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Treaties—Joint Standing Committee—Report 189: Capital Increase WBG IBRD; Capital Increase WBG IFC; Amendments CMS; Termination IPPA-Indonesia—Report, August 2020


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PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

Report 189

Capital Increase WBG IBRD; Capital Increase WBG IFC; Amendments CMS; Termination IPPA-Indonesia

Joint Standing Committee on Treaties

© Commonwealth of Australia

ISBN 978-1-76092-110-1 (Printed Version)

ISBN 978-1-76092-111-8 (HTML Version)

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License.

The details of this licence are available on the Creative Commons website: http://creativecommons.org/licenses/by-nc-nd/3.0/au/.

iii

Contents

Abbreviations ................................................................................................................................... vii

Members ............................................................................................................................................ ix

Terms of Reference ......................................................................................................................... xiii

List of Recommendations ............................................................................................................... xv

Executive summary ....................................................................................................................... xvii

The Report

1 Introduction .............................................................................................................. 1

Conduct of the Committee’s review ................................................................................... 3

2 Capital Increase WBG IBRD and Capital Increase WBG IFC......................... 5

Background ............................................................................................................................ 5

IBRD General Capital Increase and Selective Capital Increase ....................................... 6

General Capital Increase .......................................................................................... 7

Selective Capital Increase ........................................................................................ 8

Callable capital .......................................................................................................... 9

The IFC General Capital Increase ..................................................................................... 10

COVID-19 pandemic .......................................................................................................... 11

Legislation ............................................................................................................................ 12

Conclusion ........................................................................................................................... 13

3 Amendments CMS ................................................................................................ 15

Background .......................................................................................................................... 15

iv

Fisheries management ........................................................................................................ 18

Inconsistency between the Convention and the EPBC Act ........................................... 18

Costs ...................................................................................................................................... 21

Conclusion ........................................................................................................................... 22

4 Termination IPPA - Indonesia ............................................................................ 23

Introduction ......................................................................................................................... 23

Background .......................................................................................................................... 23

Reasons for Australia to take the proposed treaty action .............................................. 24

Issues ..................................................................................................................................... 25

Survival clause ........................................................................................................ 25

Investor-State Dispute Settlement (ISDS) ........................................................... 26

Termination timeframe .......................................................................................... 27

Conclusion ........................................................................................................................... 27

5 Minor treaty actions .............................................................................................. 29

Agreement between the Government of Australia, the People’s Republic of China, the Republic of Korea, the Kingdom of Thailand, the United States of America, and the Socialist Republic of Viet Nam, pursuant to Article XIII of the General Agreement on Tariffs and Trade, on the establishment of country-specific quotas in the Republic of Korea’s World Trade Organization Tariff-Rate quota for Rice .......................... 29

2019 Amendments to Annexes II, VIII and IX of the Basel Convention on the Control of the Transboundary Movements of Hazardous Wastes and their Disposal .............................................................................................. 30

2019 Amendments to Annex III of the Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade .............................................................. 31

2019 Amendments to Annex I of the United Nations Education, Scientific and Cultural Organisation International Convention against Doping in Sport ............................................................................................................. 32

Changes to Schedule 1 of the Annex on Chemicals to the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on their Destruction ......................................... 33

Amendment of 2018 to the Code of the Maritime Labour Convention 2006 .. 33

v

Conclusion ........................................................................................................................... 34

Appendix A. Submissions .............................................................................................. 35

Appendix B. Witnesses .................................................................................................... 37

vii

Abbreviations

AANZFTA ASEAN-Australia-New Zealand Free Trade Agreement

AFTINET Australian Fair Trade and Investment Network

A-HKFTA Free Trade Agreement between Australia and Hong Kong, China

AMSA Australian Maritime Safety Authority

ARIA Analysis of Regulatory Impact on Australia

CoP Conference of the Parties

CSQs country-specific quotas

DAWE Department of Agriculture, Water and the Environment

DFAT Department of Foreign Affairs and Trade

EPBC Act Environment Protection and Biodiversity Conservation Act 1999

GATT General Agreement on Tariffs 1994

HBCD hexabromocyclododecane

IA-CEPA Comprehensive Partnership Agreement between the Government of Australia and the Government of Indonesia

IBRD International Bank for Reconstruction and Development

IFC International Finance Corporation

ILC International Labour Conference

ILO International Labour Organization

IMF International Monetary Fund

viii

IPPA Agreement between the Government of Australia and the Government of the Republic of Indonesia concerning the Promotion and Protection of Investments

ISDS Investor-State Dispute Settlement

JSCOT Joint Standing Committee on Treaties

MLC Code of the Maritime Labour Convention 2006

MoU Memorandum of Understanding

NIA National Interest Analysis

ROK Republic of Korea

TRQ tariff rate quota

UNESCO United Nations Education, Scientific and Cultural Organization

WADA World Anti-Doping Agency

WBG World Bank Group

WTO World Trade Organization

ix

Members

Chair

Mr Dave Sharma MP

Deputy Chair

Mr Peter Khalil MP

Members

Senator Tim Ayres

Senator Andrew Bragg

Mr Russell Broadbent MP

Senator Slade Brockman

Senator Raff Ciccone

Mr Jason Falinski MP

Ms Nicolle Flint MP

Hon Dr John McVeigh MP

Senator Gerard Rennick

Senator Marielle Smith

Senator Jordon Steele-John

x

Ms Kate Thwaites MP

Mr Tim Wilson MP

Mr Josh Wilson MP

xi

Committee Secretariat

Julia Morris, Committee Secretary

Narelle McGlusky, Inquiry Secretary

Kevin Bodel, Senior Researcher

Cathy Rouland, Office Manager

xiii

Terms of Reference

The Resolution of Appointment of the Joint Standing Committee on Treaties allows it to enquire into and report on:

 matters arising from treaties and related National Interest Analyses and proposed treaty actions and related Explanatory Statements presented or deemed to be presented to the Parliament;  any questions relating to a treaty or other international instrument,

whether or not negotiated to completion, referred to the committee by: − either House of the Parliament, or − a Minister; and  such other matters as may be referred to the committee by the Minister for Foreign Affairs and on such conditions as the Minister may prescribe.

xv

List of Recommendations

Recommendation 1

2.43 The Committee supports the International Bank for Reconstruction and Development (IBRD) General Capital Increase and Selective Capital Increase and the International Finance Corporation (IFC) General Capital Increase and recommends that binding treaty action be taken.

Recommendation 2

3.36 The Committee also notes the inconsistency between the levels of protection afforded under EPBC Act and the Convention on the Conservation of Migratory Species, which means Australia continues to lodge reservations in relation to Appendix II listings. The Committee recommends the Government pursue amendments to the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act), as part of its broader review, to resolve this inconsistency.

Recommendation 3

4.18 The Committee supports the Exchange of letters terminating the Agreement between the Government of Australia and the Government of the Republic of Indonesia concerning the Promotion and Protection of Investments and recommends that binding treaty action be taken.

xvii

Executive summary

The Report contains the Committee’s review of four treaty actions:

 International Bank for Reconstruction and Development (IBRD) General Capital Increase and Selective Capital Increase (Washington DC, 1 October 2018);  International Finance Corporation General (IFC) Capital Increase

(Washington DC, 16 April 2020);  Amendments to Appendices I and II to the Convention on the Conservation of Migratory Species of Wild Animals (Gandhinagar, 17-22 February 2020); and  Exchange of letters terminating the Agreement between the Government of

Australia and the Government of the Republic of Indonesia concerning the Promotion and Protection of Investments (Jakarta, 6 February 2020).

The first two treaty actions concern capital increases for the International Bank for Reconstruction and Development (IBRD) and the International Finance Corporation (IFC) which are both organisations within the World Bank Group (WBG). While the IBRD supports low-income countries to reduce poverty and extend the benefits of sustainable growth, the IFC provides services to encourage private sector development in developing countries. Both organisations are playing a key role in supporting vulnerable economies during the COVID-19 crisis and their work will remain critical during the recovery phase after the pandemic has passed.

Australia supports the work of these two organisations and recognises the important part they play in maintaining economic prosperity in our region. Australia’s commitments amount to $154 million over four years for the IBRD and $144 million over five years for the IFC.

xviii

The amendments to the Convention on the Conservation of Migratory Species of Wild Animals add seven additional species of migratory animals to Appendix I of the Convention and five additional species to Appendix II. Appendix I species are endangered and Appendix II species have an unfavourable conservation status.

To avoid unintended measures under its domestic law, Australia will lodge a reservation for two species included in Appendix II, the Smooth Hammerhead Shark and the School Shark. The Committee notes that the clash between the requirements of the Convention and Australia’s domestic law in the form of the Environment Protection and Biodiversity Conservation Act 1999 are of long standing and continue to cause difficulties. The Committee has once again suggested that this issue needs to be addressed by the Government.

The Committee recommended the termination of the Agreement between the Government of Australia and the Government of the Republic of Indonesia concerning the Promotion and Protection of Investments (IPPA) during its inquiry in 2019 into the Comprehensive Partnership Agreement between the Government of Australia and the Government of Indonesia (IA-CEPA). There was concern that the overlapping investment provisions would cause difficulties for the Australian Government and for investors.

The Committee welcomes the prompt action taken to terminate the IPPA and acknowledges that implementation of this treaty action will provide certainty and improve conditions for investors.

The Committee recommends binding treaty action be taken for each of the treaties under consideration.

The Report also contains the Committee’s review of the following six minor treaty actions:

 Agreement between the Government of Australia, the People’s Republic of China, the Republic of Korea, the Kingdom of Thailand, the United States of America, and the Socialist Republic of Viet Nam, pursuant to Article XIII of the General Agreement on Tariffs and Trade, on the establishment of country-specific quotas in the Republic of Korea’s World Trade Organization Tariff-Rate quota for Rice;  2019 Amendments to Annexes II, VIII and IX of the Basel Convention on

the Control of the Transboundary Movements of Hazardous Wastes and their Disposal;  2019 Amendments to Annex III of the Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides

in International Trade;

xix

 2019 Amendments to Annex I of the United Nations Education, Scientific and Cultural Organisation International Convention against Doping in Sport;  Changes to Schedule 1 of the Annex on Chemicals to the Convention on the Prohibition of the Development, Production, Stockpiling and Use of

Chemical Weapons and on their Destruction; and  Amendment of 2018 to the Code of the Maritime Labour Convention 2006.

1

1. Introduction

1.1 This report contains the Joint Standing Committee on Treaties’ review of the following treaty actions:

 International Bank for Reconstruction and Development (IBRD) General Capital Increase and Selective Capital Increase (Washington DC, 1 October 2018);  International Finance Corporation (IFC) General Capital Increase

(Washington DC, 16 April 2020);  Amendments to Appendices I and II to the Convention on the Conservation of Migratory Species of Wild Animals (Gandhinagar, 17-22 February 2020); and  Exchange of letters terminating the Agreement between the Government of

Australia and the Government of the Republic of Indonesia concerning the Promotion and Protection of Investments (Jakarta, 6 February 2020).

1.2 The Committee’s resolution of appointment empowers it to inquire into any treaty to which Australia has become a signatory, on the treaty being tabled in the Parliament.

1.3 The treaties, and matters arising from them, are evaluated to ensure that ratification is in the national interest, and that unintended or negative effects on Australia will not arise.

1.4 Prior to tabling, major treaty actions are subject to a National Interest Analysis (NIA), prepared by Government. This document considers arguments for and against the treaty, outlines the treaty obligations and any regulatory or financial implications, and reports the results of consultations undertaken with State and Territory Governments, Federal, State and Territory agencies, and with industry or non-government organisations.

2 REPORT 189

1.5 An Analysis of Regulatory Impact on Australia (ARIA) may accompany the NIA. The ARIA provides an account of the regulatory impact of the treaty action where adoption of the treaty will involve a change in the regulatory environment for Australian business.

1.6 The Committee takes account of these documents in its examination of the treaty text, in addition to other evidence taken during the inquiry program.

1.7 None of the treaty actions examined in this report required an ARIA.

1.8 Copies of the treaties considered in this report and the associated documentation may be accessed through the Committee’s website at:

 https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Trea ties/CapitalIncreaseWBGIBRD;  https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Trea ties/CapitalIncreaseWBGIFC;  https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Trea

ties/AmendmentsCMS;  https://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Trea ties/TerminationIPPAIndonesia.

1.9 This report also contains the Committee’s reviews on six minor treaty actions:

 Agreement between the Government of Australia, the People’s Republic of China, the Republic of Korea, the Kingdom of Thailand, the United States of America, and the Socialist Republic of Viet Nam, pursuant to Article XIII of the General Agreement on Tariffs and Trade, on the establishment of country-specific quotas in the Republic of Korea’s World Trade Organization Tariff-Rate quota for Rice;  2019 Amendments to Annexes II, VIII and IX of the Basel Convention on

the Control of the Transboundary Movements of Hazardous Wastes and their Disposal;  2019 Amendments to Annex III of the Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides

in International Trade;  2019 Amendments to Annex I of the United Nations Education, Scientific and Cultural Organisation International Convention against Doping in Sport;  Changes to Schedule 1 of the Annex on Chemicals to the Convention on

the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on their Destruction; and  Amendment of 2018 to the Code of the Maritime Labour Convention 2006.

INTRODUCTION 3

Conduct of the Committee’s review

1.10 The treaty actions reviewed in this report were advertised on the Committee website from the date of referral. Submissions for the treaty actions were requested by 5 June 2020. Three submissions were received for the inquiry into the termination of the IPPA with Indonesia, two for the inquiry into the Convention on migratory species, and one submission for each of the remaining two inquiries.

1.11 The Committee held a public hearing into the two World Bank Group treaty actions via teleconference on 22 May 2020. A public hearing into the other two treaty actions was held via teleconference on 15 June 2020. The transcripts of evidence from the public hearings may be obtained from the Committee Secretariat or accessed through the Committee’s website as listed above.

1.12 A list of submissions received for the inquiries is at Appendix A. A list of witnesses who appeared at the public hearings is at Appendix B.

5

2. Capital Increase WBG IBRD and Capital Increase WBG IFC

International Bank for Reconstruction and Development (IBRD) General Capital Increase and Selective Capital Increase; International Finance Corporation General Capital Increase

Background

2.1 This chapter considers two related proposed treaty actions:

 the International Bank for Reconstruction and Development (IBRD) General Capital Increase and Selective Capital Increase (IBRD Capital Increase Treaty); and

 the International Finance Corporation (IFC) General Capital Increase (IFC Capital Increase Treaty).

2.2 Both the International Bank for Reconstruction and Development (IBRD) and the International Finance Corporation (IFC) are part of the World Bank. The World Bank is the world’s largest multilateral institution providing development finance. Its role is to reduce poverty and build prosperity across the world.1 Both the IBRD and the IFC are active in the Indo-Pacific

1 Ms Lisa Ellison, Division Head, International Policy and Engagement Division, Treasury,

Committee Hansard, Canberra, 22 May 2020, p. 1.

6 REPORT 189

region.2 The treaty actions, while dealing with the same subject, capital increases, differ slightly so will be dealt with separately here.

IBRD General Capital Increase and Selective Capital Increase

2.3 The IBRD is an international organisation established by the Articles of Agreement of the International Bank for Reconstruction and Development (the IBRD Articles of Agreement). Australia has been a signatory to this treaty since 1947. The IBRD provides financial products and policy advice to middle income countries, and credit worthy low income countries, to reduce poverty and encourage sustainable growth. According to the IBRD National Interest Analysis (IBRD NIA), the IBRD provides policy based loans to governments to support institutional reform and build institutional capacity.3

2.4 The IBRD Articles of Agreement permit the IBRD to increase its capital from time to time with the agreement of the Governors of the World Bank.4 According to the IBRD NIA, the capital increases under consideration here will:

… give the IBRD greater capacity to mitigate the impacts of economic shocks and systemic crises and allow for increased responsiveness to global security and stability …5

2.5 Further, the IBRD NIA argues that the capital increase allows the IBRD to remain an attractive source of quality financing for its clients.6

2.6 The IBRD Capital Increase Treaty is the result of two Resolutions of the IBRD Board of Governors in 2018. Resolution 663 relates to a general capital increase for the IBRD,7 and Resolution 664 relates to a selective capital

2 Ms Ellison, Treasury, Committee Hansard, Canberra, 22 May 2020, p. 1.

3 National Interest Analysis [2020] ATNIA 3 with attachment on consultation, International Bank

for Reconstruction and Development (IBRD) General Capital Increase and Selective Capital Increase, (Washington, 1 October 2018) [2020] ATNIF 4, hereafter the IBRD NIA, para 10.

4 IBRD NIA, para. 2.

5 IBRD NIA, para. 5.

6 IBRD NIA, para. 6.

7 International Bank for Reconstruction and Development (IBRD) General Capital Increase and Selective

Capital Increase, (Washington, 1 October 2018) [2020] ATNIF 4, Resolution 663, hereafter the IBRD Capital Increase, Preamble.

CAPITAL INCREASE WBG IBRD AND CAPITAL INCREASE WBG IFC 7

increase.8 The method for raising capital agreed in both Resolutions is to offer a subscription of shares to the member states of the IBRD.9 The share subscription will increase the paid in capital of the IBRD by US$7.5 billion.10

2.7 Under the proposed Treaty, Australia’s paid in contribution for the two share subscription offers will be AU$154 million, representing 20 per cent of the value of Australia’s shares in the general capital increase and six per cent of the selective capital increase.11

2.8 In relation to the impact on the Australian Government’s finances, Ms Lisa Ellison, Division Head, International Policy and Engagement Division with Treasury, advised the Committee that:

The paid-in contributions have no impact on the underlying cash or fiscal balance, because they represent a change in the composition of the government’s assets. We’re essentially giving cash and receiving shares in the institution in return. 12

General Capital Increase

2.9 IBRD general capital increases allow countries to subscribe to additional shares in proportion to their existing capital share.13 The general capital increase under consideration here offers an additional 230,500 IBRD shares, each with a value of US$120,635, to member states.14 The number of shares available to each member is set out in a table in Article 2 of Resolution 663. Australia has been offered 3,243 shares.15

2.10 Member states wishing to avail themselves of the share offer can subscribe to the number of shares they wish to purchase up to the limit set out in the Article 2 table by the fifth anniversary of the date on which Resolution 663

8 IBRD Capital Increase, Resolution 663, Preamble.

9 IBRD Capital Increase, Resolution 663, Preamble and International Bank for Reconstruction and

Development (IBRD) General Capital Increase and Selective Capital Increase, (Washington, 1 October 2018) [2020] ATNIF 4, Resolution 664, hereafter the IBRD Selective Increase, Preamble.

10 IBRD NIA, para. 12.

11 IBRD NIA, para. 7.

12 Ms Ellison, Treasury, Committee Hansard, Canberra, 22 May 2020, p. 2.

13 IBRD NIA, para. 3.

14 IBRD Capital Increase, Resolution 663, Article 1.

15 IBRD Capital Increase, Resolution 663, Article 2.

8 REPORT 189

was adopted, which is October 2023.16 There is the possibility of extending the time of the offer under certain circumstances.17

2.11 Member states availing themselves of the share offer must pay the IBRD two percent of the value of the shares subscribed in gold or United States dollars, and 18 per cent of the value of the shares subscribed in the member state’s own currency.18

2.12 Before a member state’s share subscription is approved, it must complete all necessary action to authorise the subscription, make the relevant payments, and ensure that the IBRD can make immediate and unrestricted use of the 18 per cent payment that is made using the member state’s own currency.19

2.13 All rights associated with a share subscription, such as voting rights, will be suspended if a member state has failed to make a payment in the prescribed time.20

2.14 Shares that have not been subscribed by the end of the subscription period will become part of the IBRD’s unallocated capital stock.21

Selective Capital Increase

2.15 Selective capital increases allow some member states to increase their share of capital beyond their historical proportional allocation, which increases their voting power in the IBRD.22

2.16 The selective capital increase under consideration here offers an additional 245,773 IBRD shares of the same face value as those of the general capital increase.23 For this share subscription, Australia has been offered 4,219 shares.24

2.17 The terms of the selective capital increase share subscription are identical to those in the general capital increase, except that the amount the subscribing

16 IBRD NIA, para. 4.

17 IBRD Capital Increase, Resolution 663, Article 3.

18 IBRD Capital Increase, Resolution 663, Article 3.

19 IBRD Capital Increase, Resolution 663, Article 3.

20 IBRD Capital Increase, Resolution 663, Article 4.

21 IBRD Capital Increase, Resolution 663, Article 5.

22 IBRD NIA, para. 3.

23 IBRD Capital Increase, Resolution 664, Article 1.

24 IBRD Capital Increase, Resolution 664, Article 2.

CAPITAL INCREASE WBG IBRD AND CAPITAL INCREASE WBG IFC 9

member state is required to pay is 0.6 per cent of the value of the subscribed shares in US dollars and 5.4 per cent of the value of the subscribed shares in the member state’s own currency.25

2.18 Member states who subscribe to the selective capital increase must, however, be prepared for the IBRD to call on remaining subscription funds up to 20 per cent of the value of the subscribed shares when needed.26

Callable capital

2.19 As noted above, Australia is only required to immediately pay for a specific fraction of the IBRD shares it has purchased. The IBRD will be able to call on the outstanding sum of the value of the shares, amounting to slightly more than AU$1 billion.27

2.20 This funding arrangement, in different forms, is a consistent feature across international financial institutions, including the World Bank and the International Monetary Fund (IMF).28

2.21 The IBRD share subscription under consideration here will increase Australia’s callable capital available to international financial institutions to AU$4.7 billion.29

2.22 In total, the share subscription will increase the callable capital of the IBRD by US$52.6 billion.30 The IBRD NIA notes that the IBRD has never exercised its right to call on these funds.31

2.23 According Ms Ellison:

… there’s a great reluctance across those institutions to call on the capital, because they recognise that it would undermine their creditworthiness and their long-term future operation …

25 IBRD Capital Increase, Resolution 664, Article 3.

26 IBRD Capital Increase, Resolution 664, Article 3.

27 IBRD NIA, para. 19.

28 See for example Joint Standing Committee on Treaties (JSCOT), Report 174: IMF New

Arrangements to Borrow; Scientific Cooperation USA; Science Research Innovation NZ; Technological Innovation Israel, October 2017, p. 4.

29 IBRD NIA, para. 19.

30 IBRD NIA, para. 12.

31 IBRD NIA, para. 19.

10 REPORT 189

… we are quite confident, in the Treasury, that [it is] a very unlikely prospect, but, of course, it is callable capital, which means that we can’t rule that out as a possibility.32

2.24 The callable component is a contingent liability, and it will be reflected in the Australian Government’s Budget’s statement of risk.33

The IFC General Capital Increase

2.25 The IFC is an international organisation established by the Articles of Agreement of the International Finance Corporation.34 Australia has been a member state of the IFC since 1956.35

2.26 The IFC is the world’s largest multilateral institution providing development finance.36 The role of the IFC is to support the development of robust private sector economies by providing investment, advisory and asset management services to encourage private sector development in developing countries.37

2.27 The IFC general capital increase is the result of Resolution 272 of the Board of Governors of the IFC.38 According to Treasury, the IFC has not sought a capital increase for some time. As a consequence, without the increase, the IFC would be required to reduce its lending operations.39

2.28 The capital increase for the IFC will more than triple the capital available to it. In total it currently has US$2.57 billion in capital available, and the

32 Ms Ellison, Treasury, Committee Hansard, Canberra, 22 May 2020, p. 2.

33 Ms Ellison, Treasury, Committee Hansard, Canberra, 22 May 2020, p. 2.

34 National Interest Analysis [2020] ATNIA 7 with attachment on consultation, International Finance

Corporation General Capital Increase, (Washington, 16 April 2020) [2020] ATNIF 9, hereafter the IFC NIA, para 2.

35 IFC NIA, para 7.

36 IFC NIA, para 8.

37 IFC NIA, para 6.

38 International Finance Corporation General Capital Increase, (Washington, 16 April 2020) [2020]

ATNIF 9, Resolution 272, hereafter the IFC Capital Increase, Preamble.

39 IFC NIA, para 4.

CAPITAL INCREASE WBG IBRD AND CAPITAL INCREASE WBG IFC 11

additional capital increase is worth US$5.5 billion in total, increasing the IFC’s capital available to US$8.2 billion.40

2.29 The IFC general capital increase will involve 4,579,995 additional shares with a value of US$1,000 each.41 Australia’s allocation is 102,370 shares.42

2.30 As with Australia’s purchase of the IBRD shares:

The paid-in contributions have no impact on the underlying cash or fiscal balance, because they represent a change in the composition of the government’s assets. 43

2.31 A member state wishing to subscribe to the shares must advise the IFC of its intention to do so before the third anniversary of the date of the offer (which occurs in April 2023), and must pay for the subscribed shares before the fifth anniversary of the offer, 15 April 2025.44 The cost of Australia’s subscription will be AU$144 million.45

COVID-19 pandemic

2.32 The decision to seek capital increases for the IBRD and the IFC pre-dates the COVID-19 pandemic. Nevertheless, the capital increases mean that the World Bank as a whole is better placed to assist in supporting the global economy during the pandemic.46

2.33 The World Bank’s initial response was to provide a US$14 billion fast-track facility to assist member states with immediate financial needs associated with the pandemic. Following on from that, the World Bank has implemented a separate package allocating up to US$350 billion over five years to assist member states with responding to the pandemic and its impact on the economies of member states. This will take the form of grants and loans as well as technical assistance to those states.47

40 Ms Chiara Edwards, Policy Analyst, International Financial Institutions Unit, Treasury,

Committee Hansard, Canberra, 22 May 2020, p. 4.

41 IFC Capital Increase, Article 2.

42 IFC Capital Increase, Article 3.

43 Ms Ellison, Treasury, Committee Hansard, Canberra, 22 May 2020, p. 2.

44 IFC NIA, para 13.

45 IFC NIA, para 17.

46 Ms Ellison, Treasury, Committee Hansard, Canberra, 22 May 2020, p. 2.

47 Ms Ellison, Treasury, Committee Hansard, Canberra, 22 May 2020, p. 3.

12 REPORT 189

Legislation

2.34 To implement the two proposed treaty actions, the Government has introduced amendments to the International Monetary Agreements Act 1947 (the Act).48

2.35 Previously this Act has been amended in relation to each change in Australia’s obligations to international financial institutions. In this case, however, the Act is being amended to permit the relevant Minister to change Australia’s obligations without having to amend the Act on each occasion.49

2.36 According to The Treasury, the proposed amendments will mean that the Act will no longer contain redundant details about previous capital increases, and dollar values and share amounts that are no longer current.50

2.37 The proposed amendments are contained in Schedule 4 of the Treasury Laws Amendment (2020 Measures No. 2) Bill 2020. The Bill provides that the relevant Minister can enter into agreement with the IBRD and the IFC to purchase additional shares, and that funding for these additional purchases will come from the Consolidated Revenue Fund.51

2.38 Decisions to enter into future share purchases will continue to be subject to Australia’s domestic treaty-making processes, including consideration by the Joint Standing Committee on Treaties.52

2.39 According to Treasury, this approach is consistent with other provisions in the Act that authorise the Minister entering into agreements in support of programs of the International Monetary Fund, the World Bank or the Asian Development Bank.53

2.40 In addition, the Bill includes amendments that would require that IFC capital increases facilitated by a direct change to the IFC Articles of Agreement be implemented via a disallowable legislative instrument.54

48 IFC NIA, para 17.

49 IFC NIA, para 17.

50 Ms Edwards, Treasury, Committee Hansard, Canberra, 22 May 2020, p. 3.

51 Treasury Laws Amendment (2020 Measures No. 2) Bill 2020, Schedule 4.

52 Ms Edwards, Treasury, Committee Hansard, Canberra, 22 May 2020, p. 3.

53 The Treasury, Submission 1, p. 1.

54 The Treasury, Submission 1, p. 1.

CAPITAL INCREASE WBG IBRD AND CAPITAL INCREASE WBG IFC 13

Conclusion

2.41 The Committee notes that the amendments contained in the Treasury Laws Amendment (2020 Measures No. 2) Bill 2020 means that, while the treaties associated with future share purchases will be subject to JSCOT scrutiny, the share purchases themselves will not be subject to a vote in Parliament. The Committee also notes that the proposed arrangement is already in place for a number of other international institutions.

2.42 The timing of the capital increase in relation to the COVID-19 pandemic, while coincidental, adds to the resources available to the World Bank at a time of high demand. The Committee supports the capital increases to the IBRD and IFC and recommends that binding treaty action be taken.

Recommendation 1

2.43 The Committee supports the International Bank for Reconstruction and Development (IBRD) General Capital Increase and Selective Capital Increase and the International Finance Corporation (IFC) General Capital Increase and recommends that binding treaty action be taken.

15

3. Amendments CMS

Amendments to Appendices I and II to the Convention on the Conservation of Migratory Species of Wild Animals

Background

3.1 The treaty action under consideration in this Chapter is an amendment to the Convention on the Conservation of Migratory Species of Wild Animals (1979) (the Convention).

3.2 The Convention enables the protection of wild animals that migrate through the jurisdiction of a number of countries, called ‘range states’. In order to protect these migratory species, the Convention obliges range states to apply a similar level of protection to migratory species across their range.1

3.3 Mr Benjamin Cronshaw, in a submission to the inquiry, described the Convention’s purpose in the following terms:

Conservation and protection of animal species is important. Species protection is not simply about the individual animal, but about upholding a complex and interconnected ecosystem. The loss of one animal could have ramifications for other species, which underlines the importance of species protection. Migratory species may contribute to multiple ecosystems, while also being

1 National Interest Analysis [2020] ATNIA 4 with attachment on consultation, Amendments to

Appendices I and II to the Convention on the Conservation of Migratory Species of Wild Animals, (Gandhinagar, 17-22 February 2020) [2020] ATNIF 6, hereafter referred to as the NIA, para 8.

16 REPORT 189

exposed to greater threats during their travel. Moreover, the nature of migratory species travelling jurisdictions can cause confusion about which country has responsibility for their protection, or how to do so. Thus, there is a need for the international community to cooperate and work together on migratory species protection…2

3.4 The Convention consists of a main text dealing with the administration of the Convention and the obligations of range states, and two appendices listing species to which the Convention applies. Appendix I lists endangered migratory species and Appendix II lists migratory species that have an unfavourable conservation status.3

3.5 According to the National Interest Analysis (NIA), countries with range states for Appendix I listed species:

…shall endeavour to conserve the species and its habitat; prevent, remove, compensate for or minimise, as appropriate, the adverse effects of activities or obstacles that seriously impede or prevent migration and, to the extent feasible and appropriate, prevent, reduce or control factors that endanger or are likely to further endanger the species… 4

3.6 In relation to Appendix II listed species, range states:

…shall endeavour to conclude agreements where these should benefit the species and give priority to those species having an unfavourable conservation status… 5

3.7 Listings in the appendices are regularly reviewed at Conferences of the Parties, called ‘CoPs’, so that the listings can be adjusted to reflect the status of migratory species.6

3.8 The amendments under consideration here are the result of the 13th CoP, which took place in India in February 2020. The amendments are deemed amendments, and came into effect on 22 May 2020.7 Consideration of these amendments by the Committee has been delayed because parliamentary sitting patterns have been disrupted by the COVID-19 pandemic.

2 Mr Benjamin Cronshaw, Submission 1, p. 1.

3 NIA, para 7.

4 NIA, para 17.

5 NIA, para 17.

6 NIA, para 1.

7 NIA, para 1.

AMENDMENTS CMS 17

3.9 Australia is a range state for four of the ten species added to the appendices at the February meeting: the Antipodean Albatross; the Oceanic White-tip Shark; the Smooth Hammerhead Shark; and the Tope Shark (called the School Shark in Australia).8

3.10 The Antipodean Albatross and the Oceanic White-tip Shark have been listed in Appendix I, and the Smooth Hammerhead Shark and the School Shark have been listed in Appendix II.9

3.11 The Antipodean Albatross and the Oceanic White-tip Shark are already protected to the extent required under Appendix I of the Convention in Australia. Consequently, under Australian law, it is already an offence to kill, injure, take, keep or move these species.10

3.12 The Australia Government opposed the listing of the Smooth Hammerhead Shark and the School Shark in Appendix II. According to Mr Geoff Richardson, Assistant Secretary, Protected Species and Communities Branch, Department of Agriculture, Water and the Environment:

… The basis for our opposition to those nominations was that we did not believe … that the species [were] … eligible for listing as migratory, in either appendices, in fact. The basis for that was around the definition of ‘migratory’ that the convention on migratory species includes. In order to be eligible for inclusion on either appendix, a species must have the entire population or any geographically separate part of the population or have a significant proportion of members cyclically and predictably crossing one or more national jurisdictional boundaries.11

3.13 The Australian Government based its opposition on a number of recent studies using genetic analysis which indicated that, while individual sharks may migrate between one fishery and another, there was little evidence that the species as a whole were migratory. The Committee notes that the studies discussed during the hearing applied only to the school shark.12

8 Amendments to Appendices I and II to the Convention on the Conservation of Migratory Species of Wild

Animals, (Gandhinagar, 17-22 February 2020) [2020] ATNIF 6, hereafter referred to as the Amendments to the Convention, Annex 1.

9 Amendments to the Convention, Annex 1.

10 NIA, para 1.

11 Mr Geoff Richardson, Assistant Secretary, Protected Species and Communities Branch,

Department of Agriculture, Water and the Environment (DAWE), Committee Hansard, Canberra, 15 June 2020, p. 6.

12 Mr Richardson, DAWE, Committee Hansard, Canberra, 15 June 2020, pp.7-8.

18 REPORT 189

Fisheries management

3.14 The management of fisheries in Australia is a complex administrative matrix involving State, Territory and Commonwealth jurisdictions, and a variety of stakeholders, including commercial fishing, recreational fishing, and environmental protection groups.

3.15 In relation to jurisdiction, States and the Northern Territory maintain jurisdiction over coastal waters out to three nautical miles from the coast. Beyond that, to Australia’s maritime boundaries at 200 nautical miles from the coast, the Commonwealth has jurisdiction.13

3.16 Management of fisheries in Australian waters has developed in an organic way, based on specific fisheries. Managing fisheries protection in Australia is consequently subject to a number of cooperative arrangements between the Commonwealth, and the States and the Northern Territory. In general, these cooperative arrangements involve the Commonwealth managing commercial fishing and the States and the Northern Territory managing recreational fishing. The Australian Fisheries Management Authority identifies 21 fisheries, each with its own specific cooperative arrangement.14

3.17 In relation to how Australia’s commitments under the Convention are applied to fisheries, Mr Richardson advised that:

We do consultation leading up to those meetings and following those meetings with our jurisdictional colleagues who are responsible for managing state licensed fisheries, if you like, that might take these species, either targeted or as bycatch…15

Inconsistency between the Convention and the EPBC Act

3.18 Australia lodged a reservation for the two species newly listed in Appendix II for which it is a range state. This has been a feature of Australia’s implementation of the Convention, and is a result of an

13 Fisheries Research and Development Corporation, Jurisdiction,

viewed 5 June 2020.

14 Australian Fisheries Management Authority, Managing Australian Fisheries,

viewed 5 June 2020

15 Mr Richardson, DAWE, Committee Hansard, Canberra, 15 June 2020, p. 6.

AMENDMENTS CMS 19

inconsistency between the obligations of the Convention and the relevant Commonwealth legislation, the Environment Protection and Biodiversity Conservation Act 1999 (the EPBC Act).16

3.19 The relevant section of the EPBC Act, section 209, applies the protections required in relation to an Appendix I listing under the Convention to all listings under the Convention. According to Mr Richardson:

Once listed on Appendix II, parties are only obliged to endeavour to conclude agreements where these would benefit the species. Parties to the convention are not required to prohibit the take of Appendix II species, but under the Environment Protection and Biodiversity Conservation Act there’s a domestic requirement that species listed in either appendix must be added to the list of migratory species, which then enlivens a prohibition on killing, injuring, taking or moving that listed migratory species in Commonwealth waters.17

3.20 In other words, the EPBC Act imposes the more stringent protections for migratory species relevant to Appendix I listed species to Appendix II listed species.18 The inconsistency between the EPBC Act and the Convention was included in the Act when it was first made, in 1999.19

3.21 In 2015, the Committee noted that

… the reservations have been made because the migratory species concerned are regularly caught by recreational fishers. If the reservations had not been made, those fishers would break the law every time they caught a member of the species…

…The Committee appreciates that the reservations have been sought because of what [is described as] an ‘anomaly’ in Australian law. However, the Committee notes the potential for lodging reservations in these circumstances to be misinterpreted as diminishing the level of protection afforded to the migratory species in question.20

16 NIA, para 11.

17 Mr Richardson, DAWE, Committee Hansard, Canberra, 15 June 2020, p. 6.

18 NIA, para 11.

19 Mr Richardson, DAWE, Committee Hansard, Canberra, 15 June 2020, p. 9.

20 Joint Standing Committee on Treaties (JSCOT), Report 149: Treaty tabled on 10 February 2015,

16 June 2015, p 10.

20 REPORT 189

3.22 To date, Australia has lodged reservations in relation to ten species listed in Appendix II.21

3.23 The EPBC Act is currently subject to an independent review, with an Interim Report released on 20 July 2020.22 The Interim Report includes the following statement:

The EPBC Act should be amended to clearly delineate between different international obligations arising from Appendix I and II of the Convention on the Conservation of Migratory Species listings. This would allow Australia to meet its international obligations under the … Convention and continue to manage and protect migratory species domestically. To do this, Part 13 of the Act could be modified to allow the take of Appendix II listed species subject to all relevant management arrangements demonstrating that the take would not be detrimental to the survival of the species.23

3.24 While the Australian Government lodges reservations in relation to Appendix II listed migratory species, it still applies the relevant protections domestically.24

3.25 Specifically in relation to the Smooth Hammerhead Shark and the School Shark, Australia is a Party to the Memorandum of Understanding on the Conservation of Migratory Sharks (the MoU). The MoU is a non-binding agreement concluded under the Convention for the management of Appendix II listed species, and already applies to the Smooth Hammerhead Shark. The School Shark is expected to be added to the MoU as a result of its listing in Appendix II of the Convention.25

3.26 In relation to the management of Smooth Hammerhead Shark numbers, the listing of the similar Scalloped Hammerhead Shark in in Appendix II of the Convention in 2014 means that management arrangements are already in place and enforced for:

21 Ms Narelle Montgomery, Assistant Director, Migratory Species Section, Protected Species and

Communities Branch, Department of Agriculture, Water and the Environment (DAWE), Committee Hansard, Canberra, 15 June 2020, p. 9.

22 Department of Agriculture, Water and the Environment (DAWE), Independent Review of the EPBC

Act, viewed 14 July 2020.

23 Independent Review of the EPBC Act, Interim Report, para. 3.4.1,

viewed 22 July 2020.

24 NIA, para 12.

25 NIA, para 24.

AMENDMENTS CMS 21

…all of the [Australian] jurisdictions that take hammerhead sharks. 26

3.27 In practice, this means that the national take of the Smooth Hammerhead is already limited to 70 tonnes across all Australian jurisdictions per year.27

3.28 The Smooth Hammerhead is commercially fished in Western Australian, New South Wales and Commonwealth managed fisheries.28 The population varies by fishery location. The shark has been in substantial decline in the NSW fishery, but numbers remain stable in the WA fishery.29

3.29 The School Shark is subject to a Commonwealth rebuilding strategy developed in 2015 to increase the stock to 20 per cent of its initial unfished biomass within three generations.30 Consequently, the species is heavily managed in Australian waters, including up to date stock assessments, prohibitions on fishing in breeding areas, and strict by-catch limits.31

3.30 School Sharks are very long lived (up to 60 years) and are slow to reproduce, with reproduction occurring once every three years. As the rebuilding strategy only came into effect in 2015, not enough time has elapsed for there to be a sustained recovery to date.32

3.31 Recreational fishers can still catch both species of shark.33

Costs

3.32 According to the NIA, the proposed amendments to the Convention are not expected to impose any additional costs on Australia.34

26 Mr Richardson, DAWE, Committee Hansard, Canberra, 15 June 2020, pp. 6-7.

27 Mr Richardson, DAWE, Committee Hansard, Canberra, 15 June 2020, pp. 6-7.

28 NIA, para 12.

29 Shark Report Card, 2019, viewed 5 June 2020.

30 Initial unfished biomass refers to the size of the School Shark population before commercial

fishing of the species began.

31 NIA, para 13.

32 Shark Report Card, 2019, viewed 5 June 2020.

33 NIA, para 13.

34 NIA, para 26.

22 REPORT 189

Conclusion

3.33 From the Committee’s perspective, the long standing matter of concern remains the inconsistency between the EPBC Act and the Convention. The inconsistency means Australia continues to lodge reservations in relation to Appendix II listings.

3.34 While the Australian Government has acted to ensure that the measures required of range states in relation to Appendix II listed species are in place for those species for which Australia has made a reservation, over the long term such reservations may damage Australia’s standing on conservation matters in the international community. The inconsistency has been apparent for some time. The inconsistency was discussed in detail in the Committee’s Report 149, tabled in 2015, and was identified as a problem requiring rectification in a 2009 review of the EPBC Act.35

3.35 The Committee notes that the Interim Report of the independent review of the EPBC Act has been released, and has identified that the EPBC Act should be amended to ensure the Act is consistent with Australia’s Convention obligations.

Recommendation 2

3.36 The Committee also notes the inconsistency between the levels of protection afforded under EPBC Act and the Convention on the Conservation of Migratory Species, which means Australia continues to lodge reservations in relation to Appendix II listings. The Committee recommends the Government pursue amendments to the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act), as part of its broader review, to resolve this inconsistency.

3.37 Because the amendment to the Convention is a deemed amendment and is already in force, the Committee does not need to make a recommendation in relation to ratification.

35 JSCOT, Report 149, p. 8.

23

4. Termination IPPA-Indonesia

Exchange of letters terminating the Agreement between the Government of Australia and the Government of the Republic of Indonesia concerning the Promotion and Protection of Investments

Introduction

4.1 This chapter examines the Exchange of letters terminating the Agreement between the Government of Australia and the Government of the Republic of Indonesia concerning the Promotion and Protection of Investments which was signed on 6 February 2020 in Jakarta and tabled in the Parliament on 14 May 2020.1

Background

4.2 During its examination of the Comprehensive Partnership Agreement between the Government of Australia and the Government of Indonesia (IA-CEPA) at the end of 2019, the Committee was made aware of concerns that investment provisions contained in the new IA-CEPA would overlap those in an existing bilateral investment agreement, the Agreement between the

1 National Interest Analysis [2020] ATNIA 2 with attachment on consultation, Exchange of letters

terminating the Agreement between the Government of Australia and the Government of the Republic of Indonesia concerning the Promotion and Protection of Investments, (Jakarta, 6 February 2020) [2020] ATNIF 3, hereafter the NIA, para 1.

24 REPORT 189

Government of Australia and the Government of the Republic of Indonesia concerning the Promotion and Protection of Investments (IPPA).

4.3 There were concerns that if the IA-CEPA entered into force without the IPPA being terminated there would be two sets of bilateral rules covering investment between Indonesia and Australia. In particularly, there were concerns regarding the overlapping Investor-State Dispute Settlement (ISDS) provisions in the two agreements. The Committee was advised that consideration should be given to terminating the existing IPPA in order to prevent future complications:

The existence of overlapping investment treaties complicates Australia’s compliance with these treaties and makes it harder to understand the nature and scope of Australia’s investment obligations and harder to predict the outcomes of an ISDS claim alleging breach of these obligations.2

4.4 The Committee raised the issue with the Department of Foreign Affairs and Trade (DFAT) during that inquiry and were told that as the IPPA was a separate treaty action, it would be possible to negotiate the termination separately. DFAT assured the Committee at that time that the Australian Government recognised the benefits of terminating the IPPA. However, DFAT explained that a decision had to be made during the negotiations for the IA-CEPA whether to prolong the current negotiations to this end or conclude those negotiations and treat the termination of the IPPA separately.3

4.5 The Committee acknowledged the uncertainty that could result from the two treaties remaining in force and noted that accepted practice had been to terminate existing older bilateral investment treaties when updated provisions came into effect. Accordingly, the Committee recommended that the Government pursue the termination of the IPPA.4

4.6 This treaty action will implement that recommendation.

Reasons for Australia to take the proposed treaty action

4.7 The NIA indicates that since its implementation in 1993, the IPPA has provided protection for Australian investors through a framework of

2 Professor Mitchell and Professor Voon, Submission 2, [Joint Standing Committee on Treaties

(JSCOT), inquiry IA-CEPA and A-HKFTA, 2019], p. 6

3 JSCOT, Report 186: IA-CEPA and A-HKFTA, October 2019, p. 49.

4 JSCOT, Report 186, p. 89.

TERMINATION IPPA - INDONESIA 25

investment obligations, including an ISDS mechanism.5 However, DFAT explained that, when the IA-CEPA enters into force, the IPPA will become redundant:

Upon entry into force of IA-CEPA on 5 July 2020, it will no longer be necessary for the bilateral investment treaty [IPPA] to remain in force. This is because the IA-CEPA investment chapter contains a set of high-quality rules governing the treatment of investors and their investments, balanced with explicit safeguards reaffirming the right of both parties to regulate in the public interest. These detailed modern investment provisions will usefully update and replace the older style bilateral investment treaty in regulating bilateral investment between Australia and Indonesia. 6

4.8 Additionally, DFAT re-iterated that terminating the IPPA is in keeping with Australia’s approach to updating existing investment provisions:

… terminating the bilateral investment treaty is also in line with the work the government is undertaking on international investment treaty reform, both with respect to Australia’s investment obligations as well as work being progressed in multilateral forums.7

Issues

Survival clause

4.9 During its inquiry into the IA-CEPA, the Committee expressed particular concern over the 15-year survival clause incorporated into the IPPA.8 This clause states:

In respect of investment made prior to the date of termination of this Agreement, the provisions of the Agreement shall continue to be effective for a further period of fifteen years from the date of termination of the Agreement.9

4.10 If this clause were to remain in force after the IPPA was terminated, it could leave Australia open to an ISDS claim being brought for up to fifteen years

5 NIA, para 6.

6 Ms Elizabeth Bowes, First Assistant Secretary, Regional Trade Agreements Division, Department

of Foreign Affairs and Trade (DFAT), Committee Hansard, Canberra, 15 June 2020, p. 2.

7 Ms Bowes, DFAT, Committee Hansard, Canberra, 15 June 2020, p. 2.

8 JSCOT, Report 186, p. 89.

9 Agreement between the Government of Australia and the Government of the Republic of Indonesia

concerning the Promotion and Protection of Investments (IPPA), art XV:2.

26 REPORT 189

after the IPPA was terminated.10 The Committee asked for confirmation that this Agreement will definitely terminate the clause as, by its nature, it was designed to remain operative once the IPPA ceased. DFAT assured the Committee that it would be effective:

Paragraph D of the exchange of letters provides that notwithstanding the 15-year survival clause contained in paragraphs 1 and 2 of Article 15 of the [IPPA], which concern entry into force, duration and termination, the provisions in the proposed agreement, that is this exchange of letters, will supersede the 15-year survival clause in the [IPPA] and therefore will be effective to terminate the [IPPA] itself.11

4.11 The Committee inquired if there were any current disputes that have been submitted under the IPPA and were assured that DFAT was unaware of any such disputes.12

Investor-State Dispute Settlement (ISDS)

4.12 IA-CEPA is expected to deliver both general investor protections and ISDS provisions.13 Submitters to previous trade agreement inquiries have raised concerns with the Committee regarding the possible risks posed to the Australian government by ISDS provisions, particularly in the area of public health policies. The Australian Fair Trade and Investment Network (AFTINET) restated those concerns and drew attention to the initiatives implemented by the Government to address the current COVID-19 pandemic, suggesting that the Government faces a heightened risk of claims from global corporations under ISDS provisions over these policies.14 DFAT assured the Committee that they foresaw no issues in this area:

… we are confident that the updated procedural safeguards and protections in IA-CEPA are broad enough to cover all issues of public health. That would include circumstances that have arisen more recently under COVID-19. Those include regulatory objectives, procedural safeguards in the agreement … and also the explicit safeguards in the ISDS mechanism, which exclude claims

10 JSCOT, Report 186, p. 50.

11 Ms Bowes, DFAT, Committee Hansard, Canberra, 15 June 2020, p. 2.

12 Ms Bowes, DFAT, Committee Hansard, Canberra, 15 June 2020, p. 2.

13 JSCOT, Report 186, p. 7.

14 Australian Fair Trade and Investment Network (AFTINET), Submission 1, pp. 4-5.

TERMINATION IPPA - INDONESIA 27

relating to public health measures. That means that public health measures cannot be challenged under ISDS.15

4.13 During its inquiry into the IA-CEPA, the Committee noted that overlapping ISDS provisions in the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) to which both Australia and Indonesia are Parties, could further complicate these issues. DFAT acknowledged that while this avenue was still available to investors, they could not take advantage of the provisions in both agreements:

… if you wanted to take action under AANZFTA or under IA-CEPA you would in either case have to waive your right to take dispute settlement action under domestic law or under any other international dispute law. If you want to take an action under either of those agreements, you have to waive your right to take dispute settlement action under the other options available.16

Termination timeframe

4.14 The Committee noted that the IA-CEPA is due to come into force on 5 July 2020, and inquired if the termination of the IPPA would automatically take effect on that date. DFAT explained that it would not take effect immediately as it is a separate treaty action and the domestic processes of both Australia and Indonesia must be completed first:

There are two requirements for entry into force of this agreement. One, the date of entry into force of IA-CEPA; and, because this is a separate treaty action, the date on which both of our respective domestic treaty-making processes have been finalised. It is our understanding that Indonesia has completed its own processes, although it has yet to notify us of that fact … so it’s both the date of termination of IA-CEPA and the date on which Australia and Indonesia notify that we have completed our respective treaty-making processes to terminate this agreement.17

Conclusion

4.15 The Committee commends those negotiators involved in ensuring that this treaty action was finalised so promptly after the completion of the IA-CEPA.

15 Ms Bowes, DFAT, Committee Hansard, Canberra, 15 June 2020, pp. 2-3.

16 Ms Caroline McCarthy, Assistant Secretary, Free Trade Agreements Investment and Digital

Trade Branch, Regional Trade Agreements Division, Department of Foreign Affairs and Trade (DFAT), Committee Hansard, Canberra, 15 June 2020, p. 3.

17 Ms Bowes, DFAT, Committee Hansard, Canberra, 15 June 2020, p. 2.

28 REPORT 189

4.16 The Committee acknowledges that its implementation will provide certainty and improve conditions for investors.

4.17 The Committee supports the termination of the IPPA and recommends that binding treaty action be taken.

Recommendation 3

4.18 The Committee supports the Exchange of letters terminating the Agreement between the Government of Australia and the Government of the Republic of Indonesia concerning the Promotion and Protection of Investments and recommends that binding treaty action be taken.

29

5. Minor treaty actions

5.1 Minor treaty actions are generally technical amendments to existing treaties which do not impact significantly on the national interest.

5.2 Minor treaty actions are presented to the Committee with a one-page explanatory statement and are listed on the Committee’s website. The Committee can choose to formally inquire into these treaty actions, or accept them without a formal inquiry and report. Once considered they are incorporated into a formal report of the Committee at the next opportunity.

5.3 The Committee has been asked to consider the following six minor treaty actions.

Agreement between the Government of Australia, the People’s Republic of China, the Republic of Korea, the Kingdom of Thailand, the United States of America, and the Socialist Republic of Viet Nam, pursuant to Article XIII of the General Agreement on Tariffs and Trade, on the establishment of country-specific quotas in the Republic of Korea’s World Trade Organization Tariff-Rate quota for Rice

5.4 The Committee held a public hearing into this minor treaty action in Canberra on 2 December 2019: this report presents the first opportunity for the treaty action to be incorporated into a report of the Committee.

5.5 The proposed Agreement will give effect to a negotiation undertaken with the Republic of Korea (the ROK) under Article XIII of the General Agreement on Tariffs 1994 (GATT) under the World Trade Organization (WTO) on rice imports. The Agreement will establish country-specific quotas (CSQs) for Australia, China, Thailand, the United States and Vietnam in relation to the

30 REPORT 189

R

OK’s proposed WTO tariff rate quota (TRQ) for rice, pursuant to Article XIII of the GATT.1

5.6 The Agreement will extend rights to Australia to export rice to the ROK under a new 15,595 tonne per annum CSQ within the ROK’s WTO rice TRQ. The Agreement will also extend rights to export rice to the ROK for China, Thailand, the United States and Vietnam under CSQs. The ROK offered CSQs to Australia and the other Parties to resolve previously raised concerns in the WTO (known as ‘objections’) in 2014 in relation to the ROK’s originally proposed WTO rice TRQ.2

5.7 The only action required by Australia will be to remove its formal WTO objection to the certification of the ROK’s modified WTO Goods Schedule containing Korea’s proposed rice TRQ; an act that is within the remit of the Department of Foreign Affairs and Trade. The other Parties receiving CSQs under the Agreement (China, Thailand, the United States and Vietnam) will also be required to remove their objections to the certification of the ROK’s proposed rice TRQ in the WTO.3

2019 Amendments to Annexes II, VIII and IX of the Basel Convention on the Control of the Transboundary Movements of Hazardous Wastes and their Disposal

5.8 The proposed treaty action relates to amendments to the annexes of the Basel Convention on the Control of the Transboundary Movements of Hazardous Wastes and their Disposal (the Convention).

5.9 The amendments to the annexes to the Convention will strengthen the control of unsorted plastic wastes, and plastic wastes containing hazardous substances. In particular:

 Annex II (relating to categories of wastes requiring special consideration, known as ‘other wastes’) will be amended to control the movement of mixed, non-hazardous, plastic waste not sorted to a high standard;

1 E xplanatory Statement 11 of 2019, Agreement between the Governments of Australia, the People’s

Republic of china, the Republic of Korea, the Kingdom of Thailand, the United States of America, and the Socialist Republic of Viet Nam, pursuant to Article XIII of the General Agreement on Tariffs and Trade, on the establishment of country-specific quotas in the Republic of Korea’s World Trade Organization Tariff-Rate Quota for Rice, hereafter referred to as Explanatory Statement 11 of 2019, para 1.

2 E xplanatory Statement 11, para 2.

3 E xplanatory Statement 11, para 3.

MINOR TREATY ACTIONS 31

 Annex VIII (relating to hazardous wastes) will be amended to specifically capture plastics that are hazardous (e.g. materials which are flammable, poisonous or toxic to human health); and  Annex IX (relating to non-hazardous wastes that are not controlled

under the Convention) will be amended to include certain plastic wastes destined for recycling in an environmentally sound manner and almost free from contamination and other types of wastes.4

5.10 The Hazardous Waste (Regulation of Exports and Imports) Act 1989 (the Act) and the Hazardous Waste (Regulation of Exports and Imports) Regulations 1996 (the Regulations) implement the obligations in the Convention in Australia. Minor amendments to the Act and Regulations will be required to implement the amendments to the Convention.5 Further amendments may be made to the Regulations after further consultation with industry.6

2019 Amendments to Annex III of the Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade

5.11 The proposed treaty action relates to amendments to the annexes of the Rotterdam Convention on the Prior Informed Consent Procedure for Certain Chemicals and Pesticides in International Trade (the Convention).

5.12 This proposed treaty action relates to the listing of two new chemicals, phorate and hexabromocyclododecane (HBCD), in Annex III of the Convention. Phorate is a highly toxic pesticide. HBCD is a flame retardant polystyrene foam used in thermal insulation in the building industry, as well as in upholstery and packaging. It is a concern because of its persistence, toxicity and ecotoxity.

5.13 According to the Explanatory Statement, the amendments to Annex III of the Convention are procedural in nature and will have a negligible practical, legal and financial effect within Australia.7

4 Explanatory Statement 12 of 2019, 2019 Amendments to Annexes II, VIII and IX of the Basel

Convention on the Control of the Transboundary Movements of Hazardous Wastes and their Disposal, hereafter referred to as Explanatory Statement 12 of 2019, para 3.

5 Explanatory Statement 12, para 11.

6 Explanatory Statement 12, para 12.

7 Explanatory Statement 13 of 2019, 2019 Amendments to Annex III of the Rotterdam Convention on

the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade, hereafter referred to as Explanatory Statement 13 of 2019, para 2.

32 REPORT 189

5.14 Minor legislative changes will be required to the following legislation:

 Schedule 1 of the Agricultural and Veterinary Chemicals (Administration) Regulations 1995;  Schedule 2 of the Customs (Prohibited Exports) Regulations 1958;  Schedule 3 of the Customs Tariff Act 1995; and  Sections 64 and 66 of the draft Industrial Chemicals (General) Rules 2018.

2019 Amendments to Annex I of the United Nations Education, Scientific and Cultural Organisation International Convention against Doping in Sport

5.15 The proposed treaty action amends Annex I to the UNESCO International Convention against Doping in Sport (the Convention). Annex I (Prohibited List-International Standard) identifies the substances and methods that are prohibited in sport.

5.16 The proposed amendments align Annex I with the 2020 Prohibited List adopted by World Anti-Doping Agency (WADA) on 23 September 2019, which take effect on 1 January 2020. The amendments to the Prohibited List are technical, yet minor, in nature and are the result of a consultative process to determine the substances and methods that are considered performance enhancing.8

5.17 Australia's obligations under the Convention are given effect through an anti-doping legislative framework that comprises the Australian Sports Anti-Doping Authority Act 2006 (Cth) and the Australian Sports Anti-Doping Authority Regulations 2006, which incorporate the National Anti-Doping Scheme.9

5.18 Compliance with the proposed amendment to Annex I of the Convention does not require amendment to the Australian anti-doping legislative framework, as the specification of prohibited substances and methods under the Australian Sport Anti-Doping Authority Regulations 2006 is based on the Prohibited List, as adopted by WADA and in force from time-to-time.

8 Explanatory Statement 14 of 2019, 2019 Amendments to Annex I of the United Nations Education,

Scientific and Cultural Organisation International Convention against Doping in Sport, hereafter referred to as Explanatory Statement 14 of 2019, para 2.

9 Explanatory Statement 14, para 8.

MINOR TREATY ACTIONS 33

Changes to Schedule 1 of the Annex on Chemicals to the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on their Destruction

5.19 The proposed minor treaty action will add the chemical weapons known as ‘Novichoks’ to Schedule 1 of the Annex on Chemicals to the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on their Destruction (the Convention).10

5.20 Novichoks are chemical nerve agents with no known industrial uses, but which could be used in an act of war or for terrorism.11

5.21 The changes will require regulatory amendments to the Chemical Weapons (Prohibition) Regulations 1997 and Customs Prohibited Imports (Regulations) 1956.12

Amendment of 2018 to the Code of the Maritime Labour Convention 2006

5.22 The proposed treaty action is the deemed acceptance by Australia of the amendments relating to Standards A2.1 and A2.2 and Guideline B2.5.1 of the Code of the Maritime Labour Convention 2006 (MLC).13

5.23 The MLC sets minimum working conditions for seafarers to work on ships. Amendments made by this particular treaty action are intended to ensure that a seafarers’ employment agreement will continue to have effect while a seafarer is held captive on or off the ship as a result of acts of piracy or armed robbery, that wages will continue to be paid and he/she will be entitled to repatriation.14

5.24 Australian domestic legislation already ensures that for most vessels, seafarers’ employment agreements, wages and other entitlements (including repatriation) continue to have effect in circumstances where they are held in captivity. The proposed amendments to Marine Order 11 are intended to

10 E xplanatory Statement 2 of 2020, Changes to Schedule 1 of the Annex on Chemicals to

Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on their Destruction, hereafter referred to as Explanatory Statement 2 of 2020, para 1.

11 E xplanatory Statement 2 of 2020, para 2.

12 E xplanatory Statement 2 of 2020, para 8.

13 E xplanatory Statement 5 of 2020, amendments of 2018 to the Code of the Maritime Labour

Convention 2006, hereafter referred to as Explanatory Statement 5 of 2020, para 1.

14 E xplanatory Statement 5 of 2020, para 6.

34 REPORT 189

c

over all vessels so that Australia’s domestic law and practice aligns with the amendments to the Code of the Maritime Labour Convention.15

5.25 Accepting the amendments will ensure that appropriate workplace protections for seafarers are in place.16

5.26 The amendments to the MLC were approved by the 107th Session of the International Labour Conference (ILC) of the International Labour Organization (ILO) on 5 June 2018. The Director General notified the Members who have ratified the MLC of the amendments on 2 November 2018.17

5.27 The MLC provides for the deemed acceptance of amendments that are approved by the ILC and these amendments will accordingly enter into force on 26 December 2020.18

5.28 The amendments will be implemented by the Australian Maritime Safety Authority (AMSA) via amendments to Marine Order 11 made under the Navigation Act 2012.19

Conclusion

5.29 The Committee determined to hold a formal inquiry into the first of these minor treaty actions, but not into any of the others. The Committee agreed that binding treaty action may be taken in each case.

Mr Dave Sharma MP Chair 3 August 2020

15 E xplanatory Statement 5 of 2020, para 2.

16 E xplanatory Statement 5 of 2020, para 7.

17 E xplanatory Statement 5 of 2020, para 3.

18 E xplanatory Statement 5 of 2020, para 5.

19 E xplanatory Statement 5 of 2020, para 8.

35

A. Submissions

Capital Increase WBG IBRD

1 The Treasury

Capital Increase WBG IFC

1 The Treasury

Amendments CMS

1 Mr Benjamin Cronshaw

2 Department of Agriculture, Water and the Environment

Termination IPPA-Indonesia

1 Australian Fair Trade and Investment Network (AFTINET)

2 Australia Indonesia Business Council

3 Department of Foreign Affairs and Trade

37

B. Witnesses

Friday, 22 May 2020

Canberra

Capital Increase: WBG IBRD; Capital Increase: WBG IFC

The Treasury

Department of Foreign Affairs and Trade

Monday, 15 June 2020

Canberra

Amendments CMS

Department of Foreign Affairs and Trade

Department of Agriculture, Water and the Environment

Termination IPPA - Indonesia

Department of Foreign Affairs and Trade