AUSTRALIAN GOVERNMENT TO REVIEW ITS BILATERAL INVESTMENT TREATIES

The Australian Federal Government has announced it is reviewing the bilateral investment treaties (BITs) to which Australia is a party.

BITs are typically entered into to promote and protect investments made between the BIT partner States. To that end, Australia is party to 15 BITs with each of Argentina, China, Czech Republic, Egypt, Hungary, Laos, Lithuania, Pakistan, Papua New Guinea, Philippines, Poland, Romania, Sri Lanka, Turkey and Uruguay.

These BITs typically contain provisions requiring Australia (and its counterpart) to: treat foreign investors fairly and equitably; not expropriate the foreign investor’s investment without adequate compensation; provide protection and security to the foreign investor’s investment; honour written agreements between the host State and foreign investors; not treat the foreign investors from the partner State any less favourably than investors from the host State or a third party State; and allow free transfer of funds related to an investment in and out of the State.

Presently, the Department of Foreign Affairs and Trade (DFAT) is seeking submissions by 30 September 2020 on, among other things:

  • the utility of BITs to Australian investors operating overseas;
  • the impact of BITs on foreign investment;
  • concerns with the provisions on BITs presently in force;
  • provisions in BITs which should be renegotiated; and
  • whether the BITs should be terminated.

This community engagement follows on from continued public debate in Australia (which we have commented upon previously) regarding the “investor-state dispute settlement” (or “ISDS”) provisions commonly found in BITs.  Some critics have argued these ISDS provisions, which enable arbitration proceedings to be commenced by foreign investors against Australia, give rise to an unjustified risk of costly and time-consuming arbitration claims made by investors.

The submissions will inform the Government’s position on whether to continue, amend, renegotiate or terminate the BITs to which Australia is a party, or replace them with comprehensive free trade agreements (which may or may not include ISDS provisions). We will issue an update once the submissions are published on DFAT’s website.

For more information, please contact Brenda Horrigan, Head of International Arbitration (Australia), Leon Chung, Partner, Chad Catterwell, Partner, Imogen Kenny, Solicitor, or your usual Herbert Smith Freehills contact.

Brenda Horrigan
Brenda Horrigan
Head of International Arbitration (Australia)
+61 2 9225 5536
Leon Chung
Leon Chung
Partner
+61 2 9225 5716
Chad Catterwell
Chad Catterwell
Partner
+61 3 9288 1498
Imogen Kenny
Imogen Kenny
Solicitor
+61 3 9288 1657

ICSID RELEASES 2019 CASE STATISTICS

The International Centre for Settlement of Investment Disputes (“ICSID”) has released case statistics for 2019 and updated their records for cases since 1972 (available here). ICSID has historically administered the majority of investor-state claims and these statistics remain an important bellwether for trends in such disputes. The 2019 statistics show that a lower number of cases were registered this year. There was a dip in cases involving state parties from Eastern Europe and Central Asia, and the highest proportion of cases involved state parties from South America. As in previous years, cases involving the oil and gas, electric power and other energy sectors dominated.

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Ecuador’s legislative branch approves termination of 12 Bilateral Investment Treaties

On 3 May 2017, Ecuador's Legislature approved the termination of 12 bilateral investment treaties ("BITs") entered into with China, Chile, Venezuela, the Netherlands, Switzerland, Canada, Argentina, the U.S., Spain, Peru, Bolivia and Italy.

This is not only consistent with Ecuador's political appetite to denounce international treaties but this is another step in a process that started years ago.

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