On 4 October 2015, twelve countries forming the Trans-Pacific Partnership (“TPP”) (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam) reached a deal securing a multi-lateral trade agreement that will remove trade barriers, set common standards in the trade of goods and services and provide investment protection across the Asia-Pacific region.
What is the TPP?
According to its proponents, the TPP is a “high-standard, ambitious, comprehensive and balanced agreement that will promote economic growth; support the creation and retention of jobs; enhance innovation, productivity and competitiveness; raise living standards; reduce poverty in our countries; and promote transparency, good governance and enhanced labour and environmental protections”.
The TPP contains thirty chapters encompassing trade and investment issues. Its features include:
Since the economies in the TPP represent nearly 40 percent of the world’s gross domestic product, it is bound to be influential as point of reference in world trade and investment.
Investment protections and investor-State dispute settlement
The TPP contains a number of substantial investment protections for foreign investors. These are designed to prevent governments from implementing discriminatory investment policies, to ensure compensation in cases of expropriation and to uphold basic standards of fairness in dealings between governments and investors. These investment protection obligations will be enforceable through international arbitration proceedings heard by arbitrators designated by both the disputing investor and the government of the relevant State.
The TPP has new features that do not exist in most previous investor-State dispute resolution regimes. Most notably, the TPP regime incorporates protections against abusive and frivolous claims being brought. It also expressly reaffirms the right of governments to regulate in the public interest, including on health, safety and environmental protection. Responding to criticisms of other investor-State dispute resolution regimes, the TPP includes transparency rules for arbitration proceedings. It also expressly allows amicus curiae submissions, submissions by non-disputing State Parties, expedited review of meritless claims, review procedures for interim awards, specific time limits and rules preventing the commencement of parallel claims.
The investment dispute regime contained in the TPP is a clarion call around the world on a number of levels. Coming amidst criticism of investor-State arbitration from certain quarters, the very existence of the TPP investment arbitration regime provides a timely endorsement of the concept by governments. It also provides a salient reminder that it is States themselves that keep providing for investor-State dispute settlement in their international trade and investment agreements. Finally, the new features of the regime described above may well set a new standard for investment protection going-forward. Whether or not they do, the TPP confirms that investment dispute arbitration between investors and States is not about to disappear.
Despite the fact that agreement has been reached between the States’ negotiators, the TPP still needs to secure ratification in each country. This will likely result in extensive debates at the national level in a number of States.
The successful conclusion of the TPP negotiations places renewed pressure on the European Commission to respond with its own multilateral trade initiatives. The EU recently achieved a modern, comprehensive trade and investment agreement in the Canada-Europe Trade Agreement (CETA). The EU has also been pursuing a Transatlantic Trade and Investment Partnership (TTIP), the proposed comprehensive economic and trade agreement it is currently negotiating with United States. Yet TTIP has been facing significant domestic political opposition within the EU. This includes opposition to TTIP’s provision for investor-State dispute settlement. In light of TPP and CETA, the Commission will face significant pressure to overcome domestic political opposition and deliver a similar high-quality agreement with the United States, offering the same levels of market access and investment protection.