Novel Treaty-Based Approaches to Resolving International Investment and Tax Disputes in the Asia-Pacific Region

Trade and investment treaties have proliferated throughout the Asia-Pacific region. Their dispute resolution mechanisms are important in entrenching market access commitments, especially when providing for direct claims by firms against states. But the Global Financial Crisis has also heightened calls to balance liberalisation with harmonised regulatory safeguards. The way investment treaties sometimes deal with certain claims over taxes imposed by host states, limiting the scope for investors to proceed with direct arbitration claims, suggests one innovative mechanism for resolving claims about other types of investment disputes. A second possibility is to redesign investment treaties covering such claims like some contemporary double tax treaties, which have also burgeoned through the Asia-Pacific region based on the OECD Model Treaty. Just as a taxpayer can be given rights under tax treaties to force treaty partner tax authorities to initiate an inter-state arbitration, an investor could be entitled to trigger an inter-state arbitration of other sensitive issues under an investment treaty. Both dispute resolution mechanisms address state sovereignty and public interest access, yet preserve a role for private interests. They represent only some of various possibilities for improving the treaty-based investor-state arbitration system, instead of abandoning it for Australia’s future treaties as proposed by the Gillard Government Trade Policy Statement of April 2011