Zealand than a New Zealand company investing in New Zealand.”
"The only New Zealand companies that could ever take the benefit of ISDS clauses overseas are our largest companies who can look after themselves anyway.”
While some argued the ISDS clauses also allowed New Zealand investors to similarly sue overseas, he said no Kiwi business had ever used the mechanism in previous agreements.
“In truth, the cost of those ISDS clauses is such that no small- or medium-sized company could ever use an ISDS clause because they’re too expensive a process for them to use, which means the only New Zealand companies that could ever take the benefit of ISDS clauses overseas are our largest companies who can look after themselves anyway.”
While Parker believed there were other countries who shared New Zealand’s concerns, it would be difficult to win changes as other countries were “pretty fixed in positions at this late stage in negotiations”.
“It’s also true that just about every country there has at one stage or another been on the other side of the ISDS debate: Canada’s had views both ways, so’s Australia, so’s New Zealand, so’s Japan - it’s an issue that’s in a state of flux around the world.”
In addition to attempts for wholesale change, Parker said the Government was contacting the other TPP countries individually and seeking to sign side letters waiving the ISDS clauses - an approach the previous Government took with Australia when it signed the original TPP deal in 2016.
It had not been successful so far, but would continue to push the issue in the lead-up to Apec.
“We’re not just attempting at the negotiations that are currently in Japan, but we’ve got our ambassadors in the home country of every TPP-11 country trying as well.”
’Duty first and foremost to Kiwis’
Parker confirmed he was interested in the alternative to ISDS developed by the European Union, based on a public investment court system.
“One of the principles of justice is actually once you turn yourself over to becoming a judge, you put your prior biases and conflicts of interest behind you, and that’s not as clearly done in respect of arbitrations because the people who sit on those arbitration panels, once they’ve done it they go back to being a trade lawyer, perhaps accountable for their business to some of these forces who were in the contest, so a court is better in that regard.”
The Government also announced this week it had found a way to implement its ban on foreign buyers without breaching non-discrimination clauses in the TPP, by classifying residential housing as sensitive under the Overseas Investment Act.
Ardern said the Government had received advice that the law change would work, as long as it was implemented before the TPP came into force.
Parker confirmed the Government had considered whether its workaround would violate the spirit of the TPP, but felt it was appropriate given the importance of the policy.
“When we reflected upon that, we thought our duty was first and foremost to New Zealanders, that’s the first point, and it is an important point of principle...but secondly, we note that countries that we’ve already good trading relationships with, like China and South Korea, already restrict these things, and so does Australia, so we’re not out there on our own.”