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Australia's Rejection of Investor-State Arbitration: A Sign of Global Change

Australia is the first developed state to openly indicate that it will no longer agree to the adoption of arbitration within its Bilateral and Regional Trade Agreements (BRTAs).One can debate whether the Australian government is unqualifiedly committed to this policy. There has been no indication that it will seek to withdraw from existing BITs and FTAs that provide for investor–state arbitration (ISA). What is now known is that the Australian government’s Policy Statement is based less on unremitting faith in domestic courts to resolve investor–state disputes than in disdain for ISA in particular. That disdain stems from the draft research and final Reports of the Australian Productivity Commission (APC), a public commission in Australia charged by the federal treasurer with the specific task of making recommendations on future trade and trade policy statements. This chapter has several key objectives. The first is to challenge the APC’s contention that ISA should be rejected on grounds that it is objectively inferior to other mechanisms of dispute resolution. The second is to evaluate the consequences of resorting to domestic courts, asdistinct from ISA to resolve investment disputes. The chapter makes recommendations for changes to ISA that may reasonably accommodate some perceived deficiencies in it, that redress some of Australia’s concerns, and that enable Australia to participate in investment treaties in which ISA is most likely to prevail. The chapter concludes by arguing against the Australian government’s summary rejection of ISA because that rejection lacks an entirely justifiable basis.