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Tuesday, 10 August 2004
Page: 26049

Senator BROWN (6:33 PM) —I move:

(R4) Page 4, (after line 11), after Clause 3, add:

7 Parties may not submit to arbitration

For the purposes of this agreement, consultations on investor-state dispute settlement, on any matter, may not include arbitration between an investor and a party.

The amendment nullifies article 11.16 of the free trade agreement, which is a backdoor mechanism to introduce an investor-state dispute resolution. The North American Free Trade Agreement allows companies—that is, investors—to take a party—that is, the country—to a dispute resolution process. The dispute resolution panel is set up and operates under the terms of the free trade agreement, not a court of law and not the parliament. The panel can order the country to pay compensation or to change the law or any other remedy it chooses, and there is no appeal. The Australian free trade agreement does not have an overt investor-state dispute resolution clause but article 11.16 opens the door to the same effect, and we had some discussion about that earlier in the day.

The Greens' amendment means that the parties can get together to talk out their dispute, but they do not go to a de facto court of law not created under the laws of this country, not available or appealable to the courts of this country and outside the reach of this parliament. The government will have some answer to that but, on the issue of investor-state dispute settlement mechanism in this agreement, the Australian Conservation Foundation says:

At the present time, under Chapter 11, US companies will not have the right to sue the Australian Government for alleged violations of the AUSFTA. This is because Chapter 11 omits the highly controversial “investor-state” dispute settlement mechanism included in other FTAs, such as the North American Free Trade Agreement (the NAFTA). Investors have used the NAFTA's chapter 11 provisions to challenge US Canadian and Mexican environmental laws and social policies, and to claim sums as high as a billion dollars in compensation. Within North America, this has undermined public confidence in the desirability of trade and investment liberalisation.

However, the AUSFTA leaves the door open for an investor-state dispute mechanism to be established in the future. Article 11.16 states.

“If a Party [U.S or Australian Governments] considers that there has been a change in circumstances affecting the settlement of disputes on matters within the scope of this Chapter and that, in light of such change, the Parties should consider allowing an investor of a Party to submit to arbitration with the other Party a claim regarding a matter within the scope of this Chapter, the Party may request consultations with the other Party on the subject, including the development of procedures that may be appropriate. Upon such a request, the Parties shall promptly enter into consultations with a view towards allowing such a claim and establishing such procedures.”

The article, as currently worded, is ambiguous, as is the whole agreement. It is not clear that the agreement of both parties would be required in order to establish an investor state dispute settlement mechanism.

The first thing to be said here is that in the free trade agreement there is the ability for an arbitration system to hear disputes, judge on matters and punish the Australian interest if it is found to be short of the mark on the free trade agreement. One reading of this is that it will require both governments to agree to such a dispute mechanism in the future. What we can be sure of is that the parliament has no say. It is not up to this parliament; it is up to the executive once again. The parliament gets left out. It is up to the executive in the United States, because the congress has not passed enabling legislation; it has passed the free trade agreement, effectively. It has been signed by the President.

Yet in any sort of arbitration it is very likely that American interests will be taking Australia to arbitration. Its economy is 20 times the size of Australia's, its population is 10 times bigger and so on. There is the provision here for the executive of the Australian government to enable the establishment of an arbitration process in agreement with the executive in the United States. The Australian Conservation Foundation's lawyers are saying that the article as currently worded is ambiguous enough to make it not clear that the agreement of both parties would be required in order to establish an investor-state dispute settlement mechanism—so the way is even open for unilateral establishment of such an agreement. I would like to hear the government's argument about that latter point, but the government will have to admit that there is no dispute about the former point—that is, future governments outside the reach of this parliament can agree to set up an arbitration system.