Locating Australia on the Pacific Rim : Trade, Investment and the Asian Century

Our aim in this paper is to briefly analyse Australia's investment policy, particularly in relation to investor state dispute settlement (ISDS), with reference to its regional economic concerns and growing trade relations with the Pacific Rim countries. One of the co-authors of this paper has previously undertaken extensive analysis of the doctrinal foundations and practical usefulness of ISDS as a means of resolving investment disputes. That analysis compared ISDS to other alternatives, particularly resort by foreign investors to the domestic courts of host states. The analysis also took account of the draft and final reports released by the Australian Productivity Commission which significantly influenced Australia's 2011 Policy Statement. The authors do not propose to restate that debate in this paper. Nor does this paper consider whether the preference for ISDS or domestic courts stems from subjective views and particular policy goals, as distinct from the perceived superiority of one institution over the other based on universally accepted standards grounded in normative criteria. This paper rather seeks to balance the goal of maximising FDI and fostering long term trade relations against Australia's need to implement legislation considered essential to the national interest. The focus of this paper is to examine Australia's potential rejection of ISDS in light of its geopolitical and economic interests, given the preference for ISDS articulated by many of Australia's key trading partners notably, but not exclusively, in the Pacific region. First, we consider the importance of FDI and its relationship to ISDS. Next, we set out the Australian government's recent policies and statements in relation to ISDS. We then examine Australia's trade and investments interests within the Pacific region, looking briefly at its relationships with key trading partners there. In doing this, we examine the trends in BIT practice exhibited by Australia and some of its trading partners in relation to ISDS. We also look at the preference for ISDS mechanisms in the Pacific region, and comment on the potential consequences of Australia adhering to its 2011 Trade Policy Statement in light of current negotiations over the multilateral TPPA. Finally, we propose a way forward for Australia with respect to resolving investor-state disputes, namely by way of a model BIT that provides for safeguards in relation to ISDS instead of rejecting it out of hand