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Australian miner quietly pursuing arbitration under one of Australia’s investment treaties; first such known case had been overlooked amidst Australia’s own legal and policy upheaval
publication date: Jul 7, 2011
By Luke Eric Peterson and Rishab Gupta
An investigation by IAReporter finds that an Australian mining company has been quietly pursuing a claim under one of that country’s investment treaties with the Government of India. As is discussed in more detail in a separate article, the under-the-radar arbitration is heading towards a final hearing in September of this year. The claimant, White Industries Australia Ltd., alleges that India is in breach of its investment treaty obligations as a result of the long-running failure of the Indian courts to enforce an arbitral award rendered in an earlier commercial dispute between the Australian firm and an Indian state-owned entity, Coal India Ltd. The claim is believed to have been initiated in 2010, and is the first to come to light where an Australian investor has pursued arbitration under one of that country’s bilateral investment treaties. Australia’s treaties in spotlight after government rethink Australia’s bilateral investment treaties have been the subject of considerable political controversy in recent months, as foreign investors with investments in Australia have threatened to bring arbitration claims against proposed legislation governing coal-fired power production and tobacco product sales.* Indeed, last month, one multinational tobacco company, Philip Morris, made good on such threats by notifying Australia of a dispute under the Hong Kong-Australia bilateral investment treaty, setting in motion a 3 month waiting period before arbitration may be commenced.** Meanwhile, in April of this year, Australia announced a dramatic policy shift, whereby it would not include clauses on investor-state arbitration in future international economic agreements. As we reported at that time, the government decision was driven by concerns that foreign investors might seek to use arbitration to challenge sensitive policy decisions of the government. Additionally, an Australian government commission could find no compelling economic rationale for the inclusion of investor-state arbitration mechanisms in its trade and investment agreements. In recent public comments at the London School of Economics, an Australian official, Adam Sheppard, reiterated that the economic policy rationale for such provisions was surprisingly weak, and that they appeared to address no particular market-failure. In its review of such international treaties, the Australian Productivity Commission had concluded that Australia’s outward investors could use other protective mechanisms (such as contracts or insurance policies) which did not harbor the same potential as these treaties for negative blow-back on the Australian state. In his recent remarks at the LSE, Mr. Sheppard, a Senior Economist at the Productivity Commission, pointedly noted that a public call for input by the Productivity Commission was met with no expressions of support by Australian outward investors in favour of the country’s investment protection treaties. He added that the largest outcry since the April, 2011 announcement has come not from Australian industry but from members of the legal profession specializing in international investor-state arbitration and those professing a policy preference for a strong “investor rights” agenda. First evidence of Australian BIT claim emerges in aftermath of policy shift It is unclear what bearing the revelation of a pending BIT claim by the Australian investor White Industries against the Government of India will have upon the Australian policy discourse. The claim provides the first tangible evidence of an Australian business availing itself of the arbitration-process offered under such agreements. However, it emerges at a time when recent events – most notably Philip Morris’s much-publicized legal threat – have heightened the Australian Government’s concern that the inclusion of treaty-based arbitration provisions may restrict major legislative initiatives in Australia. See our separate report for a fuller description of the claim being pursued by Australian firm, White Industries Australia Ltd., against the Government of India.
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