Threat of action from multinationals one of the ‘enormous risks’ Australia faces if trade deal is ratified, GetUp says
Australia could face a growing number of expensive legal claims from foreign corporations if the Trans-Pacific Partnership (TPP) comes into force, a new report has warned. Dr Kyla Tienhaara, from the Australian National University, said Australia ought to learn from Canada’s experience after it signed the North America Free Trade Agreement (Nafta), which came into force in 1994 and led to dozens of legal cases against Canada by US corporations.
She said the frequency of trade-based legal cases against Canada had increased significantly since 2006, in line with the global trend of such disputes, and warned a similar thing might happen to Australia under the TPP, because it has an investor state dispute settlement (ISDS) provision similar to Nafta’s.
Tienhaara’s research has informed a report, The Canary in the Coalmine, commissioned by the activist group GetUp. It warns Australia risks facing multimillion-dollar legal cases if the Senate passes the TPP, and shows ISDS disputes have been rising worldwide, hitting a record 72 cases in 2015.
It says governments lose or settle ISDS cases much more often than they win them. Cases were settled, or the corporation won, in 52% of global ISDS cases, while the state won in 36% of cases, it says.
The ISDS provision in the TPP excludes tobacco companies from potential legal action, but investors from a wide variety of other industries could still use it, the report warns.
It says Australia’s Senate ought to learn from Canada’s experience before passing the trade agreement.
Canada has been hit with 39 separate legal cases under Nafta – all from American corporations and investors – with 69% of those cases having been initiated since 2006, the report says.
“The similarities between Canada and Australia in terms of the regulatory environment suggest that Australia is likely to face the same kind of disputes [under the TPP] as Canada has [under Nafta] – that is, disputes over regulatory issues rather than direct expropriations or other interferences in the operation of an investment,” the report warns.
Natalie O’Brien, GetUp’s economic fairness campaigns director, said the report demonstrated the “enormous risks” Australia faced under the TPP.
“Multinationals based in the USA and Canada are the most litigious in the world by an enormous margin – the Trans-Pacific Partnership would leave Australia exposed to both,” O’Brien said.
“Perhaps the most terrifying finding is the evidence of ‘regulatory chill’, where governments back away from critical health or environmental regulations because of the threat of ISDS.
“The Quebec government revoked fracking rights in St Lawrence after an assessment that it would impact local marine life. Now they are being sued under ISDS by an American corporation seeking US$118.9m in compensation.”
But Luke Nottage, professor of comparative and transnational business law at Sydney University, has said modern ISDS disputes are generally handled well.
He said better public consultation on treaty drafts, with help from experts, might assuage concerns about the investment chapters in major trade agreements.
The TPP is the biggest global trade deal in 20 years, involving 12 countries in the Pacific region that collectively represent more than 40% of world gross domestic product.
It includes Australia, the US, New Zealand and Japan, and will ensure the US’s influence in the Asia-Pacific region in the face of growing Chinese influence – if ratified.