Australia's embrace of investor state dispute settlement: a challenge to the social contract ideal?

Abstract

This paper explores the origins of investor-state dispute settlement (ISDS) treaties and their implications for the Australian social contract. This analysis includes how and why ISDS emerged in NAFTA, was rebuffed with the failure of the Multilateral Agreement on Investment (MAI), and became incorporated into most subsequent bilateral US trade and investment agreements. The paper considers Australia's exposure to ISDS—first through using it in bilateral investment agreements in nations with inadequate governance mechanisms to support the rule of law, then turning against it when a multinational tobacco company tried to use the mechanism to overturn scientifically endorsed, democratically approved and constitutionally validated tobacco plain packaging measures. The paper concludes by exploring the hypothesis that an alternative governance vision can be achieved in which the system of investment arbitration and trade law is made coherent with presumptively more democratically legitimate normative systems such as constitutional and international law.

Keywords:

• free trade agreement
• investor-state dispute settlement
• ISDS
• multilateral agreement on investment

Notes

1. Australian Government Department of Foreign Affairs and Trade, Gillard Government Trade Policy Statement: Trading Our Way to More Jobs and Prosperity (April 12, 2011).

2. In addition to frustrating government efforts to address climate change and energy security, the ISDS could also complicate the pursuit of food security via the development and diffusion of next generation technologies such as off grid artificial photosynthesis technologies for hydrogen (from solar-driven water splitting) fuel and starch-based food (from atmospheric nitrogen and carbon dioxide absorption) (Faunce 2011; Faunce et al. 2013)

3. See leaked TPP Investment chapter published by Wikileaks on March 25, 2015: https://wikileaks.org/tpp-investment/WikiLeaks-TPP-Investment-Chapter/page-1.html. Accessed April 15, 2015.

Additional information

Funding

This work was supported by an ARC Discovery Grant [140100566].