Wednesday, August 29, 2012

Behind the smoke: The corporate war on us

Wednesday column

It’s easy to laugh at big tobacco. Fresh from defeat at Australia’s High Court it has taken its fight against plain cigarette packets to New Zealand where British American Tobacco warns such legislation could expose the nation to legal challenges (no kidding) and to Hong Kong where Philip Morris moved the shares of its Australian subsidiary presumably to take advantage of an obscure 1993 Hong Kong-Australia investment treaty.

Philip Morris Australia, now known as Philip Morris Asia, will argue the treaty prevents Australia from depriving a Hong Kong entity of its investments or subjecting it to “measures having effect equivalent to such deprivation”. Which it does, with a caveat. As a party to the treaty Australia is permitted to deprive a Hong Kong company of its investments so long as it does so “under due process of law for a public purpose related to the internal needs of that party on a non-discriminatory basis”. So Australia ought to be in the clear.

But the almost comic attempt to get mileage out of the treaty (moving from Australia to Hong Kong in order to complain that it was being discriminated against because it was from Hong Kong) masks a broader more serious attempt to turn trade treaties into instruments that allow corporations to sue governments.

The World Trade Organisation allows no such thing. It’s disputes settlement procedure allows a nation to haul another nation before a disputes settlements panel, but not corporation to do so.

That could be why on Friday it will be the Ukraine which will ask the WTO to set up a panel to to hear its plain packaging dispute with Australia rather than a tobacco company. There’s a suspicion that the Ukraine is acting on behalf of a tobacco company, perhaps fuelled by its ranking on the Transparency International Corruption Perceptions Index (at the corrupt end of the scale, sandwiched between Russia and Zimbabwe) and by the fact that it has next to no tobacco trade with Australia...

The dispute will take four months to hear. With appeals it could take up to 14 months. But it won’t unduly trouble Australia. A member of the WTO rather than a corporation will be taking action, it will have to show clearly how Australia’s plain packs law offends against WTO rules (which allow non-discriminatory measures that benefit health) and because the Ukraine’s national interests are not at stake it is likely to run out of enthusiasm before Australia does.

Big tobacco, and fellow travellers in surprising places, want much more.

They want what is known as an Investor State Dispute Settlement Mechanism. They want it in order to allow them to drag Australia and other sovereign governments before specially constituted international courts.

They don’t usually put it that bluntly.

Here’s how Philip Morris International put it in a briefing note for the US trade representative negotiating the so-called Trans Pacific Partnership with eleven nations including Australia: “Philip Morris International considers the availability of an investor-state dispute settlement mechanism - including the right for investors to submit disputes to independent international tribunals - a vital aspect of protecting its foreign investments.”

It is clear what Philip Morris is getting at. Four of the 30 paragraphs in the briefing note seen by BusinessDay complain about Australia’s plain packaging law.

As it happens, the US trade representative is unable to do the bidding of Philip Morris. US law prevents federal agencies from promoting the sale of tobacco overseas. But the trade representative is willing to do the bidding of other corporations that would like to sue foreign governments in supranational courts.

In fact in all but one of the 13 free trade agreements negotiated by US, its representatives have managed to insert such a clause. The exception is the free trade agreement with Australia. Although criticised at the time for giving too much away to the United States in return for very little, on the question of an outside Investor State Dispute Settlement Mechanism the Howard government stood firm.

The Gillard government is standing firm too. The multinational nature of large Australian corporations means it would be effectively be giving our corporations (but not our citizens) an international right of appeal against laws approved by the High Court.

The US is unlikely to give up. It already has such a clause in its agreements with Canada, Chile, Mexico, Singapore and Peru - five of the nations that would form part of the Trans Pacific Partnership.

It’s best hope would be that a new Abbott government saw things differently. It would, if it succumed to lobbying from Australia’s own Chamber of Commerce and Industry.

ACCI is lobbying hard, putting out a statement this month headed crudely: “Australian Foreign Investment Requires Right to Sue Foreign Governments”.

It says its “campaign” is backed by the International Chamber of Commerce, which is hardly surprising but also hardly a sign the backers have Australia’s interests at heart.

Julia Gillard and trade minister Craig Emerson are standing up to them. Will Tony Abbott?

In today's Sydney Morning Herald and Age

Philip Morris International TPPA Stance

"Australian Foreign Investment Requires Right to Sue Foreign Governments

Statement by Peter Anderson, ACCI Chief Executive, August 9 2012

Australia’s largest and most representative business organisation, the Australian Chamber of Commerce and Industry (ACCI), together with leading business groups and some of Australia’s foremost legal experts on trade policy, have launched a campaign for trade agreements to include, on a case by case basis, provisions that allow private companies to sue foreign governments for breach of contract or property rights.

The business campaign seeks to restore Australian support for these rights, known as Investor-State dispute settlement (ISDS) provisions. Case-by-case support was withdrawn by the Gillard government in its 2011 policy statement ‘Trading our Way to More Jobs and Prosperity’.

The campaign features a joint letter signed last month by sixteen business organisations and legal experts, addressed and sent to the Prime Minister.

In launching the campaign’s public phase, ACCI Chief Executive said:

“If Australian companies are to fully grasp opportunities of the Asian century and emerging markets of Africa and the Indian Ocean Rim, trade agreements must provide investor certainty for private companies, not just governments. Investors are put off if they don’t have a secure legal frameworks with enforceable rights by courts or commercial arbitration.”

“Especially in developing countries where legal systems are ambiguous or suspect, Australian companies investing off-shore need confidence to take legal action and compel international arbitration against governments which infringe property and contractual rights.”

“The recent focus on in-bound foreign investment must not overshadow the prosperity flowing from Australian companies successfully investing in emerging markets.”

“ISDS provisions support Australian companies in their investments in foreign countries and provide an efficient mechanism for companies to seek to directly rectify any adverse situations” the joint letter says.

Since 2011, ACCI has tried to persuade the Gillard government to restore a case-by-case approach to ISDS in trade agreements, including Trans Pacific Partnership and Indian Ocean Rim negotiations.

As recently as 13th July in Brisbane, business organisations forming ACCI’s General Council resolved to support a public campaign given no-change in the government’s approach.

“The government’s refusal to consider inclusion of such provisions in current or future regional and bilateral free trade agreements is a flawed approach which reduces security for Australian firms seeking to invest internationally” the joint letter says.

Together with the International Chamber of Commerce, ACCI last week held seminars on international commercial dispute arbitration across five Australian capitals, including judge from the Supreme People’s Court of China.

“Those arbitration seminars starkly reminded businesspeople that investment is stymied and Australian businesses ripped-off if legal rights are not protected and enforceable on foreign shores.”

Aside from ten business groups, the co-signed letter, attached, includes support from the Chartered Institute of Arbitrators, leading barristers (including a former Commonwealth Solicitor General) and legal academics.

ACCI Lobbies for Investor-state Dispute Settlement Provisions


. An affront to the rule of law: international tribunals to decide on plain packaging, The Conversation

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