Luke Nottage (tel. +61 403 773277)Amokura Kawharu (+64 21 1627416)Professor of Comparative and Transnational Business LawSydney Law SchoolUniversity of Sydney, NSW 2006, AustraliaAssociate ProfessorAuckland Law SchoolUniversity of Auckland, Auckland, New Zealand1 November 2017Hon Stephen Ciobo MPMinister for Trade, Tourism & InvestmentPO Box 4922Gold Coast Mail Centre, QLD, 9726Rethinking Investment Treaties given NZ Government’s New Policy against ISDSSince 2015 one of us (Nottage) has exchanged correspondence with your predecessorurging the Australian government to undertake a public consultation into devising a modelinvestment treaty or FTA chapter, or at least model provisions, which might attract somebipartisan support. Submissions and evidence along those lines were also given to andlargely accepted by various parliamentary inquiries, while arguing that Australia’s recentUS-style investment treaties (including Investor-State Dispute Settlement provisions)were mostly appropriate.
A reassessment by Australia is now even more necessary as the recently elected NewZealand Prime Minister has reportedly declared that: ‘We remain determined to do ourutmost to amend the ISDS provisions of TPP. In addition, Cabinet has today instructed1trade negotiation officials to oppose ISDS in any future free trade agreements.’ Ourclose partner’s new stance is particularly problematic for ongoing negotiations for the(ASEAN+6) Regional Comprehensive Economic Partnership, the key alternative to theTrans-Pacific Partnership agreement for regional economic integration. The problem iscompounded because India will be proposing a highly-restricted form of ISDS for RCEPbased on its new Model Bilateral Investment Treaty, which is also likely to beunacceptable to negotiating parties (including Australia) that have significant outboundinvestment interests.
A possible compromise for RCEP, and future investment treaties to be concluded byAustralia (such as a revised TPP or FTAs with India or indeed Indonesia) is a permanent“Investment Court”, along the lines promoted by the European Union since 2015 and now2being investigated at the multilateral level by the United Nations. We suggested this3mechanism – or some variant, as discussed in Part 6.B our recent joint research paper1http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11939067UNCITRAL, Possible future work in the field of dispute settlement: Reforms of investor-Statedispute settlement (ISDS) (Note by the Secretariat, 20 April 2017) pp8-14.
3Kawharu, Amokura & Nottage, Luke R., Models for Investment Treaties in the Asian Region: AnUnderview (2017) Arizona Journal of International and Comparative Law:2Faculty of LawNew Law Building F10Eastern AvenueThe University of SydneyNSW 2000 AustraliaT +61 2 9351 0210F +61 2 9351 0200luke.nottage@sydney.edu.ausydney.edu.au/law/anjelABN 15 211 513 464CRICOS 00026A	  2– to New Zealand’s Trade Minister (and Australia’s Shadow Minister) in the attachedletter last week. We now urge you too to consider this way forward for Australia regardingthe vexed issue of ISDS, as well as other possibilities to move towards more EU-styletreaty drafting regarding substantive commitments offered to foreign investors.
Yours sincerely,Luke Nottage

	  https://ssrn.com/abstract=2845088 (abridged in (abridged in Chaisse & Nottage eds, InternationalInvestment Treaties and Arbitration Across Asia, Brill, January 2018).

	  Luke Nottage (tel. +61 403 773277)Amokura Kawharu (+64 21 1627416)Professor of Comparative and Transnational Business LawSydney Law SchoolUniversity of Sydney, NSW 2006, AustraliaAssociate ProfessorAuckland Law SchoolUniversity of Auckland, Auckland, New Zealand25 October 2017Hon Jason Clare MPHon David Parker MPLabour Shadow Minister for Trade & InvestmentPO Box 153, Bankstown, NSW 1885, AustraliaMinister for Trade and Export GrowthParliament Buildings, Wellington, NZLabo(u)r-led initiative by Australia-NZ for FTA / investment treaty (re)negotiationThe new Labour-led Government in New Zealand and the Labour Opposition in Australia havean historic opportunity to collaborate in showing regional and global leadership ininternational investment law.
In particular, for treaties not yet in force (like the Trans-Pacific Partnership Agreement) andcertainly for treaties under negotiation (such as those now commencing with the EuropeanUnion and the long-delayed ‘ASEAN+6’ Regional Comprehensive Economic Partnership orRCEP), we urge you to promote an ‘international investment court’ system. This wouldpresent an attractive alternative to the traditional investor-state dispute settlement (ISDS)option for enforcing substantive treaty commitments.
The EU developed this alternative in 2015 after extensive public consultations. Theinvestment court system has already been agreed in the investment chapters of its FTAs withCanada and Vietnam, respectively, although its operation is dependent on these provisions onthe investment court (plus provisions dealing with FDI) being approved by all EU states. TheUnited Nations Commission on International Trade Law has also agreed to investigate thepossibility of establishing a similar investment court at the multilateral level, for all states thento subscribe to with respect to their investment treaties,1 but these deliberations will take manyyears. Meanwhile, Australia and New Zealand should begin promoting this concept as anattractive middle way forward in treaty (re)negotiations, as a ‘collective middle power’ in theregion with many shared interests and understandings regarding high-quality foreigninvestment.
The investment court system reflects a maturing of the way that investor claims are resolvedfrom the ad hoc approach of the usual ISDS mechanism. This is because each state wouldpre-select experts on retainers, to serve as judges assigned to particular claims if and whenbrought by foreign investors concerned about alleged mistreatment contrary to treatycommitments. With the usual ISDS mechanism, generally each disputing party (the investorand the host state) each appoints an arbitrator, who then try to agree on a chairperson for thead hoc tribunal. Another key aspect of the investment court is that it involves two tiers,1UNCITRAL, Possible future work in the field of dispute settlement: Reforms of investor-State disputesettlement (ISDS) (Note by the Secretariat, 20 April 2017) pp8-14.

Faculty of LawNew Law Building F10Eastern AvenueThe University of SydneyNSW 2000 Australia	  T +61 2 9351 0210F +61 2 9351 0200luke.nottage@sydney.edu.ausydney.edu.au/law/anjelABN 15 211 513 464CRICOS 00026A

	  2allowing other pre-selected judges to review initial decisions if there is an appeal for seriouserrors of law. These two features effectively address the major public concerns (althoughsometimes overstated) regarding the current ISDS procedure: tribunals that may beinexperienced or imbalanced, and uncertainty or unpredictability of results.
However, the investment court alternative to ISDS still allows investors to bring direct claims ifhost states violate substantive treaty commitments. This is important because an inter-statearbitration process can easily become overly politicised, and disproportionately favours largeover small- to medium-sized enterprises venturing overseas.
In addition, recent econometric research funded through the Australian Research Council over2014-7 finds that ISDS provisions allowing foreign investors direct claims against host stateshave contributed significantly to world-wide outbound FDI flows from OECD member states,especially into non-OECD (developing) countries, and especially when treaties are promptlyratified after signature.2 However, this research also finds an even stronger positive impactfrom weaker-form ISDS provisions (qualified in some way). One policy implication is that atoned-down mechanism like an investment court system is most likely to promote foreigninvestment effectively.
However, this research does not support getting rid of direct claims altogether, as India isclose to proposing in its recent Model Bilateral Investment Treaty that presumably is nowframing India’s negotiating position in bilateral FTA negotiations with Australia as well as inRCEP negotiations. Although India will now be very unlikely to agree to traditional ISDSprovisions, it might accept investment court provisions as a compromise solution.
Our further joint research into investment regulation and treaties in both Australia and NewZealand3 also identifies several substantive provisions where more contemporary EU-style,rather than US-style (TPP) drafting, may achieve a clearer balance between investor and hoststate interests. We would be happy to elaborate on any of these points.
We urge you again to pursue a practical joint initiative in both countries’ respective FTApractice, with the long-term goal also of developing a multilateral investment court.
Yours sincerelyLuke Nottage
2	  Armstrong, Shiro & Nottage, Luke R., The Impact of Investment Treaties and ISDS Provisions on ForeignDirect Investment: A Baseline Econometric Analysis (2016) Sydney Law School Research Paper No. 16/74https://ssrn.com/abstract=2824090 (abridged in Chaisse & Nottage eds, International Investment Treaties andArbitration Across Asia, Brill, January 2018)3Kawharu, Amokura & Nottage, Luke R., Models for Investment Treaties in the Asian Region: An Underview(2017) Arizona Journal of International and Comparative Law: https://ssrn.com/abstract=2845088