The Indonesia-Australia Comprehensive Economic Partnership Agreement (“IA-CEPA”) will enter into force on 5 July 2020.

We have previously discussed the IA-CEPA’s provisions in detail (see here) and the progress of its implementation (see here).

Since our last post, the IA-CEPA has been ratified by the Indonesia and Australian parliaments and steps have been taken to terminate the existing bilateral investment treaty (“Aus-Indo BIT”).

We summarise the latest developments in this post.

Continue reading


A recent judgment of the Supreme Court of Western Australia, Dalian Huarui Heavy Industry International Company Ltd v Clyde & Co Australia [2020] WASC 132 (available here), demonstrates that the use of interim measures to provide security for an amount in dispute can be a very powerful remedy when structured through the creation of a trust.

In a Singapore-seated arbitration between Dalian and Duro, the tribunal had ordered interim measures to secure (part of) the amount in dispute in the form of orders requiring an amount of money ($AUD27 million) to be placed in a solicitor’s controlled money trust account maintained by Duro’s solicitors, Clyde & Co. Duro subsequently entered voluntary administration, leaving Dalian with little recourse other than to pursue the trust money.

Justice Kenneth Martin of the Supreme Court of Western Australia found that Dalian was entitled to the trust money, thereby removing those funds from the resources available to the voluntary administrators.


The interim measures were made in the course of a Singapore seated arbitration between Dalian (an export company) and Duro (a mining and construction company) regarding an iron ore mine project in Western Australia. An interim procedural order made by the tribunal granted Dalian’s application seeking security for part of its claims in the arbitration and ordered Duro to pay $AUD27 million (‘trust amount’) into its solicitor’s trust account. This order was implemented through the execution of a Trust Agreement, with Clyde & Co holding the money as trustee.

Dalian was subsequently successful in the arbitration, securing a monetary award of $AUD53 million against Duro. Dalian commenced proceedings in the Western Australian Supreme Court seeking an order to compel Clyde & Co as trustee to pay the trust amount to Dalian. Duro entered voluntary administration three days later.

Dalian sought the release of the funds on the basis that it held an absolute beneficial entitlement to the trust money, whereas the voluntary administrators of Duro instructed Clyde & Co to maintain the status quo. The trust amount was the only significant asset held by Duro and the voluntary administrators were concerned that if Duro could not trade out of administration and Dalian were paid the trust amount, it would be impossible to recover the funds which were likely to be remitted by Dalian to a parent company in the People’s Republic of China. The effect would be to frustrate recovery steps by future liquidators against Duro’s assets on behalf of creditors. Conversely, if Dalian was not entitled to recover the trust amount, it faced the prospect of relying solely on enforcing its monetary award as an unsecured creditor.

The key issue was whether the trust amount belonged to Dalian or Duro.


The power to order security over a disputed amount in an arbitration

Dalian’s key argument was that Clyde & Co had express contractual and fiduciary obligations to pay the trust money to Dalian. Dalian argued that the funds comprising the trust amount were no longer the ‘property’ of Duro (within the broad meaning of Australia’s Personal Property Securities Act 2009 (Cth) (‘PPSA’) and Corporations Act 2001 (Cth) (‘Corporations Act’)). Rather, Dalian argued that, upon the making of the monetary award in Dalian’s favour, full beneficial ownership of the funds held by Clyde & Co vested in Dalian.

Duro’s argument was that, in seeking to implement the interim measures, all the Trust Agreement had achieved was to provide a fund held on trust exclusively and always for Duro (not for Dalian). In effect, (on Duro’s argument) the Trust Agreement was simply a means by which Duro’s assets were ‘frozen’ pending the outcome of the arbitration.

In this context, the Court made instructive comments on the power of arbitral institutions in Singapore to make orders or give directions to any party for ‘securing the amount in dispute’ under s 12(1)(g) of the Singapore International Arbitration Act (‘SIAA’). It rejected Duro’s argument and noted that the tribunal specifically chose to adopt relief by way of ‘security’ instead of lesser relief, such as freezing or asset preservation orders, that were also available under s 12(1) subparagraphs (h) or (i) of the SIAA. The Court considered that the reference to ‘security’ in the tribunal’s orders was a specific reference to the legislative wording ‘securing the amount in dispute’ in s 12(1)(g) of the SIAA.

The Court observed that the power under s 12(1)(g) of the SIAA extends further than to order security for a party’s costs (a more limited power that is a feature of the rules of Court in many jurisdictions). The Court found that the power under s 12(1)(g) of the SIAA was capable of being exercised in such a way as to create equitable rights over an amount of money placed in a trust amount.

What was the nature of the interests held?

Determining who was entitled to the trust amount after its creation depended on how the trust arrangements were construed and the nature of the equitable interests held by Duro and Dalian.

The nature of Dalian’s interest in the trust amount was (initially) a contingent equitable interest which had matured (upon Dalian obtaining the monetary award in its favour) into an absolute and unqualified beneficial entitlement in equity to receive the trust amount. The Court distinguished the holding of ‘security’ over a dedicated fund of money from a creditor’s claim against assets the subject of a freezing injunction. Crucially, the creditors claim against the assets the subject of a freezing injunction is a bare in personam claim whereas the security provided by way of the interim measures created (initially) a proprietary security interested and (after the monetary award) a perfected proprietary right vested to Dalian.

Did the appointment of voluntary administrators change anything?

Duro had a residual equitable interest in the trust money pursuant to the interim measures orders (i.e. the money would have been returned to Duro had Dalian been unsuccessful in the arbitration). Those circumstances gave rise to complex arguments as to whether the trust moneys constituted ‘property’ of Duro and/or a ‘security interest’ for the purposes of the PPSA and the Corporations Act.

The Court concluded that the trust amount was indeed a ‘security interest’ for the purposes of the PPSA (as it was a transaction that in substance secured payment or performance of an obligation). Dalian had not registered that security interest under Australia’s personal property security register. As a result, Dalian’s unregistered security interest under the PPSA was exposed to the potential vitiating effects of s 267 of the PPSA which vests unperfected security interests in the grantor (i.e. Duro) upon the grantor entering administration or an insolvency.

Fortunately for Dalian, Martin J held that Dalian’s security had ‘perfected’ upon the issuance of the monetary award which occurred before Duro went into voluntary administration. This was because the monetary award, supported by an order from the tribunal directing Clyde & Co to ‘immediately’ release the trust amount, transformed Dalian’s contingent equitable interest into a fully vested equitable entitlement to the trust amount. The circumstances satisfied the extended concept of possession in s 21(2)(b) and s 24(2) of the PPSA because Clyde & Co held the trust money (and actually possessed it in an bank account) from that point on exclusively for the benefit of Dalian. Duro’s residual equitable interest had been extinguished. On that basis, the Court rejected other arguments by Duro that the funds were captured by s 440B of the Corporations Act which would prohibit a transfer of any property in which Duro had an interest following the commencement of the voluntary administration without the consent of the administrator or the leave of the Court.


The case highlights that, in a subsequent administration or insolvency, a freezing injunction does not confer any superior interest in favour of the party which obtained those orders above that of any other unsecured creditor, whereas a security may create proprietary rights that would more effectively place the Award-creditor ahead of other creditors.

Much credit needs to go to the Singapore seated arbitral tribunal (comprised of Sir Vivian Ramsay QC as a Chair, with Dr Michael Hwang SC and Dr Robert Gaitskell QC) for, in the first instance, crafting the interim measures in the form of a security interest rather than the more traditional freezing order and then, subsequently, making orders requiring the ‘immediate’ release of the trust money (perfecting the equitable transfer of the property to Dalian).

Dalian was ultimately fortunate that the monetary award (and order for the ‘immediate’ release of the trust money) occurred prior to Duro entering voluntary administration. Dalian had a security interest under the PPSA which remained unregistered. Dalian therefore faced the risk that it’s secured interest over the trust money would be relegated to no more than an unsecured claim (pursuant to 267 of the PPSA) upon Duro entering administration. It was only a fortunate sequence of timing which had the result that Dalian’s interest had transformed from a contingent equitable right in the form of a security interest into an equitably owned proprietary right before Duro entered administration.

The case therefore serves as a cautionary tale to parties who obtain interim measures of protection from an arbitral tribunal providing security over assets to which Australia’s PPSA applies that they should take steps to register their security interest to best preserve the protection they have obtained in the event of a voluntary administration or insolvency.

For further information, please contact Brenda Horrigan, Head of International Arbitration (Australia), Chad Catterwell, Partner, Harry Thompson, graduate, or your usual Herbert Smith Freehills contact.

Brenda Horrigan
Brenda Horrigan
+61 2 9225 5536

Chad Catterwell
Chad Catterwell
+61 3 9288 1498

Harry Thompson
Harry Thompson
+61 2 9322 4951




The availability and scope of ‘discovery’ or document production significantly differs across jurisdictions, most notably when comparing litigation in common law and civil law courts. In the field of international arbitration, the compromise position adopted by the International Bar Association’s Rules on the Taking of Evidence in International Arbitration is to permit disclosure of documents where it is “relevant to the case and material to its outcome”.[1] This approach has been reasonably effective in practice as a compromise between the extensive discovery generally afforded in common law courts, and the very limited document production orders granted by civil law courts.

But what is the position where, before an arbitral tribunal is constituted, a party needs to obtain documents from a prospective respondent, to determine whether to even initiate a case at all?

Preliminary discovery may fill this gap. It may enable a prospective claimant to compel a prospective respondent to produce documents for the purpose of determining whether to commence legal proceedings. However, while an arbitral tribunal clearly has power to order document production once proceedings have commenced (subject, of course, to any limitations under the arbitration agreement and the applicable law), it is not clear that the tribunal’s powers extend to preliminary discovery.

This blog post will examine whether preliminary discovery is available in arbitrations seated in Australia, and offer some practical insights for litigants considering this.

The Australian position

The general position is that before initiating arbitration proceedings, a prospective claimant may seek preliminary discovery under domestic court procedures: see the New South Wales Supreme Court’s (“NSWSC”) judgment in nearmap Ltd v Spookfish Pty Ltd [2014] NSWSC 1790.

In this case, the plaintiff, nearmap Ltd (“nearmap”), operated a business supplying aerial and geospatial photomosaic images. It relied on innovative and confidential design processes and information. Several employees, including a former Chief Technology Officer and a Chief Operating Officer, left to operate a rival firm in the same industry, Spookfish Pty Ltd (“Spookfish”).

Nearmap was worried that its former employees retained confidential information from their employment, and that Spookfish was unlawfully using that information in its business. It sought preliminary discovery from Spookfish and its directors under the NSWSC’s procedural rules, the Uniform Civil Procedure Rules 2005 (NSW) (the “UCPR”), to determine whether to pursue proceedings against the defendants for breach of confidence (among other claims).

Spookfish resisted the application, arguing that it should be permanently stayed pursuant to an arbitration agreement between the parties, and determined by the arbitral tribunal instead. Spookfish cited s 8 of the Commercial Arbitration Act 2012 (WA) and s 8 of the Commercial Arbitration Act 2010 (NSW) (each, an “Act”), which both provide that:

“A court before which an action is brought in a matter which is the subject of an arbitration agreement must, if a party so requests not later than when submitting the party’s first statement on the substance of the dispute, refer the parties to arbitration unless if finds that the agreement is null and void, inoperative or incapable of being performed.”

Chief Judge in Equity Bergin (“Bergin CJ in Eq”) refused to stay the court proceedings in favour of arbitration, finding that the motion for preliminary discovery was not a “matter” for the purposes of the cited provisions. A claim that Spookfish’s employees breached their obligations of confidentiality would constitute a “matter”. However, an application for preliminary discovery was of a different kind, being “not a dispute as to the rights or obligations of the parties” but instead “a right independent of the Agreements…arising under the Uniform Civil Procedure Rules and any obligation to produce the documents arises from a judicial determination, having regard to whether the prerequisites in the Rule have been satisfied.”[2]

Her Honour also found that a tribunal’s power to order “discovery of documents” under s 17(3)(b) of each Act relates to discovery relevant to the issues between the parties in respect of any application for the quasi-injunctive relief set out in s 17(2) of the Act, and does not extend to ordering preliminary discovery.[3]

Further, the interim measure referred to in s 17(2)(d) of the preservation of “evidence that may be relevant and material to the resolution of the dispute” is also not a vehicle for preliminary discovery but “to secure evidence in respect of which a party to an already existing dispute of which the arbitrator is seized, may entertain fears of destruction or dissipation in the absence of such an interim measure.”[4]

Although nearmap concerned a domestic arbitration, its principles are likely also applicable to international arbitrations seated in Australia. Section 7(2) of the International Arbitration Act 1974 (Cth) requires a court to refer a “matter” to arbitration where a party has initiated court proceedings which are arbitrable and are subject to a valid arbitration agreement. In light of nearmap, Australian courts are unlikely to find that a preliminary discovery application is a “matter” which engages s 7(2).

The implication is that a prospective claimant to a dispute covered by an arbitration agreement should seek preliminary discovery under domestic court procedures instead of from the arbitral tribunal.

The prospective claimant may rely on rule 7.23 of the Federal Court Rules 2011 (Cth) or rule 5.3(1) of the UCPR. Under those provisions, a court may order preliminary discovery from a prospective defendant in possession of a document which may assist in determining if the applicant has a claim, provided the applicant has already undertaken reasonable inquiries which have not yielded sufficient information for it to decide whether to commence proceedings. The usual limitations arising from privilege and the implied undertaking as to the use of documents also apply.[5]

One interesting open question is whether parties can confer an arbitral tribunal with powers to order preliminary discovery, by expressly stating so in the arbitration agreement. Bergin CJ in Eq ruled that applications for preliminary discovery did not attract the protection of s 8(1) of the Act, not that such applications are not arbitrable. Considering parties’ flexibility to select the arbitral procedure under article 19(1) of the Model Law, it is theoretically conceivable that the parties could expressly confer the power to order preliminary discovery on the tribunal. In practice, however, recourse to domestic courts is likely to be more practical since it would allow prospective claimants to obtain preliminary discovery before an arbitral tribunal has been constituted.

As a quick comparison, English courts adopt a different position with respect to preliminary discovery (there known as “pre-action disclosure”). In Travelers Insurance Company v Countrywide Surveyors Ltd [2010] EWHC 2455 (TCC), the High Court held that it could not order pre-action disclosure under the Court’s procedures where the dispute is subject to a valid arbitration agreement between the parties.

Under s 33(2) of the Senior Courts Act 1981 (the “SCA”), the High Court may only grant an application for pre-action disclosure to “a person who appears to the High Court to be likely to be a party to subsequent proceedings in that court.” Justice Coulson held that the existence of the arbitration agreement meant that the applicant was not a likely party to subsequent proceedings in the High Court.[6] Therefore, the Court did not have the requisite power and the application needed to be made to the arbitral tribunal.[7]

The difference between the positions in Australia and England is in part attributable to the differences in the procedural rules governing preliminary discovery/pre-action disclosure. Rule 5.3 of the UCPR allows preliminary discovery if “the applicant may be entitled to make a claim for relief from the court against a person”, whereas s 33(2) of the SCA is more restrictive in requiring that the applicant is likely to be a party to subsequent proceedings in that court”.

Practical considerations

Prospective claimants should also consider the following when determining whether to pursue an application for preliminary discovery in respect of arbitration.

First, a party who is seeking preliminary discovery is generally responsible for the costs of the discovery. For example, in the Australian Federal Court (see Sites N Stores Pty Ltd v Whirlpool.Net.Au Pty Ltd [2015] FCA 1474), the default position is that an applicant for preliminary discovery should pay the costs of the producing party unless the producing party has acted unreasonably. The costs of the discovery process can be significant and the potential strategic benefits of obtaining helpful documents should be weighed against costs and procedural economy considerations.

Second, it can often be difficult to determine whether a prospective respondent possesses documents which may assist so there is an element of risk involved. This, again, should be weighed against the potential benefit of locating documents which may found a viable claim.

Third, the scope of preliminary discovery is limited. In Australia, preliminary discovery cannot be used by a party to merely strengthen its position where it has already decided to commence legal proceedings, or ‘fish’ for information without believing that a genuine claim exists (see Airservices Australia v Transfield Pty Ltd [1999] FCA 886 at [5]).

This post was first published on Kluwer Arbitration Blog on 6 May 2020. 

For more information, please contact Leon Chung, Partner, Guillermo Garcia-Perrote, Senior Associate or your usual Herbert Smith Freehills contact.

Leon Chung
Leon Chung
+61 2 9225 5716

Guillermo Garcia-Perrote
Guillermo Garcia-Perrote
Senior Associate
+61 2 9322 4903


[1] Article 3(3)(b).

[2] At [72]

[3] At [76]

[4] At [76]

[5] See Ben Kremer and Rebecca Davies, Preliminary discovery in the Federal Court: Order 15A of the Federal Court Rules, (2004) 24 Aust Bar Rev 235, 255-258.

[6] At [17]-[21]

[7] At [30]




In Inghams Enterprises Pty Limited v Hannigan [2020] NSWCA 82, the New South Wales Court of Appeal found that a claim for unliquidated damages for breach of contract could not be referred to arbitration because it was not within the scope of a narrowly drafted arbitration agreement. Relevantly, the scope of the arbitration agreement was confined to disputes concerning “any monetary amount payable and/or owed by either party to the other under this Agreement.”

The case is a further reminder to parties that they will almost always be best served by drafting the scope of the submission to arbitration broadly.


Inghams entered into a ‘chicken growing contract’ with Mr Hannigan (Agreement), under which Inghams paid Mr Hannigan to receive batches of chicks, grow them into chickens, and return them. Clause 23 of the Agreement contained a multi-tiered dispute resolution clause requiring a dispute first to be mediated and then submitted to arbitration under clause 23.6 if:

  • the parties “fail to resolve the Dispute in accordance with Clause 23.4 within twenty eight (28) days of the appointment of the mediator”; and
  • the dispute “concerns any monetary amount payable and/or owed by either party to the other under this Agreement, including without limitation matters relating to determination, adjustment or renegotiation of the Fee” under certain sections of the contract.

Inghams purported to terminate the Agreement. Mr Hannigan was successful in seeking a court declaration that the purported termination was wrongful and Inghams resumed supplying batches of chicks to him. Mr Hannigan did not seek damages in the proceedings, but made express reservations of his right to do so.

Mr Hannigan then issued a dispute notice to Inghams seeking damages due to loss of profits for the failure to supply chicks to Mr Hannigan between the date of the purported termination and the date supply resumed. The parties unsuccessfully attempted to mediate and Mr Hannigan contended that clause 23.6 the Agreement entitled him to refer the dispute to arbitration. Inghams commenced proceedings in the New South Wales Supreme Court to restrain the arbitration, seeking declarations that:

  1. Mr Hannigan’s damages claim did not fall within clause 23 of the Agreement; and
  2. even if it did, Mr Hannigan had waived any entitlement to arbitrate the dispute under clause 23 because of his commencement of the wrongful termination proceedings.

The primary judge held that Mr Hannigan was entitled to refer his damages claim to arbitration under clause 23.6 of the Agreement. Inghams appealed, arguing the primary judge erred by:

  1. construing the contract such that the damages claim fell within clause 23.6 and could be referred to arbitration; and
  2. not finding that Mr Hannigan had waived his right to refer the dispute to arbitration.


Meagher and Gleeson JJA agreed with Inghams and allowed the appeal with costs, finding:

  • The claim for damages was not an amount that was “payable” or “owed” as a result of an express or implied term of the Agreement. The dispute was not one which affected or related to the negotiation, adjustment or determination of any amount “payable” or “owed” under such a term. Accordingly, the dispute did not concern a monetary amount payable under the Agreement.
  • There is an important distinction between monetary amounts which are payable or owed “under a contract” and remedies which arise by operation of law. Whereas liquidated damages are recoverable by a contractual right of recovery, unliquidated damages for breach of contract “are compensation assessed by the court in accordance with common law principles for loss occasioned by breach”.
  • As the dispute was not required to be referred to arbitration, the waiver issue did not arise. If the dispute had been required to be referred to arbitration, Mr Hannigan had not waived his right to do so.

Bell P dissented, holding:

  • The dispute resolution clause should be construed broadly, based on legal principles and textual indications in clause 23.6 which suggest the parties intended it be interpreted liberally, including the use of:
    • the indefinite pronoun “any” in the phrase “any monetary amount”;
    • the alternative formulation “payable and/or owed”;
    • the phrase “including without limitation”; and
    • the broader concept of “monetary amount” instead of “fees”.
  • Mr Hannigan had not waived his right to arbitration because the wrongful termination proceedings did not result in, or occur because of, Mr Hannigan unequivocally abandoning any right claim damages for breach of contract in arbitration at some future time.


The majority decision follows the recent High Court of Australia decision in Rinehart & Anor v Hancock Prospecting Pty Ltd & Ors [2019] HCA 13, which eschewed adopting the Fiona Trust principle as a principle of Australian law. In Rinehart, the High Court emphasised the importance of construing the words of an arbitration clause, like any clause in an agreement, in its context.

In this case, applying that approach, the narrow formulation found in the arbitration clause (“monetary amount payable and/or owed … under the Agreement”) led to the result that claims for unliquidated damages were outside the scope of the arbitration agreement.

Had the parties used a broader formulation, as is recommended by many arbitral institutions (such as “arising out of or in connection with” or a variant thereof), it is likely the outcome would have been different.

The case therefore serves as another reminder that parties should take care when drafting an arbitration agreement, and seek expert advice from practitioners with expertise in the field when deviating from the model clauses recommended by leading arbitral institutions.

For further information, please contact Brenda Horrigan, Head of International Arbitration (Australia), Chad Catterwell, Partner, Nicholas Brewer, solicitor, or your usual Herbert Smith Freehills contact.

Brenda Horrigan
Brenda Horrigan
+61 2 9225 5536

Chad Catterwell
Chad Catterwell
+61 3 9288 1498

Nicholas Brewer
Nicholas Brewer
+61 3 9288 1049




The Australian Centre for International Commercial Arbitration (ACICA) has released an information sheet for managing the impact of COVID-19 on disputes (including disputes presently before the courts which are being impacted by COVID-19).

The guide, found here, covers the advantages of using arbitration to resolve disputes during the COVID-19 pandemic and includes useful links to sample submission agreements and a sample procedural order for the use of online dispute resolution technologies.

The guide may be of particular benefit to parties and counsel navigating disputes during this time.

For further information, please contact Brenda Horrigan, Head of International Arbitration (Australia), Chad Catterwell, Partner, or your usual Herbert Smith Freehills contact.

Brenda Horrigan
Brenda Horrigan
Head of International Arbitration (Australia)
+61 2 9225 5536
Chad Catterwell
Chad Catterwell
+61 3 9288 1498

Australian Joint Standing Committee on Treaties approves new investment treaties between Australia, Hong Kong and Indonesia

The Joint Standing Committee on Treaties (“JSCOT“) of the Australian Parliament has just released Report No. 186 examining three treaties: the Free Trade Agreement between Australia and Hong Kong, China (“HK-FTA“), the Investment Agreement between the Government of Australia and the Government of the Hong Kong Special Administrative Region of the People’s Republic of China (“HK-Investment Agreement“) and the Comprehensive Economic Partnership Agreement between the Government of Australia and the Government of Indonesia (“IA-CEPA“).  We have previously discussed the Hong Kong treaties in detail here and the IA-CEPA here.

The JSCOT’s role is to carry out a review of treaties to determine whether they are in Australia’s national interest. The JSCOT has concluded that each of these treaties are in Australia’s national interest and has recommended that “binding treaty action be taken as soon as possible.”  The treaties will now go before parliament for ratification.

JSCOT’s review process

This is a comprehensive process.  The JSCOT considers the Australian Government’s own assessment of each treaty’s merit (this is called the Australian Government’s “National Interest Analysis”) and also takes into account submissions which concern all aspects of the treaties.  Five public hearings were held in Melbourne, Sydney, Perth and Canberra.[1]  The JSCOT has heard from industry groups, academics, unions and other members of the public.

The ISDS ‘risk’?

There has been public concern in Australia (as elsewhere) about treaty mechanisms which enable arbitration proceedings to be commenced by investors against states (this is called “investor-state dispute settlement” or “ISDS”).  Some critics have argued that the ISDS system exposes the Australian government to an unjustified risk of costly and time-consuming arbitration proceedings being commenced against Australia by investors.

The JSCOT heard evidence for and against ISDS but was ultimately satisfied that the ISDS mechanisms in both the IA-CEPA and HK-Investment Agreement were not against the national interest.  The JSCOT observed that “it was repeatedly pointed out to the Committee that Australia has been a party to ISDS provisions for a considerable time and has not been subject to successful litigation.[2]  As one submission identified “neither of the claims against Australia was successful.  Philip Morris lost their case and costs were awarded against the company.[3]  The JSCOT also noted that “empirical evidence suggested that ISDS provisions increased bilateral investment flow.[4]

The short point is that the JSCOT appears to conclude that the risk of Australia being involved in and suffering loss as a result of meritless or frivolous claims by foreign investors is overstated.

Carefully crafted carve-outs

Both treaties contain a number of noteworthy carve-outs.  These carve-outs seek to limit the scope of claims that can be brought by investors against the states in respect of certain legislative or regulatory measures. They should therefore address concerns held by some about ISDS.

The IA-CEPA contains a carve-out which restricts investors from pursuing a claim relating to measures that are “designed and implemented to protect or promote public health.” A general exceptions clause further provides that claims cannot be made with respect to measures taken by the state parties to protect the public interest in sensitive sectors, such as education, indigenous rights, the promotion of essential security and certain taxation measures, provided that such measures are not arbitrary, discriminatory or a disguised restriction on investment.

The HK-Investment Agreement contains similar general carve-out provisions, but goes further by exempting specific measures including tobacco control measures and, in Australia’s case, measures relating to the Medicare Benefits Scheme, Pharmaceutical Benefits Scheme, Therapeutic Goods Administration and Office of the Gene Technology Regulator.

The impetus for the ‘tobacco carve-out’ in the IA-CEPA was Australia’s involvement as the Respondent state in an investment arbitration brought by Philip Morris in 2011 under the Australia-Hong Kong BIT, which challenged Australia’s introduction of plain packaging legislation.

It is interesting that the specific ‘tobacco carve-out’ has been included in the A-HKFTA but not in IA-CEPA.  Having considered expert evidence, the JSCOT concluded that it does not matter that the IA-CEPA has no tobacco carve-out on the basis that tobacco control measures would be covered under the general exceptions provision.[5]

Overlap with existing bilateral investment treaties

There are existing bilateral investment treaties between Australia and Hong Kong (the “Aus-HK BIT“) and between Australia and Indonesia (the “Aus-Indo BIT“).   The JSCOT noted: “the [Aus-HK BIT] will terminate with the introduction of the new investment treaty, while there is no proposal to terminate the [Aus-Indo BIT].  This has raised concerns over the overlap between the existing [Aus-Indo BIT] and the ISDS provisions in the [IA-CEPA].”

The JSCOT recommends that the Aus-Indo BIT should be terminated and that the ‘sunset clause’ (also known as a ‘survival clause’) in the Aus-Indo BIT should also be terminated.  The ‘sunset’ clause permits claims to be brought by investors for a period of 15 years following the termination of the Aus-Indo BIT.

As it stands, the termination of the Aus-Indo BIT seems to have bipartisan support.  The Australian Labor Party has indicated that it will push the coalition government to terminate the Aus-Indo BIT.  Trade Minister Simon Birmingham has indicated that he was not opposed to it and that the Australian Government “should be able to work through that issue.

What next?

The next stage is for the Australian Parliament to decide whether to pass legislation implementing the treaties in domestic law. This seems likely given that both major political parties have indicated that they support the treaties.

What should you do if you are an investor with a potential claim against Indonesia, Australia or Hong Kong?  The short point is that you need to carefully consider now whether that claim could be lost or affected due to the termination (and replacement) of the Aus-Indo BIT or the Aus-Hong Kong BIT.


[1] Para 1.10.

[2] Para 4.47.

[3] Para 4.48.

[4] Para 4.51.

[5] Paras 4.55-4.56.


Brenda Horrigan
Brenda Horrigan
Partner and Head of International Arbitration (Australia), Sydney
+61 2 9225 5536
Antony Crockett
Antony Crockett
Senior Consultant, Hong Kong
+852 2101 4111
Mitchell Dearness
Mitchell Dearness
Associate, Singapore
+65 6868 8061


In an important and clarifying decision, the High Court of Australia has handed down its decision in Rinehart & Anor v Hancock Prospecting Pty Ltd & Ors.1

The decision is significant for the conduct of international arbitration in Australia because:

  1. the High Court held that the phrase “any dispute under this deed” in an arbitration clause was sufficiently broad in the context of the deeds in question to encompass disputes about the validity of the arbitration agreement as well as substantive claims; and
  2. the High Court found that in this case, third parties who were not contractual parties to the deed in question, but who wished to rely on certain releases and clauses in the deed containing the arbitration agreement could be treated as a party to the arbitration under the Commercial Arbitration Act 2010 (NSW) (Commercial Arbitration Act).

Continue reading


On 4 March 2019, Australia and Indonesia signed the Australia-Indonesia Comprehensive Economic Partnership Agreement (“CEPA“). In this post, we briefly consider some of the noteworthy features of the CEPA chapter on investment and in particular its provisions regarding investor-State dispute settlement (“ISDS“).

Indonesia and Australia signed a bilateral investment treaty (“BIT“) containing ISDS provisions in 1992. Both States are also party to the ASEAN-Australia- New Zealand Free Trade Agreement (“AANZFTA”), signed by Australia in 2009 and Indonesia in 2012, which contains an investment chapter.

As we reported in a previous post, Indonesia announced in 2015 that it would seek to renegotiate and replace its older investment treaties with more modern agreements. The Australia-Indonesia BIT, however, will remain in force even after CEPA enters into force. This is in contrast to the Hong Kong-Australia Free Trade Agreement signed this week (see our post here) pursuant to which Australia and Hong Kong have agreed to terminate the Hong Kong-Australia BIT, which was signed in 1993 and became infamous in Australia after Philip Morris used the treaty to commence arbitration against Australia challenging the Tobacco Plain Packaging Act 2011.

Continue reading


On 26 March 2019, Australia and Hong Kong signed the Australia-Hong Kong Free Trade Agreement (A-HKFTA) and its associated Investment Agreement (Agreement).

These agreements were negotiated against the background of a heated political debate in Australia regarding the benefits and risks of investment treaties. This debate occurred as a result of an arbitration brought against Australia by Philip Morris in 2011 under the 1993 Hong Kong-Australia Bilateral Investment Treaty (1993 BIT), challenging the introduction of the Tobacco Plain Packaging Act 2011 (Cth).

The 1993 BIT will be replaced by the new Agreement once it enters into force, which is expected to occur after both countries complete their respective treaty-making processes and ratify the agreements. Accordingly, investors who may have a claim under the 1993 BIT should consider whether to pursue it before that treaty is terminated.

Continue reading