State of play of investment treaty arbitration in Australia

Investment protection regimes are at a crossroads globally. Different governments, trading blocks and interest groups are pushing their policy agendas in diverging directions when it comes to bilateral and multilateral investment protection schemes. Australia is no exception to this debate.

In this note we canvass some of the key developments in the investment treaty arbitration space in Australia, including:

  • Australia’s review of its Bilateral Investment Treaties;
  • the upcoming Australia-EU and Australia-UK Free Trade Agreements; and
  • recent legislative measures and political discussion in relation to foreign investments in infrastructure assets in Australia.

Review of Australia’s Bilateral Investment Treaties

Following the Federal Government’s announcement that it was reviewing the BITs to which Australia is party (which we have commented upon previously), the Department of Foreign Affairs and Trade (DFAT) sought submissions to inform the Federal 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 (FTAs).

DFAT has recently published 27 submissions it received. The submitters came from a broad range of backgrounds and included industry bodies, business councils, associations, universities, law societies, law firms, law academics and economists.

The key take away is that the majority of submitters considered that Australian BITs should maintain their investor-state dispute settlement (ISDS) provisions, but that the BITs should be modernised and ‘tweaks’ should be made. Australia is considered a thought leader in the investment protection space in the Asia-Pacific region and how Australia chooses to respond to those questioning the continuing utility of ISDS provisions under its BITs will be closely watched.

Although a range of issues were raised and potential tweaks proposed, some particular points of interest include:

A. Clarifying the scope of investment protections

There was widespread support for improving or modernising Australia’s BITs, in particular:

  • The fair and equitable treatment (FET) obligations in Australia’s BITs were described as unrestricted. A number of submitters recommended that the FET obligations be refined to address the scope or standard of conduct that will violate the FET standard.
  • Some Most Favoured Nation (MFN) provisions in Australia’s BITs were described as potentially allowing investors to benefit from the most generous protections found in any of Australia’s BITs, without limitation. Certain submitters recommended that the operation of MFN clauses needed to be limited after considering Australia’s policy objectives.
  • Australia’s BITs do not provide guidance on determining when indirect expropriation has occurred. Certain commentators considered it would be useful to identify factors for determining whether indirect expropriation had occurred.

B. Tightening fork-in-the-road provisions

Some of Australia’s BITs were reported to contain ‘uncertain’ fork-in-the road provisions. Fork-in-the-road provisions typically bind an investor to its chosen dispute resolution process (usually domestic courts or arbitration), so they cannot seek to pursue their claim in both forums. It was suggested that these provisions be reinforced to ensure that an investor could only use one forum.

C. Responsibility for State Government actions

An issue identified with Australia’s BITs was the silence on whether BITs bind the Federal Government for State Government actions, and whether the substantive obligations in BITs apply to State Government actions. One potential avenue for dealing with State Government compliance risk identified in the submissions was to exclude liability for State Government acts.

D. Transition to renewable energy

Concerns, whether rightly or wrongly held, were raised regarding the potential ‘chilling’ impact some claim ISDS provisions may have on Australia’s sovereign right to regulate, in particular in relation to human rights, labour rights, equality and the environment. A concern that gained some attention was the potential for an investor claim to be brought against Australia based on Australia’s measures to protect the environment, such as meeting the objectives set out in the Paris Agreement (see our overview here), namely the transition to renewable energy.

We will issue an update once DFAT publishes its findings from the BITs review.

Upcoming Australia-EU Free Trade Agreement

Australia is seeking an ambitious and comprehensive FTA with the European Union (EU) which from time to time has been Australia’s largest source of foreign investment. As a bloc the EU is Australia’s second largest trading partner, third largest export destination, and second largest service market.

Australia’s approach to FTAs

It is likely that the FTA will include a comprehensive investment chapter that provides for substantive protections and seeks to regulate ISDS.

DFAT has indicated that it is committed to seeking improved market access for Australian investment and that it will also seek an undertaking from the EU not to impose residency and/or citizenship requirements on senior representatives of Australian companies established in the EU. DFAT has also indicated its commitment to upholding Australia’s right to regulate for “legitimate public purpose and screen investments for national interest”.

The EU’s push for bilateral and multilateral Investment Courts

Much ink has been spent debating the relative advantages and disadvantages that would attend a permanent Investment Court operating as the final and sole arbiter (subject to an appellate mechanism) of investment disputes. Advocates point to issues of coherence and consistency with ISDS as well as the perennial question of costs, whilst detractors point to the potential politicisation of such a body and question its capacity to address the perceived concerns around ISDS.

Investors will be particularly interested in how Australia responds to any suggestion by the EU that the proposed FTA replace the ISDS mechanism with an Investment Court System. The EU in its recently negotiated investment agreements with Canada, Mexico, Singapore and Vietnam has jettisoned ISDS in favour of establishing a bilateral Investment Court. Under each treaty a standing tribunal is established, with members pre-selected by the contracting states, invested with power to establish its own procedural rules. In one of our previous blog posts we have considered the Investment Court System under the Canada-EU Comprehensive Economic and Trade Agreement and the procedural rules adopted there.

These agreements also include provisions allowing for the transition to a multilateral Investment Court System. Such a body, made up of pre-selected members, would in principle provide a procedural framework for any investment dispute arising under any treaty that submits to its jurisdiction.

In March this year the EU released its report of the 10th round of negotiations which indicated that Australia and the EU have agreed on “objectives for the [Dispute Settlement] Chapter, which include transparent, efficient and effective dispute settlement procedures”. The report also indicates that good progress has been made on the articles relating to the substantive investment protections to be included in the investment chapter.

We will issue an update if further information is released regarding ISDS under the proposed Australia-EU FTA.

Australia-UK Free Trade Agreement

On 15 June 2021, Prime Ministers Scott Morrison and Boris Johnson announced that Australia and the UK had reached an ‘in principle’ agreement on core elements of a new FTA. In a media release, DFAT indicated that, “When the agreement is finalised it will deliver the most comprehensive and liberal agreement outside [Australia’s] partnership with New Zealand”.

The UK is one of Australia’s largest trading partners for both goods and services. According to the information released to date, when the agreement comes into force, 99 per cent of Australian goods will be able to enter the UK duty-free. Tariffs on wine and rice will be eliminated upon entry into force, while tariffs on beef, sheep, and sugar will be eliminated in eight to 10 years. The agreement will also contain provisions to improve the ease of investing and doing business, and provisions to enhance recognition of qualifications for professional services.

Although the investment chapter contains a number of investment protections, there will be no ISDS mechanism. DFAT has indicated that, “as two well governed countries with a strong investment relationship, sound domestic legal systems and a strong commitment”, there is no need for ISDS in the FTA.

DFAT have declined to give a precise timeframe on when the FTA is likely to be finalised, noting that the negotiations will be concluded “as quickly as possible, without compromising on quality or ambition”.

Recent legislative measures and government initiatives

Australia has recently introduced Australia’s Foreign Relations (State and Territory Arrangements) Act 2020 (Cth), which establishes a legislative scheme for Commonwealth engagement with arrangements between State or Territory governments and foreign governments, and their associated entities. Relevantly, the Act empowers the Minister for Foreign Affairs to review, and potentially veto, any existing and prospective arrangements between State/Territory governments and foreign entities. Previously, the Security of Critical Infrastructure Act 2018 (Cth) sought to address national security risks posed by foreign involvement in Australia’s critical infrastructure, namely around 200 assets in the electricity, gas, water and ports sectors.

Recent discussion concerning Darwin Port and how the Federal Government may utilise the new legislative framework to potentially affect the 99-year lease of the port granted to the Chinese-owned Landbridge have drawn increased attention to foreign investments in Australian infrastructure.

Looking forward

Many will be watching Australia’s next moves in the investment protection space, be it investors or counterparties to its BITs and upcoming FTAs.

DFAT’s conclusions on its review of Australia’s BITs and the negotiations of the EU-Australia FTA and the UK-Australia FTA will be closely watched alongside ongoing discussion concerning Darwin Port and other investments in Australian infrastructure.

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

Leon Chung
Leon Chung
Partner, Sydney
+61 2 9225 5716
Guillermo Garcia-Perrote
Guillermo Garcia-Perrote
Senior Associate, Sydney
+61 2 9322 4903
Imogen Kenny
Imogen Kenny
Solicitor, Melbourne
+61 3 9288 1657

Mark Peters
Mark Peters
Law graduate, Sydney
+61 3 9322 4099

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

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

China’s International Commercial Courts hear first cases

Almost a year since their high profile establishment in June 2018, the International Commercial Courts of the Supreme People’s Court (CICC) have recently conducted hearings on the first cases that were submitted to the CICC.

On 29 May 2019, the Second International Commercial Court of the Supreme People’s Court of China heard a case concerning a dispute over shareholder qualification, relating to the energy drink manufacturer Red Bull’s investment in China. On 31 May 2019, the First International Commercial Court of the Supreme People’s Court of China heard a product liability case involving an Italian pharmaceutical company and its Chinese distributor.

Background

In June 2018, the Supreme People’s Court (SPC) established two international commercial courts, in Xi’an and Shenzhen respectively, to handle international commercial cases, especially disputes arising out of projects under the Belt and Road Initiative. The courts offer a “one-stop shop” dispute resolution mechanism, with access to mediation, arbitration and litigation. See our posts of 4 July and 7 December 2018 detailed reports on the series of rules that set up the CICC and regulate the CICC’s proceedings (the CICC Rules), including:

  • Provisions of the SPC on Several Issues Concerning the Creation of the CICC (effective 1 July 2018);
  • CICC Rules of Procedure (trial implementation) (effective 5 December 2018);
  • Working Rules of the CICC Expert Committee (effective 5 December 2018); and
  • SPC’s Notification on the International Commercial Arbitration and Mediation Institutions Included in the “One-stop-shop” International Commercial ADR Mechanism (effective 5 December 2018).

Since December 2018, the CICC has accepted several cases concerning international commercial disputes, including, among others:

  • disputes over shareholder qualification and shareholder disputes concerning Red Bull’s investment in China (Red Bull Cases), and
  • a product liability dispute brought against an Italian pharmaceutical company Bruschettini S.R.L. by its Chinese distributor, Guangdong Bencao Medicine Group Co., Ltd., (Bruschettini Case).

CICC proceedings

The Red Bull Case

According to a webcast on the China Court Website (the official multimedia website managed by SPC), the case was initially accepted by a Beijing court in January 2017. Subsequently, the CICC took over this case in 2019, on the basis that the CICC had already accepted four other cases related to a shareholder dispute over Red Bull’s investment in China.

According to the webcast of the 29 May hearing, a pre-hearing conference was held on 15 and 27 May in accordance with the CICC Rules of Procedure. The procedural issues that were dealt with at the conference included:

  • clarifying the parties’ claims/defence,
  • identifying uncontroversial facts and evidence,
  • identifying the key issues in dispute that will be determined at the hearing,
  • exchange evidence and cross-examination opinion,
  • determining on the applicable law to the case,
  • determining whether the hearing will be open to the public, and
  • other procedural issues.

According to the webcast report on the SPC’s website, the CICC asked about the parties’ willingness to have their dispute mediated by the CICC Expert Committee. The parties had initially opted for mediation by the Expert Committee, but eventually the case moved on to the CICC court proceedings because one party gave up on mediation.

The 29 May hearing at the CICC Xi’an court concerned one of the Red Bull Cases, which involves a dispute over the shareholder qualifications of Ruoychai International Group Co.,Ltd.(a Thai company) and Inter-Biopharm Holding Limited (a BVI company) in the Chinese company Red Bull Vitamin Drink Co.,Ltd. The hearing was before a bench of five SPC judges, and lasted for about four hours. No judgment was rendered immediately after the hearing.

The Bruschettini Case

According to the CICC’s website, a pre-hearing conference was held on 29 April, during which, in addition to discussing and determining procedural issues, two judges of the CICC explained the “one-stop-shop” dispute resolution mechanism to the parties. The issues discussed and/or determined at the conference include:

  • procedural issues in the pre-trial mediation, including selection of the mediators and timeline for the mediation. The mediator candidates from the Expert Committee and the timeline for confirming the selection of the mediators were determined at the conference.
  • the likely hearing date, if mediation is not successful.

The 31 May hearing at the CICC Shenzhen court was a substantive hearing of the Bruschettini Case, which lasted for about three hours. Similarly, it was before a bench of five SPC judges, who did not render a judgment immediately after the hearing.

Conclusion

Even though these first two cases heard at the CICC are not specifically related to any Belt and Road projects, they are still of significant importance, as they are the first cases heard under the CICC Rules. They are helpful illustrations of how the CICC handles its cases. In particular, they help to demonstrate how the CICC uses pre-hearing conferences to ensure smooth conduct of the trial, the role that the CICC plays in mediation, and how the CICC can provide efficient resolution of international commercial disputes.

However, these cases do not show all of the interesting features of the CICC proceedings established by the CICC Rules. It remains to be seen, for example, how the CICC will interact with the one-stop-shop institutions for arbitration or mediation, and how mediation by the Expert Committee of the CICC will work in practice.

Helen Tang
Helen Tang
Partner, Shanghai
+86 21 2322 2160
Tracey Cui
Tracey Cui
Associate, Shanghai
+86 21 2322 2166
Briana Young
Briana Young
Foreign Legal Consultant (England & Wales)/Professional Support Consultant, Hong Kong
+852 2101 4214

CJEU CONFIRMS THAT CETA DISPUTE RESOLUTION PROVISION IS COMPATIBLE WITH EU LAW

On 30 April 2019, the Court of Justice of the European Union (“CJEU“) confirmed that the mechanism for the settlement of disputes between investors and states set out in the Comprehensive Economic and Trade Agreement between the EU and Canada (“CETA“) was compatible with EU law. This confirms the Attorney General’s opinion discussed here.

The CJEU’s opinion will lend support to the EU’s effort to develop the tribunals established under trade agreements like CETA into a permanent and multilateral Investment Court System (“ICS“) in future.

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AUSTRALIA AND INDONESIA SIGN COMPREHENSIVE ECONOMIC PARTNERSHIP AGREEMENT

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.

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The new draft Dutch BIT: what does it mean for investor mailbox companies?

The Netherlands has released a new draft investment treaty for public comment (“Draft BIT“).  If adopted, the Draft BIT may raise questions about the Kingdom’s attractiveness for foreign investors who have long taken advantage of Dutch treaty protections by structuring their investment via companies in the Netherlands.  The Netherlands proposes to use the new model as a basis for renegotiating its existing BITs with non-EU states, and, as such, the new draft’s more restrictive provisions may be significant for existing investors with protection under existing BITs, as well as those considering future investments. Key features of the Draft BIT are considered below.

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ICSID tribunal rules that it is neither necessary nor urgent to grant security for costs from a claimant with the benefit of third-party funding

An ICSID tribunal has rejected a State's application for security for costs in circumstances in which the other party had third-party funding in the form of ATE insurance which specifically provided for cover of the State's costs.

Italy's request for security for costs

The application formed part of arbitral proceedings brought by Eskosol S.p.A. in liquidazione ("Eskosol") under the Energy Charter Treaty and the ICSID Convention against the Italian Republic ("Italy"). Italy sought security for costs in support of its ICSID Arbitration Rule 41(5) application for summary dismissal of Eskosol's claims on the basis that they are manifestly without legal merit. 

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Herbert Smith Freehills’ Response to EU Consultation: the Future of Investor-State Dispute Settlement

As discussed in our blog post here, on 21 December 2016 the EU Commission launched a public consultation on the multilateral reform of the investment dispute settlement system. The consultation closed on 15 March 2017 with a full report of the responses anticipated later this year. Herbert Smith Freehills has submitted a position paper to the Commission in response to the consultation.

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Brexit—the future of state-to-state, investor-state and domestic dispute resolution

The Brexit White Paper

The much-anticipated Brexit White Paper, ‘The United Kingdom’s exit from and new partnership with the European Union’, was published on 2 February 2017. This post focuses on a subject that has to date received relatively little attention—what it has to say about the future of dispute resolution. In its Chapter 2 (‘Taking control of our own laws’), and Annex A, the White Paper contains perhaps a surprising amount on dispute resolution, in comparison to the text devoted to the other eleven of the UK government’s 12 stated principles.

In this blog post we review the White Paper with the aim of discerning so far as possible the potential future of dispute resolution for the UK. In particular, we consider how the UK government envisages, at this relatively early stage, that disputes will be resolved under new post-Brexit UK-EU agreements, and if and how UK businesses will be able to enforce their provisions. We also consider certain implications of the end to the Court of Justice of the European Union (CJEU)’s jurisdiction in the UK and the adoption of the acquis under the Great Repeal Bill.

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