Australia’s new bilateral investment treaty stance

The recent Australian Parliamentary Commission’s stance that any new Bilateral Investment Treaties (hereinafter referred to as ‘BIT’s) entered into by Australia will no longer contain an alternative dispute resolution (ADR) clause normally calling for international arbitration or a hybrid method of international arbitration and mediation. Throughout the modern history of Bilateral Investment Treaty Law, the ADR clause has been an essential component and is the legal manifestation of the entire raison d’être of the BIT; which exists to protect investors whether they are individual or state parties. This new stance contradicts the historical precedent in BIT interpretation and practise. Furthermore, it poses significant adjudicatory risk for Australian investors who sign contracts with state parties under these new BIT provisions, putting them at risk for unfavourable court intervention. Additionally, the image of Australia as a safe party to investment contracts and as a neutral haven for arbitration is compromised because the adjudicatory risk of dealing with Australian investors under these new provisions opens the door to potentially unfavourable perceptions of court intervention as well. Australia will be signing a multilateral treaty with a number of Asian countries whose legal systems and court decisions may be unknown to Australian practitioners. The Productivity Commission’s stance is highly unfavourable to Australian interests and should be revised or withdrawn.