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Joint Standing Committee on Treaties
15/06/2018
Comprehensive and progressive agreement for trans-Pacific partnership

RANALD, Dr Patricia, Convenor, Australian Fair Trade and Investment Network

[09:38]

CHAIR: Welcome. The committee has received a supplementary submission from AFTINET for the inquiry. The secretariat has made that available to everyone—looking at committee members, everyone's got it. For the sake of procedure, can I ask that supplementary submission 45.1, as circulated, be accepted as evidence to the inquiry and authorised for publication. There being no objection, it is so ordered. Do you have any comments to make on the capacity in which you appear?

Dr Ranald : I am appearing on behalf of the Australian Fair Trade and Investment Network, which is a network of community organisations.

CHAIR: Although the committee does not require you to give evidence under oath, I should advise you that the hearing is a legal proceeding of the parliament and therefore has the same standing as proceedings of the respective houses. The giving of false or misleading evidence is a serious matter and may be regarded as a contempt of parliament. The evidence given today will be recorded by Hansard and attract parliamentary privilege. I now invite you to make a brief opening statement before we proceed to a wider community discussion.

Dr Ranald : Thank you very much, and I am grateful for the opportunity to give evidence to this committee. I just want to summarise some of the main points in our submission. The first point is that despite the name change and the new preamble, which is not legally binding, and the suspension of 22 clauses, we still have a lot of concerns about the TPP. These can be summarised by saying that most of its chapters are about giving greater rights to international corporations. There could be disadvantages for ordinary Australians in some of these areas, and they're the areas that I'll emphasise. I just want to say briefly about the suspended clauses that they are only suspended; they could be resurrected if the US rejoins the agreement. Australia has never before signed a deal having a number of suspended clauses which all the parties agree are essentially not acceptable but may come back into the agreement at a future date. So I think that needs very careful scrutiny by the committee.

The first set of remarks I want to make is about ISDS—investor state dispute settlement—which is one of our main concerns. I have had published in The Sydney Morning Herald and The Canberra Times an op ed piece which summarises some of the main points I want to make. That was published yesterday. Can I request it to be tabled?

CHAIR: Can a colleague move that we accept the Sydney Morning Herald article, which is in the public domain? Thank you, Senator Macdonald.

Dr Ranald : All trade agreements have government to government dispute processes, and there's no issue about that. But the TPP-11 does have this additional factor of ISDS, which gives additional legal rights to global corporations based on legal concepts which are not generally recognised in national systems and are not available to domestic investors. So it means that they can bypass national courts, sue governments for millions of dollars in compensation in international tribunals if they can argue that a law or policy has reduced the value of their investment, known as indirect expropriation, or if they can argue they've been unfairly treated, known as the minimum standard of treatment, or if the treatment did not meet their legitimate expectations. It's a very costly system for both companies and governments because they have to pay both arbitration fees and legal fees, and the cases are heard by ad hoc tribunals, not by an independent judiciary. There are no precedents and no appeals. A number of large international corporations, especially tobacco companies, as we saw with the Philip Morris case, and mining companies have publicly stated that they do use ISDS to discourage public health and environmental legislation. In our submission there's a specific reference to the Canadian Chevron company, which lobbied for ISDS to be included in the EU-Canada free trade agreement and specifically said they saw it as a deterrent against environmental protection laws. There are now over 850 known cases and increasing numbers concern health, environmental, industrial or other public interest laws. In my submission there are examples of pharmaceutical companies suing the Colombian government over a lower price for a pharmaceutical; the Canadian Bear Creek company suing the Peruvian government because the Peruvian government removed consent for development after the company failed to consult properly with Indigenous landowners; and the US Bilcon company won millions in compensation because its application for a quarry development was refused for environmental reasons.

Senator IAN MACDONALD: I'm sorry to interrupt you. Is there anywhere we could find a list of those 89 cases referred to you?

Dr Ranald : I didn't say 89. I just said there were many. The UN Committee on Trade and Development has a website, the UNCTAD website, which lists all the known cases. The 850 is what I was talking about.

Senator IAN MACDONALD: 850 cases?

Dr Ranald : Yes. That's the total that are known. Not all of them are known, but there are increasing numbers. They are on the UNC TAD website. That's referenced in my submission. There have also been cases against industrial law.

The other issue is that even if a government wins a case, as the Australian Government did eventually win the Philip Morris case against plain packaging legislation, it takes a very long time and costs a lot of money. In that case it was nearly five years to get a substantive decision, another two years to get a decision on costs, and then the decision on costs was not made public. Australia got a proportion of its costs, but governments don't always get their costs back.

What our submission tries to do is present new evidence about the growing criticism of ISDS by legal experts and legislators. This has affected all sides of politics, and many governments are reconsidering ISDS. There are also ongoing reviews of it by the two institutions which actually run the tribunals, the UN Commission on International Trade Law and the World Bank International Centre for Settlement of Investment Disputes. Those are all referenced in our submission.

I want to particularly inform the committee of what's happening in the EU and the United States. In the case of the EU there's been growing public opposition to ISDS because of cases like the Swedish energy company Vattenfall suing the German government over its phase-out of nuclear energy. There have been two European Court of Justice cases which have actually found that ISDS is incompatible with national sovereignty in EU member states. It also found that because of that impact on national sovereignty, if an agreement contained ISDS it had to be voted on by each individual national EU parliament—the ISDS aspect of it. Because of this the EU is now developing a fast-track process of agreements which do not contain ISDS. In the coming negotiation between the EU and Australia for the EU FTA, the EU has announced that their mandate will not include ISDS.

In the case of the US there is bipartisan opposition to ISDS, which has result in a US policy against it in NAFTA. The US Trade Representative, Robert Lighthizer, has said in recent congressional hearings that US companies should take out political risk insurance rather than relying on general guarantees through ISDS in trade agreements. He has also expressed concerns about national sovereignty, saying 'I'm troubled by the fact that anyone can overrule the United States Congress when it's passed a law.' There are references to all of these things in our submissions. That was evidence given to a congressional committee.

So we believe that there is a move away from ISDS. Australia's not going to have ISDS in the EU FTA, and therefore there's not a good justification for having it in the TPP-11. The general safeguards for ISDS in the TPP-11 remain ineffective. Our submission goes into great detail about this, but the main piece of evidence here is that it was still felt necessary to have a special total exemption for tobacco regulation. That should not be required if the general exemptions for health and other public interest legislation were effective. But they are obviously not, because there has to be a total exclusion for tobacco regulation.

Other TPP-11 governments have made more effort to exempt themselves from ISDS than has the Australian government. For example, the New Zealand government has reached agreements not to apply ISDS provisions not only to Australia, which is the usual arrangement, but has also reached agreements with Malaysia, Brunei, Vietnam and Peru about this. But Australia has not made such efforts.

To summarise, we believe that the ISDS in the TPP-11 would expose our laws and policies to cases from global companies based in Canada, Japan, Malaysia, Singapore, Mexico, Chile and Peru, all of which do have companies which have launched ISDS cases under other general trade agreements.

I just want to briefly mention our supplementary submission, which is about the evidence given by the Minerals Council. Critics of ISDS have long argued that there's no need to include ISDS in broader trade agreements like the TPP-11 because there are alternatives available to global companies which may be undertaking investments in risky environments. One of these is to take out various forms of risk insurance, but another which has been used quite frequently is to negotiate private contracts for specific projects between investors and host governments, which can contain ISDS provisions just applying to that particular project. This is preferable because it gives the host government more control over which guarantees are appropriate for specific investment, and it avoids the problem of companies being able to launch cases against general public-interest laws on health and the environment and so on.

In the evidence given by the Minerals Council to this committee on 1 June, that evidence was based on an earlier piece of evidence given in 2016 to the committee. It contained 10 examples of ISDS cases, but actually seven of them were not ISDS brought under broader trade agreements; they were examples of ISDS in specific contracts between the company and the government. This evidence was actually quoted without making that distinction. So I just wanted the committee to know that that distinction does have to be made, because the letter was used to argue that 10 Australian companies had taken ISDS cases against other governments, and at that time there had only been one case, the Philip Morris case, against the Australian government. The argument in favour of having it was based on the 10 to one; but in fact seven of those cases were not about ISDS in broader trade agreements. If you look at the figures in that letter and you're saying you want to look at whether ISDS should be included in broader trade agreements, there have only actually been three cases taken by Australian companies against other governments using ISDS in broader trade agreements. Since that letter was submitted there's actually been another case lodged against the Australian government by a US company, APR Energy Holdings, about a decision of the Supreme Court in New South Wales.

So if you're going to use those kinds of arguments, the real ratio of cases taken under broader trade agreements by Australian companies against other governments is more like three to two rather than 10 to one. I would argue in any case that weighing the costs and benefits of ISDS is not a simple matter of comparing numbers of cases taken by Australian companies against other governments with numbers of cases taken against the Australian government, because when you're looking at something like plain packaging tobacco regulation or environmental issues, which often not only affect the environment but affect people's health, these are very broad social impact issues.

I want to now talk briefly about the trade in services section of the agreement. We have specific concerns about this. The text of the chapter treats regulation of services as if it were a tariff to be frozen at existing levels or reduced over time and not to be increased in future. It's known as the ratchet structure, and all services are included unless they're specifically exempted. So each government has to have a list of exemptions. The exemptions only apply to government-to-government disputes. They do not apply to ISDS. I'll just give one example, which may dramatise what is meant here.

All governments need to have flexibility in future to introduce new regulations whether it is in relation to the global financial crisis, the current royal commission into the banks or climate change. But we have had a special specific example here of the failure of privatisation and deregulation in the vocational education sector. That was dramatic—it involved fraud against students and fraud against the government—and the current government had to re-regulate that sector in 2016. Unless there had been careful exemptions, complete exemptions, for private vocational education services, it would have been very difficult for the government to actually re-regulate that sector if we had already signed the TPP, or not only signed it but ratified it. And, on top of that, if there had been a company involved in vocational education from one of the TPP countries that could argue that its investment had been harmed by such reregulation then there could have been an IDS case against the Australian government in that area. These are the kinds of restraints that the combination of restrictions on future government regulation in the text and then having the availability of ISDS can place on future government regulation.

I should conclude by saying that the government has refused to undertake independent studies of economic, health, environment and other impacts of the TPP-11 in Australia despite advice from key bodies like the Productivity Commission, and public health and environmental experts. The international studies that have been done are based on very favourable assumptions but still show very small economic gains by 2030, and these gains haven't been assessed against the kinds of costs that I've been talking about in my evidence, and there are more issues that we have raised in our submission. I do recognise that there are gains for particular export sectors and that is what the national interest analysis emphasises but it doesn't provide an analysis of the impact of the TPP on the economy as a whole nor of the cost to the economy as a whole so that is why we are recommending that the committee not support the implementing legislation.

CHAIR: The committee's heard many times about impending large numbers of ISDS cases against Australia but, to date, none of them have transpired. One of course was Philip Morris against the BIA in Hong Kong. In expert testimony, it was shown that in the previous TPP inquiry that, under the current TPP and TPP-11, that wouldn't have survived the initial 60 days. The only reason it went on was because the BIA was a very old BIA in that respect. At present, it is still Australia 10—albeit noting your point that seven of them took private actions; as long as there is some argument to suggest the private actions will based on current ISDS provisions within public agreements to allow them to do that but it is still 10—three to one, noting the current case that is being used in the Australia-US free trade agreement is seeking leave based on the same terms as Philip Morris is not an ISDS case.

So the evidence still points overwhelmingly in the favour of Australian businesses in ISDS—at the worst case, three to one; at best case, 10 to one—so I still don't understand how proponents against ISDS claim that this is a terrible thing when the evidence is clearly to the contrary.

Dr Ranald : I would not agree because I don't think it is just a matter of the number of cases. I do think it's a matter of national sovereignty and democracy, and about future governments being able to regulate when they need to regulate. If you think about the TAFE example, the vocational education example, that is an example where the current government saw the need to re-regulate and did so. Because we hadn't yet implemented the TPP, there were no problems in doing that in terms of the text of the agreement but if we had signed the TPP or if it had been implemented, then they could have also faced an ISDS case. There are numerous examples, particularly of mining companies, taking ISDS cases against environmental regulation and there are several cases of pharmaceutical companies taking ISDS cases against the pricing of pharmaceuticals or other regulatory issues to do with pharmaceuticals. Our argument is that we do not need to give these giant global companies additional legal rights to sue governments. That is a step too far.

CHAIR: And yet the NIA states in paragraph 46 and paragraph 47 that there are sufficient safeguards within the ISDS clauses to preserve the right of government to regulate in the public interest. That is specifically stated within the agreement.

Dr Ranald : There are clauses that try to do that, but they all have qualifications. The main one that talks about regulating in the public interest says that it has to be a genuine regulation and it can only apply 'except in rare circumstances'. That clause has been included in previous agreements and it hasn't prevented cases from being taken. Because it's such an expensive and lengthy process, the process of defending in these cases is very burdensome for governments and it also discourages other governments from regulating. We present evidence in our submission, for example, that, during the almost five years of the Philip Morris case, the New Zealand government had plain packaging ready to implement but it did not introduce the legislation. It specifically stated that it was going to await the outcome of the Philip Morris case. The ability to sue does exert a freezing effect on government's ability to regulate. As I said, the global companies that most frequently use this, like mining and tobacco companies, have actually explicitly said that that is why they want this provision—not only to launch actual cases themselves but to discourage governments from regulating.

CHAIR: Yet, Dr Ranald, the evidence is quite clear that, if TPP were in place, the Philip Morris case wouldn't have survived the first 60 days. If the TPP were in place, there wouldn't have been a five-year protracted issue under the Hong Kong BIA. In 60 days it would have been struck out.

Dr Ranald : We would hope so, but because the tribunals are ad hoc and have a lot of discretion we don't know that for sure. That should be the case. My point is that even the tribunals that oversee these cases—and the evidence is in our submissions with references cited—have admitted that there are enormous problems with even the later versions of ISDS. They still take a very long time and they are still very expensive. There are no precedents or appeals. The TPP version does not have precedents or appeals. It mentions them as a good idea, but it does not actually have them in the text.

CHAIR: So what should investors do? Let me give you an example, Dr Ranald. There was a particularly notorious case in this state with NuCoal. It has since been found to have involved corrupt politicians and others. Court actions had been taken. There is $150 million worth of US investment. The ICAC in this state went through it. It recommended that those investors be compensated. The current government decided against it. The investors in NuCoal went to the High Court a number of years ago and lost. So we now have a state—in this case, the state of New South Wales—that has knocked out the $150 million worth of US investors. They have gone to the High Court and the High Court has ruled, quite technically, in a unanimous decision that the New South Wales government has the right to make that law, so the $150 million worth of US investors have absolutely and utterly no right to compensation on an issue that they had nothing to do with because of the previous government's involvement through it—and that's well known in terms of the public. They actually have lost their money through no fault of their own. If ISDS were in place, they would have recourse. It's not in place between the US and Australia. They, therefore, have zero recourse and zero protection. We actually now may face an issue of sovereign risk between Australia and the US. How would we deal with that scenario in your view of an investment world?

Dr Ranald : The alternatives for NuCoal would have been (a) to take out political risk insurance or (b) to have a specific agreement with the Australian government about that particular project, as the seven examples we saw in the evidence discussed earlier. But I must say that my view is that if the Australian High Court makes a decision then that is the highest court in Australia, and I don't think international companies should have an automatic right to bypass that court and go to what is a much less-fair international ad hoc tribunal system to try to get compensation for decisions of our High Court. To me that is an issue about the independence of the judiciary and national sovereignty. I'm not so concerned about $150 million in this case.

CHAIR: But it's not your money—clearly!

Dr Ranald : No, I know. But I think you have to look at the broader picture of what is national sovereignty and what is democratic legal process.

CHAIR: But do you believe that everyone who does business with Australia now needs to take out political risk insurance and do a deal that includes provisions with respective state governments?

Dr Ranald : No, I do not, because I do not believe that in general we have such a risky political or judicial environment. I do not believe that. But I'm saying that those options were open to that company just as they're open to any other company.

Senator IAN MACDONALD: We will invite investment into Australia from foreign companies. They invest on the basis of the law as it then is and do everything perfectly legally. A change in government or a change of policy then results in that investment not being legal anymore. You're saying that's bad luck for the investor that we invited in?

Dr Ranald : I think the NuCoal example is a very specific and unique example—

Senator IAN MACDONALD: I'm thinking about the live cattle trade, to be honest. But you could give any hypothetical example you like. We invite investment in. They come in. They're perfectly legal under the law of the land at the time. A future policy change or a future government change means their investment is completely lost and they have no recourse.

Dr Ranald : But the prospect that there could be different policies in the future, either because circumstances change or because governments change, is what democracy is about. That is democracy.

Senator IAN MACDONALD: Well, that's fine. You can change it. But the investor we invited in shouldn't bear the brunt. Live cattle is a classic example. For decades we've exported live cattle. People invested money in that. We changed it, and maybe it was a good change. But we invited them in to invest in that. Should they bear the financial brunt of that? Or should the general Australian taxpayers say, 'Right: we've changed our mind, we've changed our policy, but we're not going to make this foreign investor pay'?

Dr Ranald : I think for those sorts of changes generally the Australian government offers some kind of transition arrangements to whoever's affected. But my point is that those sorts of decisions are democratic national decisions or decisions of our court. I do not believe it's necessary or proper to have those kinds of decisions challenged through bypassing our laws—

Senator IAN MACDONALD: Not challenged, but compensated.

Dr Ranald : Yes—demanding compensation. But often those cases are settled and part of the settlement is that the regulation is changed.

Senator IAN MACDONALD: Well, that's a different question.

Dr Ranald : But even to demand often millions or in some cases billions of dollars of compensation by international corporations, which already have enormous market power, to give them that extra—

Senator IAN MACDONALD: Some do.

Dr Ranald : legal weapon to use against social regulation I believe is not necessary. We do not need this in trade agreements. And as I said, governments like those in the EU and even the US are coming to that conclusion.

Senator IAN MACDONALD: I might come back to you later.

Ms TEMPLEMAN: We're obviously having complex discussion around it, but perhaps I can get something really clear: already people can have ISDS protections in individual agreements that they create with governments. So, if I want to put in a mine in a country on the African continent I can have an ISDS provision in there.

Dr Ranald : Yes, that's right.

Ms TEMPLEMAN: Are there any examples of companies doing business in Australia, where they have insisted with the Australian government to have ISDS provisions?

Dr Ranald : I'm not aware of those, but often those contracts are private agreements and private contracts. The letter actually indicates that, as well. But I would think it's unlikely because Australia does have a very reputable political and democratic system. But if you take New Zealand, for example, which is a much smaller economy, the previous New Zealand government had such an agreement with the makers of the famous films that were made in New Zealand: The Lord of the Rings. They had a specific investment agreement for that project, because it was such an enormous project between New Zealand and that particular company. So, that's the case in which you'd see those agreements. But I'm not aware of them in Australia.

Ms TEMPLEMAN: So, in terms of attracting investment to Australia, no-one is really suggesting that ISDS is a deal-breaker in these sorts of trade agreements, in terms of us being a reliable investment location?

Dr Ranald : No—that's right, and you should be aware that, as was pointed out, we don't have ISDS in the US-Australia Free Trade Agreement, yet US investment in Australia has continued to increase since that agreement came into force in 2005. So it obviously has not been an issue for US investment in Australia.

Ms TEMPLEMAN: If I can just go to the point you made about the vocational education sector and the implications of government regulation in future changing, in your submission you also mention child care and aged care as being potential examples where there may be impacts, and air transport services. Just to paint a picture of that, your evidence is suggesting that were there, for instance, an airport operating with a certain set of restrictions and at some time down the track there was a government decision to increase the restrictions on the flights in and out of that airport, or the volume, and that had a consequence for an international airline, then the government could be subject to action over those sorts of government regulations.

Dr Ranald : I'm not quite sure about flight movements, because there are separate international agreements about those. The example I gave in my submission was that there's been a lot of effort by unions in the airline industry to make sure that the maintenance for aircraft is done in Australia. That is a clearer example of where it could be argued that if a future government or a future airport or airline company said, 'We still want to have the maintenance done here rather than elsewhere,' that could be an issue that would conflict with the provisions in the 'trade in services' chapter, because it would be seen as a restriction on trade. With child care and aged care, the 'trade in services' chapter specifically says that when you open up to foreign investment in services you can't have restrictions on numbers of service providers and on staffing levels of service providers and you can't have what are called 'burdensome restrictions' on things like licensing and qualifications and those sorts of areas—qualifications of staff, for example.

In Australia we have a current debate about the quality of aged care. Governments are talking about whether there should be more regulation about staffing levels, qualifications and the licensing of staff and the centres themselves. I'm just saying that the 'trade in services' chapter reduces the ability, the flexibility, to regulate in these sorts of areas. Then you have the double-whammy of, if a new regulation actually affects a particular private company from a TPP country, they could also launch an ISDS case.

Ms TEMPLEMAN: The natural consequence of that would be, potentially, that you have one set of rules for Australian businesses and a different set of rules would have to apply for non-Australian businesses, to avoid any—

Dr Ranald : I don't think a government would do that. What they would do is apply, to all, the standard that's in the trade agreement. That would mean that any restrictions on those sorts of regulations would apply across the board.

Ms TEMPLEMAN: And in that way, as you say, completely take away the power of a government to really make decisions about standards and quality and the like.

Dr Ranald : It restricts the ability to introduce new regulation in the future.

Ms TEMPLEMAN: That was a question. I'll make sure I put an inflection on the end of it so that I make sure I'm clarifying it. I have a question on a different area: the temporary movement of people. You mentioned the requirement for labour market testing for contractual service suppliers being removed. One of the other pieces of evidence that's come before us is around different definitions about service suppliers for different countries—so, there's an irregular definition. Could you talk through the key concern around the removal of that labour market testing requirement?

Dr Ranald : Australia has removed that labour market testing requirement for the broad category of contractual service providers, which is equivalent to what used to be the visa 457 category and is now the temporary service—I've forgotten the exact term, but it has a new name. The number of occupations in that has been slightly reduced from 600 to 400, but there are still 400 occupations in that category.

Ms TEMPLEMAN: Temporary Skill Shortage visa.

Dr Ranald : Yes. I'll just to go the bit in my submission—it is page 21. Australia has said that it will remove labour market testing for all of those categories of employment in that definition, and that it has obtained some concessions from other countries in the TPP, which have said that they're giving us certain concessions, but we are giving this blanket removal of labour market testing. Our argument is that, if you look at what other governments have committed, the commitments are much more specific. I believe you actually had a supplementary submission from the Department of Foreign Affairs and Trade that lists all these for each country. In our submission, I just picked out some examples. For example, Chile's commitments relate to businesspersons engaged in specific nominated occupations. Japan's commitments specify that persons must be employed by an overseas company or must be in an advanced research or professionally qualified position. Malaysia's commitments are confined only to professionals in education and financial services at quite a high level. Vietnam includes only employees of companies with service contracts in Vietnam. So, the point we're making is that other countries have been more selective in their commitments but Australia has removed labour market testing for this very broad range of occupations, which includes all kinds of trades occupations, as well as some professional occupations.

Ms TEMPLEMAN: What do you see as being the consequences of that?

Dr Ranald : If you look at all of the recent evidence produced by two Senate inquiries and various academic studies—some very recent academic studies from both the University of New South Wales and the University of Sydney, which are cited in our submission—it's very clear that these workers coming to Australia under temporary visas are different from people who migrate under other systems, because they do not have a permanent job, they're tied to one employer, and that makes them extremely vulnerable because if they complain they can be deported. There are numerous studies showing that these workers are often exploited. Sometimes they're not paid at all, but they're very often not paid properly, they work very long hours, they suffer workplace injuries et cetera. It's been very well documented also by the workplace ombudsman. Apart from the impacts on these workers themselves, it has an impact on the labour market as a whole. We've also cited academic studies which show that too, that if you have a large number of people who are in a more vulnerable position than the rest of the workforce, that has an impact on the working conditions of the workforce as a whole.

Mr CREWTHER: Do you not think there could potentially be more benefits for Australian investors overseas in TPP-11 countries through the ISDS provisions, as opposed to risks to those investing in Australia? Do you think there's a counterbalance that there's more risk of not having it then there is in having it?

Dr Ranald : I think, along with Robert Lighthizer—this would be one of the very few areas where I would agree with him—that it is up to international companies themselves to assess the risk of investing in different environments. They can take out risk insurance and they can have investment agreements for particular projects, so I do think they have other options. If you look at which companies actually use ISDS they are usually very large global companies with deep pockets, because it is expensive for them. I was at a seminar where we had the wine industry and various other agriculture industries present. We were discussing both ISDS and the WTO dispute system, which is a government-to-government dispute system, and all of those industries said, 'We would not use ISDS—it's too expensive. If we have a systemic problem with another country we ask the Australian government to make a complaint through the WTO.' I do think that this system has grown as a system which is mainly used by very large global corporations to give them additional legal rights which I think are not justified in terms of democracy and sovereignty.

Mr CREWTHER: You note in your SMH article:

ISDS is hotly debated because it gives increased legal rights to global corporations, enabling them to bypass national courts—

and so on—

in unfair international tribunals over changes in law or policy …

Why do you come to the view that those international tribunals are unfair?

Dr Ranald : If you look at the judicial system in Australia, once you become a judge you can no longer be a practising lawyer, because there is an obvious conflict of interest. ISDS uses ad hoc tribunals where they pick from a panel of investment lawyers who can continue to be practising lawyers. So the people on an ISDS panel can one month be advocating for an international company and the next month be sitting on a tribunal as an arbitrator. That is not an acceptable judicial standard. Also, each tribunal has discretion over its own decisions, and there is effectively no appeal from that decision. They don't have to take notice of what another tribunal might have decided. Again, in the Australian legal system when you become a judge you are expected to look at other, similar cases and what they call precedents and be able to justify your decision in relation to the legal principles involved in those other cases. That is not the case—there are no precedents and there are no appeals, so the decision of the tribunal is final. That is the system that is in the TPP-11. That's why we call it an unfair tribunal system.

Mr CREWTHER: Given that the ISDS cases you cite are from old agreements, and there are a number of changes in the ISDS provisions under TPP-11—for example, improvements around safeguards preserving the right of government to regulate in the public interest—if we are proceeding with ISDS provisions, what further safeguards do you think are necessary to improve upon what is already proposed under TPP-11?

Dr Ranald : Not all of the examples I cite are old agreements. I think one of them is under the Central America Free Trade Agreement. which is a relatively recent agreement.

Mr CREWTHER: I mean older than TPP-11.

Dr Ranald : I don't think TPP-11 is a big advance on those more recent agreements, because it has exactly the same phraseology for its main clause that I talked about before. In other words, it still has 'except in rare circumstances' and there are various other so-called safeguards which we discuss in our submission in detail, but none of them would actually prevent a case from being taken. They might provide a bit more defence for the government in fighting the case, but the only specific exclusion which would actually prevent a case being taken is for tobacco regulation. The fact that that's there under the general exceptions in chapter 28 shows that governments didn't believe that the general safeguards in the ISDS chapter were adequate. It wouldn't stop a tobacco company from bringing a case, so they had to have a specific exclusion for tobacco companies. I think that it shows that the general safeguards are not going to stop cases from happening in the future.

Ms TEMPLEMAN: A government procurement issue you've raised is about the impact this could have on the government's ability to specify that Australian companies are chosen above others. Can you identify what the actual risk is that you see in the agreement?

Dr Ranald : It's a bit complicated, because what has happened since the agreement has been negotiated is that there's been an inquiry by the Joint Select Committee on Government Procurement. It recommended that the government should ensure that trade agreements do not prevent either state or federal governments from giving some preference, especially to local companies, in procurement decisions. This followed the whole debate about the steel industry and so on. All of our trading partners, like the US, Korea, Europe and other countries in the Asia-Pacific, have those sorts of exemptions for government procurement—that you can give preference, especially to small and medium enterprises. That exemption is in the TPP, but what alerted me was that in the national interest assessment there is a note—about the things that have to change in terms of legislation or regulation—that the government procurement guidelines will have to be changed. Unfortunately, that change by the Department of Finance is not subject to parliament's saying no. It's just tabled in parliament. I think that the committee should investigate exactly what changes are being recommended for the Department of Finance procurement guidelines, to make sure that they are not more restrictive than was recommended by that select inquiry and, indeed, not more restrictive than current state governments, some of which have regulations and some of which have actually expanded their ability to give preference to local companies.

CHAIR: Dr Ranald, if they're guidelines, they're only guidelines. If they're instructive upon the parliament they'll be a disallowable instrument, which means they can be struck out by either house.

Dr Ranald : I was told by someone in the Department of Finance that they're not disallowable.

CHAIR: If they're only a guideline they actually have no weight and bearing.

Dr Ranald : There are the Department of Finance regulations about how departments should—I think they're described as a guideline.

Ms TEMPLEMAN: A legislative instrument.

CHAIR: If it's an instrument it's disallowable—

Senator IAN MACDONALD: That's disallowable.

CHAIR: in the House within 10 days. Senator Macdonald, this is your last question. You've got one minute.

Senator IAN MACDONALD: Dr Ranald, I have to admit I don't know of you. I see you're an organisation of some 60 different groups. Do you have a paid secretariat or is it a voluntary group?

Dr Ranald : We have one part-time employee and we have volunteers. Because it's a network of organisations we are entirely supported by those organisations. I have a copy of our members as of 30 June last year, if you want it.

Senator IAN MACDONALD: Okay, that saves my next question. The members would fund you to a certain degree?

Dr Ranald : Yes.

Senator IAN MACDONALD: Your comment on the ISDS tribunals—I should really read the rules of the tribunals, but I can't imagine that someone could be a tribunal member if either of the parties to the dispute disputed that tribunal member's bona fides on the basis that they have been or were in some way involved with one of the parties in some time in the past in a financial way.

Dr Ranald : The parties get to nominate one person each, and then there's one that has to be agreed by the parties or appointed by a relatively independent source. My point is that the whole pool of candidates from which they are appointed can continue—and most of them, or in fact all of them, do continue—to be practising advocates.

Senator IAN MACDONALD: Because they're experienced in the field, obviously.

Dr Ranald : Yes, but in Australia when you become a judge—

CHAIR: Sorry, Dr Ranald, I'm going to pull it up there.

Senator IAN MACDONALD: Sorry.

CHAIR: Can I have someone move that Dr Ranald's submission of the membership of her organisation be accepted?

Senator IAN MACDONALD: I so move it.

CHAIR: Thank you, Senator. Dr Ranald, thank you for your attendance here today. If you've been asked to provide any additional information—I don't believe you have, therefore you don't have to get it to us in seven working days. You'll be sent a copy of the transcript of evidence when it becomes available, and you'll have an opportunity to request corrections to transcription errors. Thank you for your time.