Agreement has been reached on the long-awaited Trans-Pacific Partnership (TPP). The TPP is a free trade agreement between 12 Pacific Rim nations, including Australia, Japan, Malaysia, New Zealand, Singapore and the United States, which represent around 40% of global GDP and one third of world trade. The text of the TPP is still being finalised by the TPP States and is not yet available.
Reports indicate that the TPP includes an Investment Chapter with a “modern” investor-state dispute settlement (ISDS) mechanism.
USTR Summary of the Investment Chapter
The scope and extent of the Investment Chapter will only become clear when the text of the TPP is released to the public. A leaked draft of the Investment Chapter was very similar to the 2012 US Model Bilateral Investment Treaty (US Model BIT).
The United States Trade Representative (USTR) has prepared a comprehensive summary of the TPP.
The USTR summary confirms that the TPP provides basic investment protections such as:
- minimum standard of treatment in accordance with customary international law;
- national treatment;
- most favoured nation treatment; and
- prohibition of expropriation without compensation.
The USTR summary also confirms that the TPP provides for international arbitration of investment disputes. It indicates that there are substantive safeguards to ensure that governments may continue to regulate in the public interest, including on health, safety and the environment. The ISDS mechanism also includes procedural safeguards to, for example, prevent “abusive and frivolous claims”, ensure transparency of arbitral proceedings, impose time limitations on the commencement of claims and rules to prevent parties from pursuing the same claim in parallel proceedings.
It is also reported that the TPP will conclude a binding code of conduct for arbitrators appointed to tribunals in investment arbitrations.
The TPP creates many opportunities for an open market for trade and investment across the 12 TPP States. Reaching agreement on the TPP is the first step in creating that open market.
The TPP Parties continue to finalise the text of the TPP. Each State will be required to comply with its local procedures to review and ultimately enact the TPP in its State. The US Congress has put in place a fast track procedure to ratify the TPP. However, the exact content of the TPP and the process for ratification and entry into force of the TPP will only become clear when the text is released to the public.