A Comprehensive and Progressive Agreement for Trans-Pacific Partnership

Key points

  1. The ministers responsible for the Trans-Pacific Partnership (TPP) of 11 countries have announced that the core elements of a Comprehensive and Progressive Agreement for Trans-Pacific Partnership are agreed (CPTPP). While much of the original TPP looks to remain intact, 20 provisions of the TPP are suspended, in particular with respect to Investor–State Dispute Settlement (ISDS) disputes for initial approvals of investments and financial services. There are also 4 items to be finalised by the Parties’ consensus.
  2. The final impact of these changes can only be determined after the release of the full text. Current indications are that the differences will not significantly change the shape of ISDS under the TPP. Investors making investments into these 11 countries will still want to proactively consider how to take advantage of the protections given by this agreement if it comes into force.
  3. This is a significant step forward to implementing a mega-regional agreement for the Asia-Pacific region, which substantially is the form rejected by the United States early this year.

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TPP deal reached: investment arbitration survives

After a lengthy final period of negotiation in Atlanta, it has been announced that the TPP, the world’s largest mega-regional trade and investment deal, has been agreed. The investment chapter is not yet available but is briefly summarised on USTR’s website here. As anticipated, the TPP includes substantive investment protections found in many investment agreements, and the suggestion from available information is that the formulation of those provisions replicates much of what is found in the US Model BIT 2012. For example, (and in contrast to other recently negotiated free trade agreements such as the CETA and EU-Singapore FTA), investors are granted a minimum standard of treatment in accordance with customary international law. This does not come as much of a surprise – as reported in our earlier blog post here, the leaked investment chapter of the TPP contained many of the features of the US Model BIT 2012, although some differences too.

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A step towards finalising the Trans-Pacific Partnership Agreement: what does this mean for businesses?

As discussed in our blog post here, the TPP is a major free trade agreement between twelve countries in the Asia Pacific and the Americas that has been under negotiation for over four years. These twelve countries are the USA; Canada; Japan; Australia; New Zealand; Singapore; Vietnam; Malaysia; Chile; Peru; Mexico; and Brunei.

On 24 June (Washington DC time), the US Congress voted to give President Obama “Trade Promotion Authority”. Trade Promotion Authority authorises the President to enter into trade deals and eases the TPP’s passage to ratification by disallowing any Congressional amendments. Although the authority is not the signing of the TPP itself, it is a significant signal that the TPP is to be signed imminently.

As negotiations enter the final stages, it is clear that the TPP will bring about broad-reaching changes to the way organisations across the world do business. We have created the Trans-Pacific Partnership Hub to keep you up to date with the latest developments. We will continue to update the Hub as the implications for specific sectors and businesses are delivered.
For further information, please contact one of the TPP Expert Team listed below, or your usual Herbert Smith Freehills contact.

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The changing landscape of Investment Treaty arbitration – Herbert Smith Freehills comments on recent developments and the future of investment arbitration

As the US Senate is poised to pass legislation granting President Obama the trade promotion authority which will facilitate the passing of the Trans-Pacific Partnership Agreement (TPP), the future of the most controversial parts of the TPP and many other recent trade agreements – investment protection and investor-state dispute settlement (or ISDS) – remains uncertain.

In our 23 June 2015 webinar, “The changing landscape of Investment Treaty arbitration”, four of our Investment Treaty arbitration specialists looked at the ongoing debate surrounding investment protection and ISDS, focusing on the TTIP and TPP and the current approaches being adopted in their negotiation. They considered what the future looks like for ISDS if these two treaties form a “blueprint” for the future of investment protection. The webinar also provides an update on recent developments in the sphere of investment arbitration, including the EU’s developing position on Intra-EU claims, provisional measures, arbitrator challenges and the annulment process.

To access a recording of this webinar, please contact Prudence Heidemans.

Speakers:

Isabelle Michou, Partner, International Arbitration, Paris (Chair)

Christian Leathley, Partner, International Arbitration, London

Andrew Cannon, Partner, International Arbitration, Paris

Iain Maxwell, Of Counsel, International Arbitration, London

Isabelle Michou
Isabelle Michou
Partner
+33 1 53 57 74 04
Christian Leathley
Christian Leathley
Partner
+44 20 7466 2532
Andrew Cannon
Andrew Cannon
Partner
+33 1 53 57 65 52
Iain Maxwell
Iain Maxwell
Of Counsel

 

Indian Government seeks comments on a proposed draft Model Text for the Indian Bilateral Investment Treaty

The Government of India (“GOI“) has recently published a draft “Model Text for the Indian Bilateral Investment Treaty” (“Model BIT“), which is understood to be intended to revise India’s model bilateral investment treaty of 1993 and to serve as a framework for the renegotiation of India’s over 80 bilateral investment treaties (“BITs“) which are currently in force. The GOI has asked for public comments on this Model BIT by 10 April 2015.

There are a number of significant features in the Model BIT that appear to be reactions to the BIT claims that India has been faced with over the last few years. These include the only concluded BIT case against India, namely the White Industries award of 2012 (discussed here), in which a BIT tribunal found against the GOI on the basis that delays in enforcing an international arbitration award through the Indian court system had amounted to a breach of its obligation to provide investors with an “effective means of asserting claims and enforcing rights” (which obligation had been imported into the relevant India-Australia BIT from the India-Kuwait BIT using the most favoured nation (“MFN“) provisions of the former). More recently, the GOI has faced several claims relating to retrospective changes to its tax legislation in 2012 (e.g. the Vodafone case).

In this regard, and perhaps unsurprisingly, many parts of the Model BIT appear to be framed as an attempt to limit protections afforded to inbound investors into India, rather than ensuring the protection of outbound Indian investors into overseas markets. Several of the provisions appear to be squarely aimed at preventing repeats of these previous claims; for example, the absence of an MFN clause, and specific exclusions of claims based on taxation or the provision of non-commercial services by the host state.

On the other hand, various portions of the lengthy draft, such as the detailed provisions prescribing the contents of a Notice of Claim and Notice of Arbitration under the Investor-State dispute settlement (“ISDS“) provisions, and the provisions on arbitrator independence and challenge, appear to be attempts to incorporate aspects of the current debate around ISDS in the TPP (“Trans-Pacific Partnership“) and TTIP (“Transatlantic Trade and Investment Partnership“) as a template for more explicit treatment of such matters in future BITs.

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Developments in resolving cross-border disputes

With the increase of global commerce, it also becomes increasingly important to provide for effective and quick dispute resolution mechanisms across state borders. A number of developments in international law recognise this trend and seek to address it. These developments include:

  • The inclusion of Investor-State Dispute Resolution mechanisms in the Trans-Pacific Partnership Agreement and the Transatlantic Trade and Investor Partnership,1
  • Further global acceptance of the importance of the New York Convention, which now has 152 signatories (Bhutan and Guyana being the most recent state to become parties), and
  • The European Union Justice Ministers approval of a decision to ratify The Hague Convention of 30 June 2005 on Choice of Court Agreements.

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The Trans-Pacific Partnership: a New Year’s resolution of special significance

Following a further round of negotiations for the Trans-Pacific Partnership Agreement (the TPP) held in Singapore at the start of December 2013, it is expected that the agreement will be signed in early 2014 after more than three years of highly secretive negotiations. The TPP is a regional free trade agreement which, if the negotiations are successfully concluded, could create a trade bloc second only to the European Union in the size of its total trade value. The conclusion of this agreement is expected to have enormous significance for the dynamics of global trade and the outcome is keenly anticipated.

Although the negotiations have taken place behind closed doors, which is itself a source of great concern for many observers, speculation has centred on the public commentary by the participating states around issues central to the agreement. This has been augmented by the leak of several draft chapters of the agreement over the past three years. While the negotiations are likely to have moved on significantly since they were disclosed, the leaked chapters continue to shape the discussion around the content of the TPP and its highly contentious provisions.

With the twelve state parties – including the United States, Canada, Japan, Australia and Singapore – having set the ambitious goal of reaching agreement by the end of last year, this twenty-first round of negotiations was anticipated as the potential turning point for issues believed to be the source of significant rifts in the partnership. However, reports indicate that while a resolution has not yet been reached, the agreement is likely to be concluded early in 2014.

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