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TPP: This Election Could Decide If Companies Can Sue Australia Over Environmental Policy

Experts are warning that the Trans Pacific Partnership could get in the way of effective action on climate change, and Australia’s international obligations, at a symposium being hosted by the Queensland University of Technology.

The apprehension comes as political players take different positions on the controversial Pacific Rim trade deal, ahead of the July 2 poll which could prove critical to Australia’s involvement. The Labor Party has taken a dim view of aspects of the deal, but is yet to rule out voting for it.

Central to widespread concerns about the deal is what’s known as an Investor State Dispute Settlement (ISDS) clause, which would allow foreign companies to sue the Australian government in offshore tribunals that sit outside the judicial system.

“In the same way the tobacco companies are sort of grasping onto every last straw they can to save their business model, the energy companies are going to do the same thing,” said Dr Kyla Tienhaara, a Research Fellow at the Australian National University.

She said regulatory interventions like a moratorium on coal seam gas, or governments rejecting a coal mine because of the emissions it would create, could fall foul of the ISDS clause.

Challenges to government policies can be brought if they materially impact on the profits a company reasonably expected to make. The tribunals which companies can appeal to are presided over by investment lawyers, who have the power to determine what compensation may be owed.

“The essential problem is these cases are decided very much on the ideology of the arbitrators that sit on the panel, and there’s no precedent. They can pick the words they like and ignore the words they don’t like, and there’s no process of appeal,” Dr Tienhaara said.

That makes it difficult to predict outcomes, and can lead to a chilling affect on the sort of bold regulation that’s needed to reduce carbon emissions and give affect to the international climate deal struck in Paris last year.

Deals like the North American Free Trade Agreement have led to governments being sued for making decisions on public policy in order to protect the environment. The Labor Party has expressed serious reservations about ISDS clauses, and said it would not enter into any new ones if it wins government later this year. Since it’s already been negotiated, it’s not clear whether they would reject the TPP on this basis.

The Opposition has said it will try to get out of ISDS provisions, or at least renegotiate them. It’s unlikely the text of the deal could be substantially changed at this point, but before the TPP becomes binding, Australia’s Parliament would need to pass enabling legislation.

The Greens and Nick Xenophon take a similarly dim view of the ISDS provisions, and have vowed to oppose the Trans Pacific Partnership in its current form. With these two players likely to hold the balance of power, their opposition could prove significant. The Coalition, on the other hand, has negotiated a steady stream of ISDS provisions in trade deals, and presented them as an essential element of their ‘jobs and growth’ mantra.

“I don’t think the current government is particularly worried about it,” Dr Tienhaara said. “I think the Coalition sort of sees it as they’re open for business, and they’re not likely to be hit with this.” One of the issues with this mentality is that it’s often state government policies that come into conflict with companies claiming lost profits.

Because international trade agreements are the purview of the Commonwealth, however, it’s the Federal Government that would end up in a tribunal.

Dr Abbe Brown has also been speaking at the QUT symposium about the possibility that international agreements signed onto by the Commonwealth, like the Paris climate deal, could be overridden by the Trans Pacific Partnership. One example is that the Paris agreement encourages the sharing of renewable energy technology, but the ISDS clauses in the TPP could be used by companies to attack states on intellectual property grounds.

The Australian Government could ultimately end up forking out millions of dollars, as Canada has after being hit with more than 35 ISDS challenges. Many of those cases have been brought by US companies, which tend to be the most litigious.

Australia was recently hauled into a tribunal by tobacco giant Phillip Morris, which challenged Labor’s plain packaging laws under a bilateral agreement with Hong Kong.

Whether the world’s biggest trade deal, the TPP, will go ahead in the end is still highly uncertain. Both presumptive American Presidents, Hillary Clinton and Donald Trump, have expressed opposition to it, and President Barrack Obama has had trouble passing the deal.

At home, the Labor party could yet foil it, and the Greens and Nick Xenophon could potentially stand in the way of implementing legislation too.

The Coalition, however, will do what it can to see the deal passed, despite the negative consequences experts are warning that might have for environmental policy.

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