The TPP Investment Chapter and Investor-State Arbitration in Asia and Oceania : Assessing Prospects for Ratification

The Trans-Pacific Partnership (TPP) Agreement was signed in February 2016 by 12 Asia-Pacific economies that already account for 40% of world GDP, including the United States, Japan and Australia. If ratified, economists model significant economic growth prospects, especially for smaller and/or less developed member states, with a considerable impetus coming from greater cross-border investment. Further economic benefits are expected if others join the existing signatories, with expressions of interest already coming from leaders in several Asian states. However, whether the treaty will be ratified and come into force remains unclear, partly because of some ongoing opposition to the TPP's investment chapter provisions even among existing signatories, for example from some quarters within Australia. One focus of criticism is the extra option of investor-state dispute settlement (ISDS), aimed at more credibly enforcing the substantive protections and liberalisation commitments of host states. The first part of this paper therefore assesses prospects for ratification in light of investment trends and treaty practices in Asia and Oceania, including current and possible future TPP states. It shows how many have now weathered occasional claims from foreign investors, without abandoning ISDS from subsequent treaties. The second part introduces the ISDS-backed substantive provisions of the TPP investment chapter, particularly compared to other recent Australian free trade agreements (FTAs). These provisions continue a trend for over a decade, following the lead of the United States and evident in the FTA practice of many other Asia-Pacific states, of including provisions more favourable to host states compared to an earlier era of stand-alone bilateral investment treaties, which often followed a simpler European template. As such, the investment chapter seems less likely to prevent ratification of the TPP, although the broader politics in countries like Australia remain complex. In addition, the paper concludes with a wider question as to whether and how investment treaties in the region may develop an even more pro-host-state stance. This is now being be promoted by the European Union in negotiations with the US, but also several Asia-Pacific states, both in terms of substantive provisions and an “investment court” in lieu of ad hoc ISDS arbitration panels