Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

This is a very important piece of legislation that is before the Senate. The Trade and Foreign Investment (Protecting the Public Interest) Bill 2014 is a bill about restricting power of corporations to sue and harass sovereign governments in how they go about enacting legislation on behalf of the Australian people or their nations around the world. It is about giving parliament and parliamentarians a say in our democracy and some influence over secret trade deals. It is about helping to take politics out of our secret trade deals. But mostly it is about protecting our democracy, our sovereignty as a nation, the environment and workers and about bringing much-needed balance back to the trade debate. It is about getting power back to communities. Lastly, and personally to me, who brought the bill to the Senate, it is making a statement about the kind of society that we want to live in.

Investor state dispute settlement clauses are one of two types of dispute resolution mechanisms in modern trade deals. There are state-to-state dispute mechanisms, where a country can take action against another government over a breach of a trade deal, and there are mechanisms where private investors can take their own, personal, action against governments through shady, secret arbitration panels. Essentially, what we have set up in modern trade deals is a parallel system of governance that gives corporations the right and ability to impinge directly upon our ability as parliamentarians to enact legislation in the public interest. Corporations do this if they feel that a government policy or a change in policy has directly affected their profitability or their investment.

It is not only the Greens who are trying to raise the profile of this issue in Australia. A number of other stakeholders in this country are trying to raise the profile of this issue. The Centre for Civil Society has been talking about this issue for a number of years. I see Senator Macdonald in the chamber. He would well remember a similar debate back in 2004 around the US-Australia free trade deal, when his government, under John Howard, refused to sign on to investor state dispute settlement clauses in that trade deal for a very good reason, which Senator Macdonald no doubt knows very well.

This is an issue not just for Australian society; it is an enormous issue all around the world. I was visited by the French consulate about this bill. They came to consult with me and find out more about why we are introducing this bill. They said that ISDS, investor state dispute settlement, clauses had made the front page of both French national newspapers for two days in a row. Two days in a row, on the back of riots in Europe on this issue! The appointment of a trade commissioner in Europe and her wanting to leave ISDS clauses out of free trade agreements negotiated with the US has led to a fracturing of politics in Europe. Whether these clauses are to be allowed in modern trade deals is a hugely contentious issue. In the US it is also an enormous political issue.

We put this bill to parliament—it was inquired into by the Senate Foreign Affairs, Defence and Trade Legislation Committee—because we wanted to raise the level of national debate about the inclusion of such clauses in modern trade deals. I was very grateful when High Court Chief Justice French wrote a paper partly on this bill and around this bill, saying that this country, especially the legal fraternity, needed to have a national debate on whether these clauses should be included in trade deals.

While I was away on holidays—I went on a surfing trip to Indonesia, so I was only able to take a couple of small books with me—I took with me a political essay by Laura Tingle, called 'Great Expectations'. The essay talked about the disconnect in this country between the Australian public and politicians and why politicians are held in such low esteem by the Australian public. It explored a lot of reasons why Australian voters and the Australian public felt that politicians and parliamentarians had lost control of various agendas, particularly in a world of globalisation. It talked about a growing sense of anxiety and alienation in our community and why people were feeling this sense of loss of power over their own lives. It was an excellent expose of some of the deeper underlying issues in our society.

I personally have never felt as acutely this perception and real feeling of loss of control that people in this country have as when I have been talking to people about the free trade debate. This is no secret. Free trade negotiations have been going on for decades and they have always attracted controversy, because the increased opening up of our economies and globalisation of our society have led to very significant changes across our laws, our institutions, our regulations and of course our communities. Now, as we get further and deeper into opening our economies, this issue is becoming more acute. What we have got left to trade is a lot more sensitive. It is a significant matter of public interest right around the world.

The Trans-Pacific Partnership Agreement is one example. It is the largest trade deal this country is negotiating, covering 40 per cent of GDP. On the weekend, Minister Robb dismissed the concerns of civil society and, may I say—having been through Senate inquiries on this—not just civil society; he dismissed concerns of the Productivity Commission and a number of very conservative commentators around the way trade deals are done, negotiated in secret, and about the inclusion of things such as investor-state dispute settlement clauses. He dismissed these too easily and too quickly. It seems that perhaps Laura Tingle is right that a number of politicians and parliamentarians are out of touch with the way the Australian public are feeling with respect to the decisions that we make in this House about things that directly impact the future.

What is it about free trade deals that cause anxiety, mistrust and frustration in the Australian community? I think people realise, from looking at the track record, that negotiations involve trade-offs. You have to give up something to get something. Yet it is only sold to them that somehow these deals are beneficial. There are always costs to trade deals. There have to be, by definition. Every textbook you pick up as a university student talks about this. But we only ever hear about the wins. We only ever hear about the increased agricultural access. But people can see over the years the changes to their communities and to society.

We have seen the collapse of the car industry. I believe one of the reasons the Korean free trade deal was not finalised by the previous Labor government was that they knew it would be the straw that broke the camel's back with the car industry. The Labor Party also knew that it would involve signing ISDS clauses. During hearings of the Joint Standing Committee on Treaties, we heard evidence from a number of stakeholders that the ISDS clause was what had prevented this deal from being signed, because Labor had taken a very strong view on including these undemocratic and dangerous provisions in trade deals. But, unfortunately, it looks like Labor will vote for the Korean free trade deal with ISDS. I will get to that in a minute.

In this debate about trade, who picks the winners? If we have trade-offs in negotiations, who actually picks the winners? How highly politicised is it from the minister and the executive, who control the trade deals and are the only ones who know what is going on behind closed doors? How politicised is this process in picking winners if the power always lies with the executive?

The secrecy is a very serious issue, not just for the Greens and for civil society; the Productivity Commission itself has consistently raised the lack of transparency around trade deals as being a serious issue. The Australian Chamber of Commerce and Industry said there is no need for the secrecy and lack of transparency and that we should be looking at totally redoing our trade negotiation process in this country. Parliament has no oversight in the decisions that are made behind these closed doors. When the final text has been signed and is in train by the government, when the media machines are working overtime to sell these so-called benefits of free trade deals, then we get to scrutinise it. But by that stage it is too late

You either vote against it because there are things you do not like about the trade deal, such as the inclusion of ISDS, or you vote for it. You cannot change it.

As I said yesterday, you take it lock, stock and barrel or get two smoking barrels straight in the face, standing in front of a speeding train. You are anti-Australian and anti-economy, when you have very serious and justified issues about these trade deals, their outcomes and the way they are negotiated—the influence of foreign countries and their agendas, the stakeholders behind trade deals. We think trade deals are all about governments negotiating in our names, but actually behind those government negotiators are special interests, mostly corporate interests. Let me tell you trade and free trade deals are about deregulation. That is what they are about. They are about deregulation and they are about business agendas.

Coming back to this feeling of anxiety that we have in our community about the role of government, many people see these trade deals as a corporate takeover of our country, our institutions and our government by stealth—by stealth because they are conducted in secrecy. We need to change the way we do trade deals in this country, but try and understand that trade deals themselves and the emphasis we put on trade have changed considerably over the decades that we have been opening our economy. Trade deals today are now less about putting things on ships—really tangible concepts that Australians understand: selling iron ore, beef and wine, importing cars—and more about services and promoting services. The future of trade deals, such as the trade in services agreement that is being negotiated, is about investment and protecting direct foreign investment in different countries.

Of course, these deals rely on synchronising laws and regulations between countries. That is what they are now. By default, they are about synchronising laws and regulations between countries—and in whose interest? In the interests of US multinationals? Twenty-three out of the 29 chapters in the transpacific partnership agreement do not relate to trade the way we traditionally understand it. They are all about changing laws and regulations between countries, synchronising and standardising laws and regulations. These are significant matters of public interest in a whole range of different areas—local content for media, the environment, the ability to have moratoriums and flexibility in environmental policy, labour and working standards, policy on pharmaceuticals and access to health care. All these things are being done in secret.

I want to debunk some of the arguments against this bill and against removing ISDS, that somehow these ISDS cases have been around for a long time and that we are very comfortable with them. Guess what—they are proliferating. Ten years ago there were only a dozen ISDS cases around the world. Now there are nearly 600, because the nature of trade deals is changing. They are about protecting direct foreign investment in different countries.

And it is not just First World countries that are having cases brought against them, such as the Australian government being sued by Philip Morris—an aggressive tobacco company trying to change our health policy in this country, trying to intimidate our government, sending a strategic message across the world: 'If you're a Third World country, don't you dare change packaging regulations that impact on our profits. We will sue you. We will spend whatever it takes to achieve that outcome.' This is what got Chief Justice French involved in this debate. And, by the way, Philip Morris is suing the government of Guatemala for doing the same thing, and there are a number of other cases against Australia through the WTO for trying to change our health regulation in this country. This is an example of aggressive corporations trying to sue governments.

These ISDS clauses have been around for 20 or 30 years. They were simply about expropriation of assets. But now there are significant shades of grey about what powers corporations have and their ability to bring cases against governments. We have so-called carve-outs and exceptions now written into these clauses. Do they work? Not according to nearly all the experts around the world. The evidence presented to the committee inquiring into this bill is that they do not work. They certainly do not stop litigation, like the Philip Morris litigation being brought against the government, which we know causes regulatory chilling. It is a very simple way for a corporation to put pressure on sovereign governments not to bring in legislation.

We do not even know how many threats there have been behind the scenes. There is an excellent expose by the ABC on Background Briefing, which goes for 45 minutes and comprehensively covers all the issues on ISDS. They interviewed an expert, Toby Landau, who had been consulting for the UK government. He talked in detail about all the cases he had worked for the UK government around the potential to be sued if they brought in the policy. He said that it is a very real risk that has to be taken into account now by our public servants and our politicians when they bring in policy. You need to consult on this stuff now, because it would give corporations a right to sue sovereign governments if they disagree with our policies.

We know from some of the outcomes from around the world that these legal suits can lead to tens of billions of dollars' worth of losses to taxpayers and citizens in those countries. El Salvador is being sued by OceanaGold, an Australian company based out of Melbourne, for US $300 million. They had a mining licence revoked because of issues around a corrupted process and environmental damage. They are not just suing for the money they have sunk into their exploration; they are suing for lost income—$300 million, which I understand is about half the education budget of El Salvador.

For anyone who says we can have these deals now and that we can safely include them in trade deals, I suggest you go and read a publication that the EU recently commissioned. It has hundreds of the best legal minds in the world saying, 'Do not include these carve-out and exception clauses in trade deals.' By the way, that is exactly what the Productivity Commission said here: 'Do not include these clauses in trade deals'. They bring no benefits; there is no evidence of any increased flows in direct foreign investment across borders or increased trade, but there is plenty of evidence that they significantly bring risks to any country that does have these deals. That is why John Howard did not sign up to it; that is why the Labor Party refused to sign up to deals that included ISDS. Now we will have the Korean free trade agreement legislation coming into the Senate shortly and it includes ISDS. Labor voted for it in the lower House; will they vote for it in the Senate? If they vote for KAFTA with the government—which has clearly changed its tune on this as well—then what do we do for the Transpacific Partnership Agreement? It is the biggest trade deal in this country's history and it has US companies involved and they are the most litigious—the statistics are simple—investors who use investor-state-dispute-settlement clauses.

It is not just Australia that I am worried about; I am worried about the impact on other countries in our region, which are poorer and do not have the money that first world countries have; their environmental and labour standard policies may be impacted by aggressive corporations that try to protect their profits and their shareholders. I would say to the Labor senators: if you want a good expert's say on this, print out Melissa Parke's article in The Guardian yesterday—it is an excellent article on why we should not have ISDS clauses in trade deals. It is a really good and well-written article—you should read it. She understands that including these clauses in trade deals will open a can of worms. I would say to the Liberal senators: have a look at the printout from the DFAT website 10 years ago when John Howard refused to include these in trade deals. It clearly says that we do not need these clauses; that we have strong political institutions in America and Australia; and that these things can be negotiated if they are needed. What has changed in 10 years? We are still doing a lot of business with the US, as we are with Korea. We do not have these in place now, and so why do we need them for the future? They are unnecessary and they present significant risks.

Let's make a strong, visible decision today to protect our government's ability to legislate in the public interest and protect our sovereignty, our communities, our workers and our environment. In other words, let's protect the public interest; let's send a message to the Australian people that we do have control and that we will stand up for them. Today I ask the Senate to vote for the bill. Let's wrestle back power and allow the Australian people to at least start wrestling back power and influence over their own future and the lives of the communities. Let's not weaken our democracy; let's take a very visible stand today and implement this bill and set an international standard.

James McGrath (Queensland, Liberal National Party) Share this | Link to this | Hansard source

It gives me great pleasure to speak on the Trade and Foreign Investment (Protecting the Public Interest) Bill 2014. I think the bill probably is well-intentioned, but I do not think it is a bill that I can support or that my party would support. To bring a blanket ban in on the inclusion of ISDS clauses in free trade agreements would be wrong and would certainly limit the ability of the government to negotiate the best possible deals for Australia and Australian exporters, so the government is considering the inclusion of ISDS clauses in free trade agreements on a case-by-case basis.

There is a great deal of scaremongering with regard to the ISDS approach and the fears raised are simply unfounded judging by Australia's extensive level of experience with them. It is important to remember that ISDS is not a new concept for Australia. We currently have ISDS clauses with 28 economies through four free trade agreements and 21 bilateral investment treaties—these have been agreed to over the past 25 years—and as the minister for trade has pointed out the world certainly has not ended—in fact, far from it. Modern ISDS provisions provide very explicit carve outs and safeguards to protect our ability to govern and regulate in our national interest. ISDS is not a mechanism which allows for frivolous claims. The Labor Party included ISDS provisions in the Australia-Chile Free Trade Agreement and in the ASEAN-Australia-New Zealand free trade agreement back in 2009. The main thing is that ISDS provides protection for those who choose to pursue new opportunities for Australia by investing abroad.

I now want to just talk about a couple of Australian companies who have made use of ISDS overseas. In November 2011 a tribunal awarded White Industries Australia Ltd, an Australian mining company, compensation from India for violating the India-Australia agreement. Details of the award were announced in February 2012. White Industries complained that the Indian courts failed to enforce a foreign arbitration award obtained in 2002 in a dispute between White Industries and its Indian joint venture partner, Coal India Ltd—an Indian state-owned entity. In 2011 Tethyan Copper Company formally commenced ISDS provisions against the government of Pakistan, alleging that Pakistan was in breach of its obligations under the Australia-Pakistan IPPA. In December 2012 Planet Mining's ISDS request against the government of Indonesia was registered by the International Centre for Settlement of Investment Disputes. This was a claim brought under the Australia-Indonesia IPPA in relation to a five per cent stake in an Indonesian company whose exploitation licenses for a coal deposit in Kalimantan had been revoked. In November 2013 the Canadian company Pacific Rim Mining Corporation became a wholly-owned subsidiary of the OceanaGold Corporation. In June 2009 PacRim registered an ISDS request against the government of El Salvador under the US-Central American-Dominican Republic free trade agreement and El Salvador's investment law. This claim was dismissed in June 2012 as a result of a denial of benefits clause. This claim is ongoing under El Salvador's investment law.

Why I talked about those cases—they are the only cases that Australian companies are dealing with at the moment—is that we have to protect Australian companies who want to invest overseas. It is Australian companies who create jobs; it is Australian companies who help grow the economy. Australia is a free trade economy. We are a trading nation. I might digress a little bit. Over the 2000s Australia's ratio of exports and imports to GDP has risen each year. We are an open economy. The size of our import and export sectors is greater than 20 per cent of gross domestic product. Australia is one of the main countries that has benefited from rising international trade. In fact, if we did not have trade and had a closed economy, you would find us becoming one of those closed economies, like Burma or places like that, where we would lose jobs, we would lose wealth and we would be unable to spend any of the money that those opposite want us to spend. Reducing tariffs is producing an estimated savings of at least $1,000 per year to the average Australian family. For example, without the reductions to tariffs on motor vehicles Australians would pay around $10,000 extra on a $30,000 car. Greater access to imports has benefited consumers and businesses by widening the choice of products available and boosting the living standards for many Australians. For us to limit the ability of our government to negotiate agreements with overseas countries by having a blanket ban on ISDS clauses would limit our ability to grow the Australian economy.

There are a number of people who put in evidence to the various committees that looked into the Korean free trade agreement and also to the Senate Foreign Affairs, Defence and Trade Legislation Committee, a committee that recommended against this bill, by the way. Professor Nottage, who is a professor of law at the Sydney Law School, in evidence told the committee that while he thought that the bill was well-intentioned, in the sense that the ISDS treaty based system is far from perfect, he could not support the bill. He said:

[it] would make Australia unique among developed countries and put us in the company of a very few countries, even among developing countries, mainly a few very Leftist regimes in South America. I think it would torpedo future trade and investment treaty negotiations to which the major parties in Australia have long been committed, as well as potentially inhibit the development of multilateral initiatives and international investment law.

In its submission to the committee DFAT argued that the bill may prevent the government from concluding negotiations to benefit Australian producers, consumers and the broader community—something I talked about just before. Furthermore, DFAT went on to say—and I am looking at the report—that excluding ISDS provisions from future trade agreements would impose a significant limitation on the ability of the government, of whichever party, to pursue its broader trade and policy objectives. The report also says:

The Australian Chamber of Commerce and Industry expressed concern that although Australian investors have not utilised ISDS provisions to any great extent in the past—

and I have just talked about the four cases that are public and that I am aware of—

if a ban on ISDS provisions was implemented it would prevent Australian firms from being able to protect their international interests by using such provisions. The Australian Dental Industry Association noted similar concerns in the dental industry. Having sat on the committee and also sitting on the joint Senate committee on treaties, I have done a bit of reading in this area. I think the committee's conclusions are conclusions that I certainly strongly agree with; I supported the motion of the committee.

I think the ISDS system has improved significantly over recent years both in the way in which treaties are drafted in relation to ISDS causes and the way in which cases are argued and how arbitrators decide cases. The committee noted:

Australia … stands to gain more by remaining actively engaged with the international investment law system … where ISDS provisions apply.

The committee noted:

… were Australia to legislate for a blanket ban on ISDS provisions in trade agreements, it would be sending a message to existing and potentially new trading partners that Australia was turning inward-looking and distancing itself from the international law system.

I think that comes to one of the key points here: the government are not saying that each agreement must have ISDS clauses, and we are not having the Greens position, saying that they must not be included; we are saying that it should be decided on a case-by-case basis. The committee was:

… of the view that a blanket ban on ISDS would impose a significant constraint on the ability of Australian governments to negotiate trade agreements that benefit Australian business. It is for this reason that the committee considers the current case-by-case approach to ISDS is in Australia's long-tern national interest and a sound policy for weighing the risks and benefits of ISDS provisions in trade agreements.

I will not list the ISDS provisions in the 21 investment protection and promotion agreements, or IPPAs, but I will briefly touch upon the Korean free trade agreement.

The Korean free trade agreement contains a number of safeguards and carve-outs in four areas. There are safeguards built into the core obligations of the investment chapter. There is a schedule of reservations which allows Australia to maintain existing measures and to reserve policy space to maintain or adopt new measures in sensitive areas. There are exceptions and other carve-outs, and there are actually procedural safeguards built into the ISDS mechanism. I think it shows that the ISDS approach has evolved and changed since such provisions were first brought in over two decades ago.

The safeguards built into the core investment obligations have been developed as a result of the experience of states defending ISDS disputes under the older style agreements. These safeguards are binding on any ISDS tribunal and so reduce the risk of obligations being interpreted in an overly broad way. They include a statement that, except in rare circumstances, non-discriminatory regulatory actions by a party to protect legitimate public welfare objectives, such as public health, safety and the environment, do not constitute expropriation; and a clarification that the obligations of 'fair and equitable treatment' and 'full protection and security', which have been interpreted broadly by some tribunals, are limited to the minimum standard of treatment required under customary international law.

Australia has scheduled reservations to preserve policy space in sensitive areas. In addition to the reservations which Australia generally includes in free trade agreements, the Korean free trade agreement includes several additional broad reservations which preserve our ability to maintain existing measures or adopt new measures in relevant sectors and areas, including essential security, with respect to foreign investment proposals; human health; blood and blood products; and providing preferences to socially or economically disadvantaged groups. In addition, Australia has included reservations which also appear in other free trade agreements and which provide policy space in relation to Indigenous persons or organisations; social services such as social welfare, public education, public housing, public utilities, health and child care; creative arts and cultural heritage; and gambling.

There are procedural safeguards in the ISDS mechanism. These include an expedited procedure to decide preliminary objections and to dismiss unmeritorious claims promptly and the power for the tribunal to award costs against an investor if it makes frivolous claims; a provision that a joint interpretation by the parties, Australia and Korea, is binding on the tribunal; and the ability of the tribunal to consolidate claims where they arise out of the same event. This also is able to provide a high degree of transparency.

In relation to exceptions and other carve-outs: Australia's carved out decisions under our foreign investment policy—the Foreign Investment Review Board—to object or to impose conditions on a proposed investment from the scope of ISDS: the World Trade Organization based general exceptions apply to all obligations of the investment chapter. These include exemptions for measures to protect human health and the environment. A WTO based essential security exception applies to the investment chapter and includes an additional safeguard provided if a party invokes the security exception in an ISDS dispute, the tribunal shall find that it applies. There is also a specific tax exception which carves out tax measures from most of the investment obligations.

The inclusion of ISDS was not a controversial issue in the Chile free trade negotiations. Both sides there agreed on the importance of providing investor protections. For the free trade agreement overall, both sides agreed that negotiations should be concluded as quickly as possible. This was facilitated and helped by the fact that both Australia and Chile had bilateral free trade agreements with the United States and guiding principles to stick to the approach taken in these agreements to as much an extent as possible.

On the issue of ISDS in particular, Chile's free trade agreement with the US included ISDSs and, as such, both sides were prepared to consider the inclusion of ISDSs. Australia and Chile already had an ISDS under an old bilateral investment treaty, and the free trade agreement negotiations allowed Australia and Chile to develop a more sophisticated approach to ISDS with more safeguards. And both sides had to agree to terminate the old bilateral investment treaty as part of the agreement.

By going through those two free trade agreements, I think it is important to note that the previous government and this government have taken the issue of ISDSs very seriously and have used it as a serious negotiating block in terms of whether it should be included or not. To put a blanket ban on the inclusion of ISDS provisions into any free trade agreements, bilateral agreements or whatever would certainly restrict the ability of Australia to negotiate. I take the point that concerns have been expressed in relation to secrecy in how we negotiate our free trade agreements, but I think it is probably a little bit naive to want to have our agreements negotiated out in the public domain.

It is very important that, once they are negotiated, they do come to the parliament and go through the Treaties Committee, so ably chaired by the member for Longman, and that the treaties are then put to parliament. To suggest that we should negotiate treaties publicly or that it is somehow an attack or affront on democracy that we do not know about the treaties until they come along, I think is wrong. I think it would limit and hurt our negotiating position if suddenly our good friends at Fairfax Media, or Sky News or whoever were reporting on our latest negotiating tactics were. I think it would result in a poorer treaty being agreed, and a poorer treaty would mean that Australians would be poorer. And if Australians were poorer it would mean that we could not have investment and create jobs. And if we do not have the jobs we cannot have the taxes. So, we need to make sure that the Australian economy can grow. I do not think that bringing a ban in on ISDS clauses is the way to do that. I think the current system of the ISDS provisions being negotiated on a case-by-case basis is the best way forward. For that reason, I do not support this bill put forward by the good senator opposite.

Anne McEwen (SA, Australian Labor Party) Share this | Link to this | Hansard source

The opposition will not support passage of the Trade and Foreign Investment (Protecting the Public Interest) Bill 2014. Labor oppose the inclusion of investor-state dispute settlement provisions in trade agreements. However, Labor cannot support the remedy proposed by this bill.

This bill would significantly constrain the executive powers of the government of the day. This approach runs against the constitutional division of powers between the executive and the legislative arms of government in our democratic system. This approach would also create a precedent, undermining the ability of elected federal governments to make progressive reforms in Australia by entering international treaties and conventions.

Labor is a progressive party of government. Over decades, Labor governments have used the Commonwealth treaty-making powers to implement a whole series of progressive reforms in the national interest: progressive reforms to protect the environment, to tackle climate change, to protect human rights, to protect employment and workplace rights, and to prohibit racial discrimination. These are progressive reforms which Labor governments have introduced by using the power of the executive to enter international treaties.

Earlier this week, this Senate paid tribute to former Prime Minister Gough Whitlam. I remind the Senate that the Whitlam government ratified the World Heritage Convention using the executive treaty-making powers which this bill seeks to constrain. It was only because the Whitlam government ratified the World Heritage Convention that the Hawke government was then able to save the Franklin River and the World Heritage listed wilderness areas of western Tasmania. That is something which the Leader of the Greens, Senator Milne, acknowledged in a speech on Gough Whitlam on Monday this week. That is why I am surprised that the Greens, a party formed out of the campaign to save the Tasmanian wilderness, would now week to create a precedent curtailing the executive's treaty-making powers. If that precedent had been in place in 1974, the conservative Senate of the day would have blocked ratification of the World Heritage Convention, and the Franklin River would have been dammed as a result.

I now turn to the issues concerning investor-state dispute settlement provisions. This bill seeks to constrain current and future governments' executive treaty-making power. It would work as a legislative constraint on government from entering into any international agreement that contains investor-state dispute settlement provisions. These provisions, commonly called ISDS provisions, provide foreign investors with greater rights than domestic investors. They grant foreign investors the right to access an international tribunal if they believe actions taken by a host government are in breach of certain commitments made in a free trade agreement or an investment treaty. The ISDS mechanism dates back to shortly after World War II. Inexperienced governments of newly-independent European countries needed to attract foreign investment but lacked experience in property rights and a strong rule of law. Accordingly, one of the original and fundamental justifications for the creation of the ISDS mechanisms was to attract foreign direct investment by providing investors with confidence of an objective legal forum, devoid of the problems of underdeveloped legal systems. Unfortunately, however, in recent years a number of serious problems have arisen with the way ISDS provisions are being applied. International ISDS arbitration is now characterised by substantial costs, substantial delays, lack of certainty, lack of appeal rights, a perception of a lack of impartiality, and abuse of process.

In the decade between 1992 and 2002, the cumulative number of cases under ISDS provisions grew from nought to almost 100. In the following decade to 2012, the number grew to over 500. Of the current known ISDS cases, less than half—244—have been concluded. An ISDS case can typically take between five and 10 years to resolve and the OECD estimates an average cost of $8 million per case, with some cases costing up to $30 million. The panel of arbitrators tend to be largely from the United States or the EU. Professionals in the industry can oscillate between representing a claimant and being a judicial member on a different case involving the same claimant or industry. This practice raises at least an impression of a lack of impartiality. In a robust, developed legal system, justice must both be done and be seen to be done.

The ISDS system has also been used by multinational companies to introduce regulatory chill on sovereign countries. A classic example is the current tobacco plain packaging legislation case against Australia. This expensive and lengthy case, initiated by Philip Morris Asia, has resulted in other countries deferring the implementation of similar health and life saving legislation. These problems with the ISDS system have resulted in governments, organisations and individuals around the world calling for substantial reforms. As just one example, United Nations Conference on Trade and Development, or UNCTAD, has stated:

Challenges posed by today’s investor-state dispute settlement regime create momentum for its reform.

…   …   …

Given the numerous challenges arising from the current ISDS regime, it is timely for States to assess the current system, weigh options for reform, and then decide upon the most appropriate route.

Moreover, the underlying economic rationale no longer stacks up. ISDS provisions could be justified by market failure associated with opportunistic and discriminatory behaviour of host governments. However, the potential of expropriation risk is largely resolved in the marketplace by reputational effects. That is, governments which tend to seek foreign direct investment on an ongoing basis will be significantly harmed by any expropriation type behaviour, even on a single account. Studies have also found that foreign firms tend to enjoy regulatory advantages, rather than bias, as compared with their domestic equivalents. In Australia, the Productivity Commission has concluded that there is no available evidence to suggest that ISDS provisions have a significant impact on foreign investment flows.

As noted in submissions to the Senate Foreign Affairs, Defence and Trade Legislation Committee inquiry into this bill, there has been an increase in international concern about the operation of ISDS provisions, accompanied by calls for reform. The United Nations Conference on Trade and Development, UNCTAD, has advocated for a roadmap for ISDS reform. The European Commission is currently analysing the results of almost 150,000 submissions to its public consultations on the ISDS provisions in the Transatlantic Trade and Investment Partnership, the TTIP. Governments and NGOs in Germany, France, Indonesia and South Africa have all expressed their lack of support for future ISDS provisions in multilateral agreements.

In 2010 the Productivity Commission recommended that Australian governments avoid including ISDS provisions in international agreements. In 2011 the former Labor government announced it would not provide foreign investors with greater legal rights than those available to domestic businesses and therefore would not agree to the inclusion of ISDS provisions in new trade and investment treaties. This policy change did not prevent Australia from progressing bilateral and plurilateral treaty negotiations. Indeed, under this policy Australia concluded negotiations on a free trade agreement with Malaysia without the inclusion of ISDS provisions.

It is unfortunate that the Abbott government is either ignorant of the legitimate concerns about ISDS provisions or in its rush to garner three free-trade-agreement trophies this year is just rolling over when Australia's negotiating partners seek to include such provisions in trade agreements. In the South Korea-Australia free trade agreement the coalition government agreed to South Korea's request for ISDS provisions. Labor have indicated that when we are returned to government we will seek to renegotiate this aspect of the South Korea-Australia free trade agreement. Unlike the coalition government, Labor have a clear and responsible policy on ISDS. Labor disagree with the coalition's case-by-case approach to ISDS.

However, Labor is a party of government. In our system of government the state is divided into the executive, legislative and judicial branches. Under this system it is the executive which has responsibility for negotiating and signing international treaties, including trade and investment treaties. Under our system the executive negotiates and enters treaties, and it is the parliament's role to scrutinise these agreements to ensure the executive government is accountable to the public and to consider any enabling legislation. We believe that this balance of responsibility should be maintained. The legislature should not seek to negotiate treaties, revise the text of treaties or set the negotiating mandate of the government. This would undermine the ability of the government of the day to make reforms in the national interest through the executive's treaty-making power.

Over the years, progressive Labor governments have entered international treaties to implement important reforms in areas ranging from the economy to the environment, from industrial relations to eliminating discrimination. I have already given the example of the Whitlam government's ratification of the World Heritage Convention. Let me give some more examples. Some of the most significant protections for human rights in Australia rely on international conventions and treaties which the Whitlam government ratified, including the 1953 Covenant on the Political Rights of Women, the 1966 International Covenant on Economic, Social and Cultural Rights, the 1966 International Convention on the Elimination of all Forms of Racial Discrimination, the 1967 Protocol Relating to the Status of Refugees, and International Labour Organization conventions relating to employment of indigenous workers, freedom of association and the right to organise, equal remuneration, employment discrimination and minimum wage fixing.

The Keating Labor government ratified the ILO Termination of Employment Convention in 1993. This provided Labor with the constitutional basis to pass legislation protecting workers against unfair dismissal. The Industrial Relations Reform Act 1993 extended unfair dismissal protections to millions of federal award and award-free employees who had never been protected against unfair sackings. The use of the ILO convention to provide the constitutional basis for this legislation was opposed by the Liberal Party. On the precedent that would be created by the Trade and Foreign Investment (Protecting the Public Interest) Bill, a coalition dominated Senate could have sought to block ratification of that ILO convention.

The Hawke-Keating government ratified the United Nations Framework Convention on Climate Change and the Rudd government ratified the Kyoto protocol. These agreements established the basis for international cooperation on tackling climate change. The executive's treaty-making power has also been used to protect against racial, sexual and religious discrimination, to provide protections for refugees and to promote and protect Indigenous populations.

In conclusion, as a progressive party of government, Labor accepts the responsibilities of the executive government of the day to negotiate and enter treaties in the national interest. In addition to the mechanisms of accountability to the parliament, governments are ultimately accountable to the people through the ballot box for the way they exercise their executive power. Labor does not support this bill, because it would constrain the executive powers of the government of the day, alter longstanding and well settled constitutional arrangements and undermine the ability of elected federal governments to make progressive reforms by entering international treaties.

Rachel Siewert (WA, Australian Greens) Share this | Link to this | Hansard source

I rise to contribute to the debate on the Trade and Foreign Investment (Protecting the Public Interest) Bill 2014, avery sensible bill that Senator Whish-Wilson has introduced as a private senator's bill. The purpose of the bill is to prevent the Commonwealth entering into an agreement with one or more foreign countries if the agreement includes investor-state dispute settlement provisions.

The concern that I have just heard expressed by the Labor Party I think in part seeks to muddy the waters by saying the bill restricts the ability of governments to enter into treaties. Senator Whish-Wilson has had legal advice to suggest that it does not, but he has also indicated on occasion that if there are issues with some of the wording of it, to make it clear we could consider amendments. It is interesting too that, despite speaking strongly about the issues around investor-state dispute settlement provisions, Senator McEwen for the Labor Party did seem to think it was important that the Labor Party has just supported and voted with the government on the KAFTA, which sets a bad precedent for negotiations on the TPP. If they so strongly believed that these issues were of concern, they should have voted against it and forced a renegotiation. As I said, it does indicate a bad precedent for the TPP, which does include US corporations, who are very litigious.

We should be sending a message now that these forms of provisions are not acceptable. They may have been useful in the past, but the world has significantly changed, and our legislation needs to move on so that we ensure that investor-state dispute settlement provisions do not give foreign corporations excessive powers in this country. Free trade agreements are no longer simply concerned with the exchange of goods and services. The inclusion of foreign investment ensures a much more complex system, which does not necessarily make for a better one.

The Greens are very concerned about the government's proposals to include investor-state dispute settlement provisions in future free trade agreements, which could allow foreign companies to sue the government if they consider their business interests to be impinged on by policy or legislation decisions of the government. This is big business insinuating itself into the decision making of a state. It is crony capitalism at its extreme. The Australian Greens Trade and Foreign Investment (Protecting the Public Interest) Bill 2014 seeks to ban the inclusion of investor-state dispute settlement provisions in future trade agreements in order to protect the public interest. Sovereign risk is part of the consideration for companies who want to invest in foreign countries. Risk is part of doing business. Investor-state dispute settlement provisions allow foreign corporations to sue governments if they feel regulations and policies impact on profits. They give corporations a lot of power and there is no proof that increased investment flows. There is no right of appeal in the arbitration process and there is very little transparency with what goes on. Labor refused to sign up to ISDS when they were in government, but they still voted through the Korean-Australian deal, which had ISDS in it. We think they did not want to be seen to be blocking trade deals when this has significant implications for decision making in this country.

The government will not acknowledge or do not understand the risks, because what they want is to get the trade deals done. However, I must note that Mr Howard refused to allow ISDS clauses in the Australia-US FTA. If we get ISDS in the Trans-Pacific Partnership Agreement, US companies will have the right to sue the Australian government. US corporations are the biggest users of ISDSs, and we expect cases against the government would increase if we were to sign the TPP. ISDS applies to state and local governments as well and has significant implications across Australia.

We oppose ISDS provisions for a number of important reasons. Litigation using ISDS has proliferated in recent times and this is likely to increase in the future. You can expect that it will. If you put it in the agreement, you can expect that corporations, particularly US corporations, will use it. ISDS clauses have outlived their usefulness and are now under review in a number of countries and in a number of trade negotiations, including 10 countries in Latin America, in South Africa, in India, in Indonesia and in the European Union. After decades of public debate, it is time to rethink their inclusion in modern trade agreements, because circumstances have significantly changed from the times that Senator McEwen was talking about. It is no longer used for those purposes. The purposes these provisions are used for are to allow multinational corporations to take control, essentially, of key policy decisions or to oppose policy decisions that countries make. It is unacceptable.

There is no evidence that ISDS clauses have any economic benefits for trade or investment. However, the risks of using them are clear and supported by evidence and numerous case studies, a couple of which I will go into shortly. Trade deals are changing from historic market-access trade-driven considerations to facilitating and protecting foreign investment through limits placed on the ability of the government to develop domestic laws and policies in a wide range of areas, including public health, patents on medicine, the environment, food labelling, internet use and privacy, and local media content. This makes the inclusion of ISDS provisions more dangerous.

Although current ISDS litigation by the Philip Morris tobacco company against Australia's plain-packaging legislation is globally significant, we have only escaped the danger of more cases because previous Labor and Liberal governments have only included ISDS in trade agreements with developing countries, which do not have investments in Australia, and have not included them in the Australia-US Free Trade Agreement. US corporations are the most frequent users of ISDS. The current Trans-Pacific Partnership Agreement, the TPP, has proposals for ISDS in the ongoing negotiations, which would therefore expose Australia to a much higher risk of litigation. There was strong evidence presented to the inquiry that ISDS safeguard clauses can and have been reinterpreted and overturned through the arbitration process. Australia has no oversight of control over the inclusion of ISDS in trade negotiations, or other aspects for that matter, of the secretive trade talks. Legislation is the simplest way to remove the risk of their use into the future.

The Australian Greens trade and foreign investment bill seeks to ban the inclusion of ISDS in future trade agreements in order to protect the public interest. Why should we be beholden to foreign investors' vested interests to the detriment of our own citizens? It is a very, very real risk. I am particularly concerned about the impact of ISDS provisions on Australian agriculture and the health and wellbeing of Australians. I urge farmers to take a stronger interest in the inclusion of these provisions, because I think it will lead to adverse impacts on farmers in this country. I urge them and their representative organisations to pay attention to these provisions.

The inclusion of ISDS provisions is a potentially detrimental policy for Australian agriculture. There are already examples of Monsanto suing foreign governments for decisions they see as not being in Monsanto's best interests. We can look at the example of Monsanto and Guatemala. In a landmark decision on 4 September, following intense pressure by Indigenous people, trade unions, farmers' organisations and others, the Guatemalan judiciary ruled to suspend the controversial plant variety protection law, commonly referred to as Monsanto law, because of the multinational biotech company's involvement in it. If passed, the Monsanto law would have given exclusivity on patented seeds to transnational companies, but opponents claim that the new law violated the Guatemalan constitution and the people's rights to traditional cultivation of their land in their ancestral territories.

The law offers producers of transgenic seeds—often corporate companies like Monsanto—strict property rights in the event of possession or exchange of original or harvested seeds of protected varieties without the breeder's authorisation. A breeder's rights extend to varieties, essentially derived from the protected variety. Thus a hybrid of a protected or unprotected seed belongs to the protected seeds producers. What are the implications of this? For one, if a Guatemalan farmer who had been tending his or her land for generations violates the law, wittingly or unwittingly, he or she could face a prison term of one to four years and fines of US$130 to $US1,300, which is very hefty for farmers in that country, who are frequently living on the brink of poverty.

The new legislation would open up the market for genetically modified seeds, which would threaten or displace natural seeds and end their diversity. This is an extremely dangerous proposition, because it threatens food security by introducing a vicious cycle to Guatemalan farmers. With the introduction of modified seeds, it would be hard, if not impossible, to revert back to using Indigenous seeds, making Guatemalan farmers dependent upon foreign seeds—expensive foreign seeds. By law, once genetically modified seeds are invariably mixed with natural seeds, the end result would be legally owned by the property rights holder—that is, guess who? Monsanto.

A publication of the Rural Studies Collective warned about the consequences of this Monsanto law, describing how the law 'promotes privatisation and monopolies over seeds, endangering food sovereignty, especially that of indigenous peoples'; and that 'Guatemala’s biodiversity will fall under the control of domestic and foreign companies.' That is right—handing over that biodiversity to companies to own. Opponents claim that, if passed, Monsanto's law could make criminals of already repressed small farmers who are just trying to cultivate crops for their own consumption, which they have been doing for generations. The law would have prevented Guatemalans from growing and harvesting anything that originates from natural seeds, and farmers could be breaking the law if these seeds had been mixed with patented seeds from other crops as a result of pollination or winds, unless they had a licence for the patented seed from a transnational corporation like Monsanto.

In a statement issued in July, the National Alliance for Biodiversity explained:

According to this law, the rights of plant breeders are superior to the rights of peoples to freely use seeds. It’s a direct attack on the traditional knowledge, biodiversity, life, culture, rural economy and worldview of Peoples, and food sovereignty.

Nigel Scullion (NT, Country Liberal Party, Minister for Indigenous Affairs) Share this | Link to this | Hansard source

Hear! Hear!

Rachel Siewert (WA, Australian Greens) Share this | Link to this | Hansard source

I am glad that somebody agrees that that is what Monsanto's law could result in and understands the issue.

Beyond the domestic repercussions of this ruling, it could also affect Guatemala's inclusion in the Central American free trade agreement. The free trade agreement between the United States and a group of smaller developing countries includes Guatemala. The plant variety protection law originated back in 2004 when Guatemala signed up to the agreement, and agreeing to Monsanto's law is part of the agreement. Should Guatemala or another nation have to listen to the demands of the US by honouring the free trade agreement laws? Not according to the Natural Society, who say:

Big Ag and Big Biotech would severely threaten international food sovereignty. More than 40 countries have already realized this possibility, banning GMO crops.

There are reports that Monsanto intends to sue the Guatemalan government under the ISDS provisions following this decision. We do not want this to happen in Australia. You only have to look at what could happen in Australia, where we have farmers who wish to grow organic crops; we have farmers who do not wish to grow genetically modified organisms. This law could threaten our ability to make laws to protect farmers from GMO crops, and the Steve Marsh case from Western Australia is a very good example.

You can easily foresee a situation where Monsanto brings a case against Australia if we bring in laws that protect farmers such as Steve Marsh from contamination or, for example, put in place strict liability laws or labelling laws around genetically modified organisms so that people know what food they are eating and can make a choice between genetically modified organisms and organic food. These ISDS provisions could enable US corporations to bring action against not only Australia for some of those other circumstances and impact on growers but also consumers who wish to make decisions about what they eat. This potentially could extend to taking that control away.

I would like to quickly look at food security in the south-west of WA. In the south-west of WA we are being significantly impacted on by climate change already. People are having to make choices about what they wish to grow, and they are looking at those markets which are clean and green. They are looking at the markets that do not want to be consuming genetically modified organisms. They want to capitalise on those markets. So they are starting to make decisions about what they grow and in what circumstances. Again, these particular provisions could significantly impact on their choices about what they grow.

ISDS provisions could also limit farmers' rights with regard to stopping fracking on their land. For example, there are disputes in Canada where investors are challenging measures that were introduced on environmental grounds. One, a claim by Lone Pine Resources, arose out of Quebec's moratorium on hydraulic fracturing or fracking that led to the revocation of the company's gas exploration permits. The ISDS litigation concerning mining has steadily increased over the past decade. OceanaGold, an Australian company, currently has a subsidiary that is suing the El Salvadorian government through ISDS provisions for more than $300 million, almost half the government's annual budget, over the government's refusal to grant a goldmining permit. Do we want that happening in this country?

This bill should be passed to protect the interests of Australian farmers and the Australian community and to make sure we have the ability to make decisions that are in this country's, our people's, our farmers' and our consumers' best interests. Going down the path, in this modern age, of supporting ISDS provisions facilitates global companies, multinational companies, taking over the decision making of the country. If they can bring litigation against environmental standards, provisions that protect our food sovereignty and our decision making on where we choose to mine, we are handing over decision making to unelected, transnational, multinational companies. We do not believe Australians want that. We believe they want those decisions to remain with Australia. We think this is a sensible road to take. We urge the Senate to pass this legislation.

Anne Ruston (SA, Liberal Party) Share this | Link to this | Hansard source

I, too, rise to speak on the Trade and Foreign Investment (Protecting the Public Interest) Bill 2014 brought into this place by the Australian Greens. I understand the purpose of this bill is to prevent the Commonwealth from entering into an agreement with one or more foreign countries that includes investor-state dispute settlement provisions.

It is really quite interesting and refreshing, having listened to the contributions of a couple of those who have gone before me, to hear the Australian Greens finally acknowledge the concept of Australian sovereignty. I must say that many of the policies and legislative instruments that they have sought to introduce into this place were, in my opinion, completely contrary to protecting Australia's sovereignty. So I will just put on the record that it is very pleasing that, despite the probable ramifications of what they are trying to do here and their single-mindedness without due consideration for the other side of this particular argument and the debate, at last they realise that Australian sovereignty is important. It is also interesting that we have a situation where we have the Australian Greens arguing for less regulation and protection for Australian businesses, not more. That has certainly surprised me in listening to the debate so far.

In looking at the investor-state dispute settlement mechanism, my understanding of it in layman's terms is that this particular provision in international agreements gives the right to both parties to an agreement to have built into that agreement a mechanism by which disputes can be resolved. You would have to wonder why on earth we would be seeking not to put this protection in place for Australian investors? We have to remember very clearly that this is a two-way street. It is not as though we are suggesting with this mechanism that only international investors will be able to seek remedy for something that has occurred within Australia. We are also putting a provision into this particular mechanism to enable Australian investors in overseas markets to be able to seek remedy for wrongdoing in a particular marketplace.

The second very important component is that this is not about frivolous activity. This is not about frivolous litigation. There is no way in the world that any jurisdiction can bring a frivolous claim against either of the parties to an agreement. To suggest that we are going to have all these frivolous claims and that multinational companies are going to steal Australian sovereignty is an extreme view of what has been put in place as a protective mechanism for Australian investors. To suggest that Australian sovereignty will end up going out the window is somewhat of an overreach by those who are supporting this bill. Australia has had ISDS measures in place over a number of years. In fact, I believe there have been ISDS provisions in a number of the agreements that have been negotiated on behalf of Australian producers wanting to export overseas, and over that period of time, to my understanding, there has only been one case brought against Australia. That was brought by Philip Morris Asia in relation to plain packaging legislation under the 1993 agreement between the government of Australia and the government of Hong Kong for the promotion and protection of investments. As far as I am aware, that is the first investor-state dispute that has been brought against Australia.

When Australia went to plain packaging, Philip Morris was arguing that Australia's measures constituted an expropriation of Australia's investments in breach of article (6) of the Hong Kong agreement and that escalated the matter and triggered the dispute mechanism. Obviously, Australia has rejected the claims that have been made by Philip Morris Australia in relation to this matter and so far the constitutional challenges that have been taken against plain packaging have been refused. I would think that after the experience of 30 years and a multitude of trading arrangements, which Australia has entered into with people around the world, to have had only one challenge would suggest a fine track record for these arrangements and suggests there is no problem with these dispute mechanisms challenging Australia's sovereignty. Had there been several cases in which Australia had been found to be liable and had to pay remedy over 30 years, then you would have to look at this matter more seriously. But the fact that we have had these arrangements in place for 30 years and we have had one case brought against us, has not been found against us, does beg the question: why is it that we have this particular bill in the house at the moment?

It is also worthwhile mentioning in this space that, when negotiating FTAs or multi or bilateral agreements, it is very important to look at the circumstances that surround each and every one of these agreements. Australia does not have a blanket policy to include ISDS provisions in all of our agreements. In fact, we are very careful to make sure that the agreements that we enter into put specific provisions that are to the benefit of Australia in each and every one of them. Each time we make an agreement with a foreign nation, conditions are often very different and to come up with a blanket suggestion that we should allow Australia to enter into an agreement that leaves our investors exposed I think would be irresponsible. There are obviously situations where these particular provisions are considered not necessarily in Australia's best interests and so they are not included in the legislation. It really does worry me that we are debating this sort of legislation—it is scaremongering and all we are doing is scaring the horses—for what benefit?

An ISDS is not a new concept. So far 28 economies through four free trade agreements and 21 bilateral investment treaties over the past 25 years have had this provision, but modern ISDS provisions have very specific carveouts and safeguards to protect our ability to govern and regulate in our national interest. Those are the two words that we should underline when discussing anything about free trade or anything about international agreements—'national interest'. We need to ask: what is in our national interest? We operate in a world of risk—there is absolutely no doubt about that—and if we want to trade with international partners and promote our manufacturers, primary producers and service providers, who wish to operate in an international marketplace, then we have to realise there is a level of risk associated with that. It is very important that in going into these marketplaces that we have in place a number of provisions to protect our primary producers, service providers, manufacturers and anybody else who wishes to export.

One thing that we must never lose sight of is that Australia is an exporting nation. Australia cannot exist on its own markets; we have to export. That is the nature of Australia. We cannot support the population level we would need to sell to ourselves; we are never going to get rich selling to ourselves. First and foremost, any of our trade agreements and arrangements with oversea countries must be in the national interest and we have to ensure that our exporting organisations are given the maximum opportunity to succeed overseas.

I am quite happy to concede that there is always an element of risk when you go offshore due to the intricacies of foreign jurisdictions, but to end up in a situation where we seek to take away a very important protection for Australian investors overseas without considering the exposure—

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

ISDS has nothing to do with exports.

Anne Ruston (SA, Liberal Party) Share this | Link to this | Hansard source

that Australian producers have to the international market. I cannot say strongly enough that our export markets are so important that if we do not protect Australian investors and make sure we have those provisions in place—

Senator Whish-Wilson interjecting—

we are way more exposed than other countries that are not so reliant on the export market. I think we need to look at the bigger picture and be absolutely and totally focused on what is in Australia's national interest, not in the interest of scaremongering and carrying on.

Senator Whish-Wilson interjecting—

I would like the senator opposite who continues to interject to stand up and tell me about the myriad cases that have been brought against Australia in the last 25 years. As I mentioned a minute ago, there is but one, and as yet it has not been found against Australia. Really, to be carrying on like this, scaremongering and putting at risk through this legislation all of Australia's really important exporters is, I think, not just frivolous but extremely dangerous. The Greens should be asked to account for this.

The most important thing is to make sure that we protect Australia. Looking at the myriad free trade agreements currently being negotiated, particularly the two that have been brought to conclusion in the last few months—thanks to the extraordinary work of Minister Robb and his counterparts—and the benefit that those arrangements will bring to Australian producers, whilst you can measure it simply in terms of the reduction of the tariffs and trade barriers that Australian exporters now receive, you can also see that the opportunity for Australia is absolutely huge.

Just look at the KAFTA, the free trade agreement with Korea. In the area of beef, that will eliminate the 40 per cent tariff on beef and the 18 per cent tariff on by-products over the next 15 years. There is the abolition of the three per cent tariff on raw sugar. In the case of wheat, the 1.8 per cent tariff on wheat and the eight per cent tariff on wheat gluten will be eliminated. That may not seem a lot but, when you consider the volatility of the world wheat market and the massive impact that minor fluctuations in price can have on the world wheat market, it is really important that Australian farmers particularly get the opportunity to operate on a level playing field.

The dairy industry has historically faced very high tariffs, particularly on things like cheese and butter. They will be eliminated. Then there is wine. I come from a wine area in South Australia and I am sure my South Australian colleagues will have to concede that it is just so important with the current situation in the Australian wine industry that we create new export markets for our wine to put the Australian wine industry back where it used to be, at the forefront of international wine sales. At the moment, the industry is having a pretty tough time. Our grape growers and our winemakers are suffering from notoriously low prices, notwithstanding the fact that the Australian dollar has not helped them terribly much. We must give any little extra incentive possible to our wine exporters so that they can enter markets competitively, against some pretty stiff competition from countries like Chile. Chile has already been granted a tariff-free status that Australia has not been able to negotiate, so it is extraordinarily important that, in all of these agreements we are putting in place, we do the absolute very best that we can for our Australian farmers so that they are able to continue to grow their industry. The nature of the Australian economy means that we will never, ever be able to survive just by selling to ourselves. We must export, so these agreements are tremendously important.

The Japanese free trade agreement is equally important to Australian businesses, particularly Australian producers. We hear a lot about Australia having the opportunity to be the food bowl of Asia and the aspirations of many of our near neighbours to consume Australian produce, but, at the end of the day, there will always be a point at which the price has a bearing. Our ability to take advantage of the opportunities that are offered to Australia to become a significant supplier of food to our Asian neighbours comes about through our ability to negotiate agreements with these countries so that Australian exporters are in a position to export. Equally, Australian investors need to have the opportunity for protection when they are investing in operations overseas.

I look at this bill and think that we really need to be very, very clear as to what the net outcome is. The Greens have stood in here today and made an argument for some of the potential downsides of ISDS. I do not think anybody would disagree that a mechanism by which somebody can instigate action against another country is not necessarily favourable. However, what about companies in Australia who seek to invest overseas, particularly in countries whose legal regimes and legislative environments are not as robust as ours in Australia? What about them? Weigh up the risk borne by Australia against the risk that is borne by our investors who seek to go overseas and balance them out.

There is no possibility whatsoever for claims to be frivolous—and I think that is the bottom line. You cannot make a frivolous claim against another country under these provisions. If you cannot take frivolous claims and Australia has a very strong legislative and regulatory environment, the risk to Australia is so small compared to the massive risk that our investors would otherwise face in some of the markets they may seek to invest in. You balance it out and you end up with a net situation where Australia is by far the greater beneficiary of these provisions. I think that is where you need to start.

We cannot take all risk out of everything. In my opinion, we have gone too far in this country in trying to mitigate all risk. The problem with mitigating all risk is the fact that it costs a lot of money. This is not only in relation to ISDS arrangements; across the board, the fact that we have attempted to take all risk out of everything that we do is burdening this country with an unnecessary regulatory burden and bill. Half the reason that we are standing here with this budget crisis that we have at the moment is that the previous government legislated a whole heap of regulations to try and protect people from themselves. The cold hard facts of the matter are that as long as you continue to put more and more regulatory burden into the marketplace the more it is going to cost, and our businesses in Australia have to bear that burden.

To be sitting here today and suggesting that we are going to be able to take all risk out of the marketplace, for Australian sovereignty, is terribly short-sighted in the sense that we are trying to protect our Australian businesses largely from activities that could occur in foreign jurisdictions. There is very little risk here of foreign jurisdictions having any capacity to cause too much grief in Australia. I suggest that the piece of legislation that we have before us, whilst it may well have the best of intentions, is extraordinarily misguided.

Alex Gallacher (SA, Australian Labor Party) Share this | Link to this | Hansard source

I too rise to make a contribution in this debate on the Trade and Foreign Investment (Protecting the Public Interest) Bill 2014. I think that our earlier speakers have indicated our position of opposition to this bill. I would have known two parts or nothing about ISDS about four months ago, but having moved from the Rural and Regional Affairs and Transport Committee and other committees onto the Foreign Affairs, Defence and Trade Committee I now, happily, know a little bit about it.

ISDS has been the subject of a couple of inquiries, and it is instructive to put a couple of lines on the record setting out some of the evidence that has been gathered by both the legislation committee and the references committee of the Senate Standing Committees on Foreign Affairs, Defence and Trade. The Department of Foreign Affairs and Trade provides the following definition of ISDS provisions on its website:

ISDS provisions grant foreign investors the right to access an international tribunal if they believe actions taken by a host government are in breach of commitments made in a Free Trade Agreement … or an investment treaty, thus providing additional protections for investors.

I think the line that has been taken here by the Greens is that only foreign investors in Australia need protection. Senator Ruston highlighted the fact that we are a trading nation and history shows that we have probably taken more actions against countries than have been taken against Australia, and the Philip Morris case is the one that comes to mind.

It is instructive to also put on the record that Australia has negotiated ISDS provisions in free trade agreements signed over the past three decades. Currently Australia has ISDS provisions in four free trade agreements: the Australia-Chile Free Trade Agreement, the Singapore-Australia Free Trade Agreement, the Thailand-Australia Free Trade Agreement and the ASEAN-Australia-New Zealand Free Trade Agreement. The Korea-Australia Free Trade Agreement, which has been signed but has not yet entered into force, also includes an ISDS provision. Australia currently has ISDS provisions in 21 bilateral investment treaties with Argentina, China, the Czech Republic, Egypt, Hong Kong, Hungary, India, Indonesia, Laos, Lithuania, Mexico, Pakistan, Papua New Guinea, Peru, the Philippines, Poland, Romania, Sri Lanka, Turkey, Uruguay and Vietnam.

It is instructive to cite a couple more lines with respect to this matter:

The Senate Foreign Affairs, Defence and Trade References Committee conducted an inquiry into the Australia-United States (US) Free Trade Agreement in 2003. At the time, the committee noted that the inclusion of ISDS provisions in agreements with developing countries was a new development. These provisions had primarily been included in agreements to protect Australian investments and property from expropriation by governments in those countries where the rule of law was weak.

This is a very pertinent issue. We had many submissions to the references inquiry into the KAFTA, which highlighted issues from intellectual property to the sovereign right of governments to legislate with respect to health and the rest of it; very well-qualified people indicated concerns with ISDS and the use of these ISDS provisions by global corporations, so to speak, in the case of Philip Morris. When listening to those submissions, I think it is instructive to note that these are provisions that are used after there is exhaustion of the rule of law in the country or countries from which we are seeking a remedy. In Korea, there is a legal system that is recognisable and works; in Australia, there is a legal system that is recognisable and works.

Very interestingly, evidence was put that the Koreans had simply said, 'We will have ISDS or no treaty,' which, given that there is a rule of law in both countries, would seem to have been a tactical position that they had taken. To be fair, they probably had us over a barrel: if we do not get into the Korean market with our agricultural exports, primarily beef, by 1 January, we will be suffering a further competitive disadvantage with the American growers. So, in its wisdom, the government made a decision to include the ISDS. That seemed to provoke a reaction, if you like, and maybe this bill is a reaction to that circumstance.

The position of the opposition, though, is that we were not prepared to delay the KAFTA in order to negotiate amendments to the ISDS mechanism. That would have been unproductive, so to speak. The committee recognised that we already had, as I laid out before, a number of ISDS provisions within quite a number of bilateral and free trade agreements. I think it is also instructive to put on the record that, if the key objective of such a negotiation should be the clarification of our shared understanding of the word 'expropriation', then we get in behind the ISDS provision to the actual detail. The committee noted that other free trade agreements, such as the Canada-Korea FTA, have used narrower definitions of where the term 'expropriation' applies. In the view of the committee, a narrower definition of expropriation which limits the scope of potential liability would provide additional predictability and certainty.

What is very clear to me in my short time on the Foreign Affairs, Defence and Trade Committee is that this is a very complex area. This is a very, very complex subject. ISDS may well provide us with certainty when we are investing in countries where there is less of a rule of law than in Australia. It may provide that balance that allows people to invest in countries where the rule of law is not as visible as it is in Australia. The reverse position is that we are pretty open and honest about our legal system, as Philip Morris found. If you want to challenge the system, then the system will play its part and a decision will be handed down. To go off then and use a Hong Kong free trade agreement to advance concerns is an entitlement and a right. Philip Morris is a global corporation and it has basically done what global corporations do in trying to protect their shareholders' position. Very clearly, it seems to me that ISDS is a horses-for-courses argument. In some cases it would probably be appropriate, as we have determined over the last three decades. Into the future it probably becomes less valuable in the view of the opposition.

It is worthwhile noting the recommendation of the Productivity Commission on ISDS:

That Australian Governments should seek to avoid the inclusion of investor-state dispute settlement provisions in BRTAs that grant foreign investors in Australia substantive or procedural rights greater than those enjoyed by Australian investors.

So, clearly, it is not only experts or people making submissions saying that ISDS is out. We also have the Productivity Commission making a recommendation. The job of the trade minister gets harder and harder. He has to negotiate a trade agreement with a country in the interests of Australia's exporters, and he is getting very competitive and conflicting advice from all quarters.

The committee recognised that the Australian government had indicated it will consider ISDS mechanisms in future trade agreement on a case-by-case basis, which is basically a replication of the last 30 years. In light of this position, the committee considered it vital that the Australian government ensure there are sufficient safeguards within those future ISDS mechanisms to protect the ability of the Australian government to conduct its ordinary processes without the apprehension that investors may instigate compensation claims if investments are negatively affected. So, we have this very complex situation. Very clearly, the committee would recommend that the Australian government should not agree to investor-state dispute settlement mechanisms in future free trade agreements. The reason being is that we have had a history, for over 30 years, of some in, some out, some working well, some not so well, and then we had the Philip Morris position.

Along with a number of other people I have a view, which has come through evidence to the committee, that ISDS is probably not the way to go forward. With the existence of a good legal system in Korea and a good legal system in Australia, ISDS does not appear to have merit to be included. Having said that, free trade agreements are negotiated differently in different countries. I was told last night that the Japan free trade agreement needs to go to the lower house of the Japanese parliament for agreement and that no trade agreements can be made without that assent. We do know that the Korean free trade agreement is currently before the Korean parliament, and they need to sign off on it. Clearly, that is not the case in Australia where only the enabling legislation goes through the respective parliaments. Here we have a situation where we can all be on the same wavelength but on different paths, and I think that is what has happened in this debate.

The point where we get to agreement is not clear. It is the view of quite a number of well-educated, skilled research people that ISDS provisions are going to be detrimental to Australia in the future. It is the attitude of other people that they have worked well for three decades, and we have had only one case in three decades. It protects Australia's investments overseas. We are trading nation and the more we can gain access to markets the better. It is very clear that different parliaments deal with it in different ways. It is also clear that, at the end of the day, there is a negotiation process where someone has to bite the bullet, so to speak, and make a decision. For better or worse, in the KAFTA agreement this government has done that. We have placed on the record our position in respect of that. There you have a broad-brush approach to the situation we find ourselves in.

The European Union has a view on ISDS. The Americans have a view on ISDS. Someone argued that the Americans are using ISDS as a mechanism for their global corporations to further enhance their primacy in the market and their leverage. I am not across that. I hear that view, but I do not subscribe to it particularly—I see no evidence of that. But investor-state dispute settlement, or ISDS, is clearly a topic that is going to be around for a fair while. It will not be resolved in the short term—and, importantly, it will not be resolved by the passage of this bill. This bill could in fact have a detrimental effect on negotiations which are in the best interests of Australian trade.

I will restate the argument. These sorts of trade negotiations have been going on for the last thirty years. There are a large number of countries involved, and trade access to those countries is critical to Australia's economic welfare. Many thousands of mining industry workers, mining companies, agricultural workers, pastoralists and so on rely very heavily on agreements like the Korean free trade agreement.

It is worth noting that even a country as prosperous as Korea, with an average income of over US$30,000 per annum and with very healthy exports of manufactured goods, protects its beef production to the tune of 40 per cent. My question to DFAT was, 'Can you explain to me why a country as wealthy as South Korea taxes its citizens 40 per cent on their purchases of protein?' I asked the Japanese ambassador the same thing. It appears that they protect those industries not for economic reasons but for cultural reasons. Their rural landholders and their rural agricultural lobby groups are immensely strong. It makes no economic sense to charge their citizens 40 per cent extra for protein.

Assuming the Korean parliament agrees to the free trade agreement and we get to 1 January 2015 with the agreement in place, then at least our beef exporters will not be at an even more substantial disadvantage in the Korean market than they currently are. But, as I said, for 75 per cent of our trade with Korea there are no tariffs either way. It is iron ore, it is concentrates, it is lead, it is zinc—it is stuff they need and, as we speak, there are no barriers to any of that coming and going. The barriers have primarily been in the agricultural sector because the Koreans have a view—unlike Australia—that they need to protect that sector.

Delaying the agreement because of the ISDS provisions would be economically foolish. Were we to pass a bill like this, which would have that effect—at least in intent—it would put us at risk of not having the Korean free trade agreement operating on 1 January 2015. The Japan free trade agreement starts on 1 April. I thought that was quite interesting—April Fools' Day being the date of commencement of a free trade agreement. There would be a similar effect on that agreement if we were to take these ISDS provisions off the table. The Koreans have clearly indicated that it is non-negotiable. They wanted the ISDS provisions.

The opposition remains opposed to ISDS clauses. We would look to further clarify the definition of 'expropriation', as other nations have done, but we would otherwise proceed in an orderly manner to pursue Australia's trade interests. I do not have any particular view of Minister Robb other than that he has a very complex and difficult job negotiating these outcomes—as all other trade ministers who have represented the Australian government have had. It is an extremely complex field. Our ministers do, in the main, the best they can in the context of the matters that are up for negotiation at the table. ISDS provisions remain under extreme scrutiny by this opposition, but they should not prevent these agreements from proceeding.

Richard Di Natale (Victoria, Australian Greens) Share this | Link to this | Hansard source

The Trade and Foreign Investment (Protecting the Public Interest) Bill 2014 was introduced by Senator Whish-Wilson. Senator Whish-Wilson is leading the charge in informing the Australian community about, and protecting the Australian community from, the impact of secret trade deals negotiated without the scrutiny of the Australian parliament. This bill goes to the heart of what the role of government should be and what the role of corporations should be in our community.

The language in this area is very dense and very technical. The term 'ISDS' is used deliberately to ensure that most people do not understand its implications. It is actually very simple. It is simply about whether corporations should have the right to sue governments over the decisions they make. Should a corporation have the right to sue a government if that government makes a decision that affects the corporation's bottom line? That is what this is about. It is very straightforward—and it is a fundamental question. What is the role of government? Should corporations be able to penalise governments for making laws that are in the public interest but which impact on the bottom line of those corporations? It goes straight to the heart of what the role of government is. I take the Churchillian view that democracy is the worst form of government—except for all the others. I would much rather that democratically elected governments made decisions on behalf of the community rather than corporations, whose primary responsibility is to make a profit and to ensure that shareholders get a return. That is effectively what is at stake here.

Of course, when you get into these debates and you get into these polar corners, you end up with people who support trade deals and people who do not. I am not anti trade. I think international trade is a good thing. I think international trade is a tool, if used properly, that can lift people out of poverty. International trade and foreign aid together are very, very powerful tools to lift the living standards of developing countries and developed countries. But it cannot just be free trade; it also has to be fair trade. Those two things need to go together.

Again, reducing tariffs can be a good thing. In fact, it has been a good thing here in Australia, across many industries, enabling us to be a much more competitive, open economy. But this is not some divine rule that has been handed down from above on a tablet. It is interesting that it is often those industries that have benefited from protection from government, that have been able to grow and become strong, that are the greatest proponents of free and fair trade. Trade is a tool here; it is not an outcome.

What these provisions represent is basically a right for companies to make a government go before a local court or a specially arbitrated international tribunal if it believes that government has breached the terms of a trade deal. That is, if the company or investor is successful, governments are held financially liable for the losses that the company incurs. It is so pervasive that it cuts across all tiers of government. It is not just a question for the federal government; it is a question for state governments and a question for local governments.

The great shame here, and we have heard this time and time again, is that there is no transparency in this process. These deals are being negotiated in secret and the community do not understand them. It is a very technical area and it is only after a number of briefings that I have come to understand just how far reaching and pervasive some of these terms are.

We heard from the other side that actually Australia is not really going to be caught up in this. There have been very few investor-state dispute provisions targeting Australia. Let us not forget there have been over 550 claims made against governments over the past 10 years. There have already been 550 disputes, cases brought against governments, over the past 10 years. Australia has signed on to 28 agreements that include these provisions—deals with countries like China, India, Peru, Chile, Singapore and so on.

There is one situation that I want to focus on specifically because it highlights just how dangerous these investor-state dispute provisions are, and it is the issue of plain packaging. We now know that Philip Morris is suing Australia under an ISDS provision in the Hong Kong-Australia investment agreement. What they are doing is they are challenging some of the most significant public health measures introduced by any parliament—that is, our plain packaging legislation introduced by the previous government with the strong support of the Greens—to try and reduce the number of people taking up smoking. But under the 1993 Agreement between the Government of Australia and the Government of Hong Kong for the Promotion and Protection of Investments—it is called the Hong Kong agreement—we have seen a claim being brought against Australia. It is the first one that has been brought against Australia. I guarantee, if we sign on to this TPP with the ISDS provisions which we have heard about, it will not be the last.

Philip Morris's Asian division claim that Australia's tobacco plain packaging regime constitutes a breach of an agreement, and that agreement is that there is fair and equitable treatment of Philip Morris Asia's investments. They are asserting that the plain packaging legislation constitutes an unreasonable and discriminatory measure and that their investments have been deprived of full protection and security. That is exactly the point. This is one of the only products we have that, if it is used according to the manufacturer's instructions, will kill you. So the Australian government, as it has done over successive years, has taken an important measure to try and reduce smoking rates. It is what the community expect of us, and yet here we have a multinational company taking action against the Australian government because its profits are under threat. That is what this debate is about.

What we have is the Australian government making laws. They are good laws. They are laws that save people's lives, and yet we have an undemocratic entity taking action against a sovereign nation because of a threat to its investment. The question, of course, is: where does this stop? We now know that there are questions around the Pharmaceutical Benefits Scheme in this agreement, and access to affordable medicines. What about food regulation and food safety?

Let me focus on one specific area. It is the area of a new class of drugs that we call biological drugs. In the rules that we know were being discussed just this week, there were negotiations around the use of biological drugs that will, if implemented, delay access to affordable cancer treatments and new vaccines and increase the cost of PBS listed medications to Australian consumers. There are about 64 of these biological drugs now listed on the PBS. There are going to be many, many more to come. It is a very exciting area of research, generating cancer drugs, medicines for conditions like rheumatoid arthritis and multiple sclerosis and other vaccines. They are very difficult to make. The manufacture of these biological drugs is technically very, very complex. It means that they are expensive. During the period when the company makes the drug, it gets a monopoly because of the nature of the production process of the drug. You cannot simply copy it in the same way that you copy other medications.

We have a process called data exclusivity. Let me try and unpack that. Any drug that is made gets five years of something called data exclusivity. It means that, if you are a generic company and you want to copy someone else's drug, the trials that were done with the originator drug cannot be used for a minimum period of five years. It is an added layer of protection to the company that is innovating and making the drug. It says, 'If you want to copy this drug, it is going to be five years before you can use our results.' Normally in our system, with generic drugs, they do not have to repeat the clinical trials that are done by the originator, and in five years time they get access to that data. It is called data exclusivity. It is an added layer of protection to patent laws.

Under this proposed agreement, there is a plan to extend that data exclusivity. The US wants 12 years of data exclusivity. It means that, should a biological drug be manufactured to treat cancer or rheumatoid arthritis or multiple sclerosis, it will be an additional seven years before a competitor can come along and say, 'We can make this drug, but we can make it for a lot cheaper; it is going to cost the taxpayer a lot less.' That is seven years that we prevent a competitor's entry into this market. These are the champions of free trade! 'We love competition; we love it so much that we are going to stop competition for seven years by disallowing another entrant into the market.' That is what the US wants right now. In Australia, we have a five-year period. The US wants 12. What are we going to get? We simply do not know, because these deals are being negotiated in secret.

I think it is a great irony here. Competition is great. It is wonderful. It is the engine to a productive economy, unless you are a corporation who wants to use patent law, who wants to evergreen and who wants to use data exclusivity to prevent the entry of a competitor—in which case, 'We don't like it.' At the moment, this issue is being discussed very much. The Pharmaceutical Patents Review Panel has said very explicitly that there are no examples that indicate that the current protection systems are not sufficient enough to provide protection for innovator companies. I quote the Pharmaceutical Patents Review Panel:

… at this stage the case has not been made to extend data protection for biologics in Australia.

We do not know what is going to happen. We may find it goes to eight years, as I think Japan are currently talking about, or 12 years, as is the case in other countries.

This is a huge issue. Let me give you an example. There is a particular drug that is marketed as Lucentis. It is an injectable antibody. It treats macular degeneration and stops people from going blind. It was a drug with the third-highest cost to government in 2013. It cost Australian taxpayers $286.9 million in total. When the first biosimilar drug comes onto the market—that is, a generic competitor—you will get a 16 per cent statutory price reduction. That is a saving to the taxpayer of $45 million in the first year, with a whole lot more flow-on effects from price disclosure in subsequent years. That is a huge saving. On the one hand, we have a government running around like Chicken Little saying: 'Look at how unsustainable the health system is. We've gotta introduce co-payments. We've gotta make medicines more expensive.' Well, you are right; you are making them more expensive through these trade deals. That is what they are doing. If you are so concerned about the cost of medications and the cost of the PBS, why would you sign a trade deal that is going to prevent the entry of cheaper generic drugs into the market? That is what we are dealing with right now.

There are so many other areas in this agreement that we could talk about. We have heard from my colleague Senator Rachel Siewert about a whole range of environmental disputes. There are disputes in Canada where investors are challenging measures introduced on a whole range of environmental grounds. There are pine resources in Quebec. They had a moratorium on hydraulic fracturing there, which meant that the company lost their gas exploration permit, so there is a dispute going on there. There is a moratorium on offshore wind farms in Ontario, which was a silly decision by that government, but it is their decision to make. They were democratically elected; if they want a moratorium, they should be able to do it—even if I disagree with that. Then we are told that the ban is a breach of the contract for electricity supply with the Ontario Power Authority for a 20-year period, so there is another dispute. There is OceanaGold, an Australian company, who have a subsidiary in El Salvador suing the government for more than $300 million. Why? Because the government refused to grant a goldmining permit. They are being sued because they knocked back a permit for a goldmine. In Sweden, there is an energy company that has fielded a request for arbitration against Germany. Again, it is because the government made a decision—in this case, I think it was a good one—to phase out nuclear power. Here we have situation after situation where democratically-elected governments, making usually good but sometimes bad decisions, are being challenged by hugely profitable multinational corporations because they affect their profits.

We have to decide who it is that should be making decisions on behalf of the public interest. Who is it? Democratically-elected governments or corporations? I know how I would decide. Then you have to ask the question: what is it all for? The Productivity Commission in 2010 said:

The Commission received no feedback from Australian businesses or industry associations indicating that ISDS provisions were of much value or importance to them.

Another quote:

There does not appear to be an underlying economic problem that necessitates the inclusion of ISDS provisions within agreements.

Here we have our government, behind closed doors, talking to a range of countries, introducing these secret provisions that nobody wants, not even Australian business, that will have an impact on a whole range of vital sectors making decisions about plain packaging, the costs of medicines, whether a mine should be approved and the sort of energy supply we have in this country. Who do we want to be making those decisions? I know who I want. I want the people, who, every few years, I mark a little number next to their name to be accountable. I want to know that, if they get it wrong, I can go back in a few years and boot them out. I do not want some faceless person whose only obligation is to return a profit and who is not accountable to the people that he is taking action against.

I commend Senator Whish-Wilson's legislation. It is an important issue and I think it is about time we started recognising that it is governments, not corporations, that should be legislating on behalf of the public interest.

Sam Dastyari (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I do want to acknowledge the large presence of people in the press gallery who have come to hear my words about ISDS! I want to thank them for making the effort. And I will confirm the rumours are true that at 12.20 today—

Senator Whish-Wilson interjecting—

No, the rumours are true! At 12.20 today there is going to be a pretty important announcement in the Senate chamber, when Senator Fifield finally confirms rumours that he is appearing on Dancing with the Stars. I do not have much time because I believe we are limited to 12.20, so I will try to cover all the ground that I want to cover. Firstly, I congratulate Senator Whish-Wilson for bringing this bill forward, the Trade and Foreign Investment (Protecting the Public Interest) Bill 2014, and for encouraging us to have this debate. The truth is that, for something as significant as ISDS, there has not been all that much interest. It is not a topic that, frankly, enough people understand or enough people have been talking about. That is unfortunate, considering the significance of all of this and the impact this can and will have.

It is important to take a step back and see where all this came from and why it was significant in the first place. The principle behind it, like a lot of principles, is not necessarily a bad one. I slightly disagree with some of what Senator Di Natale said, although I agree with his sentiment. I do not oppose the idea that corporations and businesses have a right to protect some of their investments and that they do have a right, especially when dealing with certain nations, including Third World nations, that do not have the same kind of natural law or rights that we have where a general's brother will suddenly start nationalising your business for their own gain. In those kinds of extreme circumstances there should not be some kind of international or trade vehicle that allows businesses to maintain and protect their rights and property. That, as a principle, I do not think is a bad thing. But what is incredibly unfortunate is what has happened in the ISDS debate and what we consistently see happen. What starts off as what seems like a fairly reasonable principle—that is, businesses that make huge investments in other nations should have some kind of capacity to protect their investment—is overtaken and distorted where big corporations are using free trade agreements to stymie or profit from what would otherwise be democratic, reasonable and rational decisions that governments make. Governments can and will from time to time be making decisions that will go against the interests of private corporations. But when they do it and they do it in the public good, they should have a right to be able to do that. Of course, within Australian law we believe that when this happens to Australian companies they should have an opportunity to participate in that process. We have a parliament and places like this so that we can have that kind of debate.

What is really worrying about the ISDS debate is that a corporation can take on a government without having to really make the public case, without even having to debate whether their actions are in the public interest or public good and, more unfortunately—and you see this happening right around the world—corporations are misusing ISDS provisions in obscure trade agreements, some of which go back 20 or 30 years, simply to give themselves a vehicle or an avenue to make those kinds of claims.

There is this idea that there is a handful of international lawyers who are becoming very wealthy in this quasi legal space. You also have a whole lot of senior lawyers, senior jurists, senior academics across the world who are highlighting the fact that it is a really big problem when a small group of people meet in a hotel room to resolve an ISDS dispute and make decisions that can have a significant impact of tens, hundreds or even billions of dollars on a national economy that should be entitled to make those decisions.

Where I slightly disagree with respect to this legislation—and where I disagree somewhat with Senator Whish-Wilson, for whom I have a lot of respect for on this issue—is prohibiting it as a rule. I do not think that is the right way to go. But I think we should be very aware of ensuring it is not part of how we engage in our own trade negotiations.

Those in the chamber who follow this stuff closely—and a lot of people follow this stuff a lot closer than I do—can tell you about where things are at with the Trans-Pacific Partnership and whether there will be ISDS provisions within that. I congratulate the former Howard government on taking out the ISDS provisions when they initially negotiated the free trade agreement with the US. I understand there is a lot of pressure from many corporations that it be included in future agreements. Those are not just domestic corporations; I think it is the big American companies that have been very outspoken in their support of including the ISDS provisions. The American government and the American congress itself have been quite supportive. The reason is that they have never been at the other end of it. The American system has never really been at the other end of losing one of these big disputes. Once that happens, and I think it is inevitable that it will happen, the tide will start to turn.

We need to look at what is in the Australian interest and what is in our own interest here. To highlight the concern, I want to use the most recent free trade agreement with South Korea as an example. Again, as a point of principle, a free trade agreement with South Korea is a good thing. Is it going to massively change the Australian economy? No. There are larger trade deals; there are smaller trade deals. But it is something that should be welcomed. The inclusion of the ISDS provisions is, I think, unfortunate. I think it has been made quite clear by the former trade minister at the time, Craig Emerson, and others that it was not something Labor was prepared to negotiate into the agreement. We felt that the agreement would have been better and that the agreement should not have included those ISDS provisions. Unfortunately, the current government had a different view. It passed it with the ISDS. Was that reason enough, as far as we were concerned, to oppose the whole free trade agreement? No. But it is unfortunate. We believe it could have been a better free trade agreement without ISDS. We certainly would have negotiated it so that it would not have been included.

More specifically, though, getting to Senator Whish-Wilson's bill, I think it is unfortunate that a whole chunk of Australian business and the Australian community are not really aware just of the significance of this ISDS debate for Australian society. Senator Di Natale made a reference to the most recent case, regarding tobacco and an obscure provision within a free trade agreement between Australia and Hong Kong that actually goes back to before Hong Kong even returned to being part of China. To be able to use that and latch onto that to make an argument against what I think was a very reasonable policy that was introduced by the Labor Party is concerning, and it should be concerning.

When we are seeing ISDS being used in that way, the international community has a right to be concerned. It should not be part of our free trade agreements. We should be quite outspoken in opposing it when we are looking at the TPP and other trade deals. I note that I am running out of time but I will say that Senator Whish-Wilson should be congratulated for bringing this forward. I do, however, believe there are better ways of tackling the ISDS issue than through this bill. While I will not personally be supporting the bill itself, I certainly support the sentiment that we should all be very, very concerned about ISDS and the risks that arise from it.

Gavin Marshall (Victoria, Deputy-President) Share this | Link to this | Hansard source

Order! It being 12:25, the time allotted for this debate has now expired.