The much awaited text of the TPP has been released.  As anticipated, the Investment Chapter (Chapter 9) sets out protections for investors of each TPP State and the mechanism for investors to bring claims in the event a TPP State fails to comply with these protections. A summary of those protections and the investor-state dispute settlement (ISDS) mechanism is set out below.

What is protected?

The TPP Investment Chapter protects investments made by investors of one TPP State in another TPP State (TPP Host State).  Both “investors” and “investments” are broadly defined.

An “investor” includes a national of a State that is party to the TPP.  That may be a citizen or company that has its place of incorporation in a TPP State.  There is a denial of benefits clause whereby the TPP Host State may deny an investor the standards of protection in certain circumstances such as where the investor only has substantial business activities in the TPP Host State.

An “investment” is broadly defined to include all types of tangible and intangible assets held directly or indirectly, such as property, intellectual property, shares, loans and contractual rights. For example, holding shares in the project company or the company that is involved with the ultimate investment may be considered to be an investment.

Note, however, that the TPP also requires that the investment has the characteristics of an investment, such as the commitment of capital or other resources, the expectation of a gain or profit or the assumption of risk. An order or judgment made in a judicial or administrative action is not considered to be an investment.

Actions of the State

The TPP protects an investor against acts or measures by the TPP Host State or a State entity that interferes with or impacts upon the investment.  Those acts or measures may include the withdrawal of a licence or permit by a State entity or changes in legislation or regulation, particularly tax regulations, that impact upon the investment.

The TPP confirms that it applies to actions of central, regional or local government or authorities.  It also applies to a body, including a State enterprise that acts with government authority.  The TPP does not provide protection against, nor a remedy for, acts taken by private parties that impact upon the investment (such as a breach of contract with a private party).

Standards of protection

The TPP includes the following standards of protection:

No unlawful expropriation:  the TPP Host State must not expropriate investments of investors from another TPP State unless it is done for a public purpose, is non-discriminatory, is in accordance with the due process of law, and prompt, adequate and effective compensation is paid.

Fair and equitable treatment:  similarly to NAFTA, the TPP provides that fair and equitable treatment (FET) is part of the minimum standard of treatment under customary international law.  FET requires the TPP Host State to provide a transparent and stable legal and regulatory framework.  It also requires that the TPP Host State must not act unreasonably or arbitrarily, nor contrary to the legitimate expectations of the investor.  In addition, FET includes the obligation not to deny justice in court or administrative proceedings in accordance with the principle of due process.

However, the TPP also provides that the mere fact that an action or measure of the State is inconsistent with the investor’s legitimate expectations does not mean that it is a breach of FET. Likewise, the mere fact that a subsidy or grant has not been renewed does not mean that it is a breach of FET.

Full protection and security:  similar to FET, full protection and security is also part of the minimum standard of treatment under customary international law. The TPP Host State must act with due diligence to secure and protect the investment and provide at least physical protection to investors.

National treatment:  the TPP Host State must grant investors the same treatment that is given to its nationals.

Most-favoured nation treatment:  the investor is entitled to treatment as favourable as that given to nationals of any third countries. Note that the TPP provides that MFN treatment does not extend to the ISDS mechanism (thus, a TPP investor cannot bring in more favourable provisions from another ISDS mechanism in another treaty).

There are also provisions relating to the transfers relating to an investment, performance requirements and other protections.

Each of these standards of protection is interpreted in accordance with international law and in some circumstances, the law of the TPP Host State.  Tribunals constituted pursuant to the provisions of the TPP will draw on the substantial body of investment law to assist with interpreting and applying the relevant provisions of the TPP to a particular set of circumstances.

The breach of any of these standards of protection may entitle the investor to compensation.  The amount of compensation will depend upon the loss suffered by the investor.  It may include the costs spent by the investor in purchasing the land and starting the project or it may be the fair market value of the investment if the project or business is in operation. If the investment is shares, the amount of damages will also be relative to the percentage of shares held in the relevant company.

Carve outs

The TPP provides for a general exception whereby States are not to be prevented from adopting measures that it considers appropriate to ensure that “investment activity in its territory is undertaken in a manner sensitive to environmental, health or other regulatory objectives”.

There are also specific exclusions relating, for example, to non-conforming measures in each State (which are set out in Annexures to the chapter).

ISDS – international arbitration

The TPP enables an investor to bring a claim in international arbitration against the TPP Host State.  This means that rather then pursuing a claim in the courts of the TPP Host State, the investor is able to commence a claim in a neutral and independent forum.  Indeed, the TPP provides that when an investor commences a claim in arbitration it must also formally waive any rights to pursue a claim in the national courts (other than an application for interim measures).

Before commencing arbitration, an investor must send a notice of dispute to the TPP Host State requesting negotiations or consultations. If the dispute is not resolved within 6 months, the investor may commence arbitration.  The investor must first give 90 days notice of its intention to submit the dispute to arbitration before submitting the notice of arbitration.

The TPP provides that the investor may commence arbitration under:

  • the International Convention on the Settlement of Investment Disputes (ICSID Convention) if the State of the investor and the TPP Host State are both parties to the Convention;
  • the ICSID Additional Facility if only the investor or the TPP Host State is a party to the ICSID Convention; or
  • the rules of arbitration of the United Nations Commission on International Trade Law (UNCITRAL); or
  • any other arbitral institution or any other arbitration rules if both the investor and the TPP Host State agree.

The TPP includes a limitation period of 3.5 years, i.e. the claim must be brought within 3.5 years from the date on which the investor first knew or should have known of the alleged breach of the TPP and the investor knew it had incurred loss or damage.

The TPP provides detailed provisions for the arbitral process.  For example, it includes provisions on the appointment of the Tribunal, the conduct of the arbitration including amicus curiae, transparency of the proceedings, the use of expert reports, consolidation of claims and the award.  It also provides that the Code of Conduct for arbitrators set out in Chapter 28 may apply to the Tribunal.


The TPP provides a modern and comprehensive approach to investment protection and ISDS.  The TPP text must still be considered and finalized by each of the TPP States.

Once the TPP comes into force, it will encourage investment and provide certain protections between investors of the TPP States.

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