The most shocking thing about the leaked draft of the Trade in Services Agreement is the innocuously named ”Dispute Settlement” provision.
The authors, the European Union and the United States, want Australia to let an outside arbitrator readjudicate decisions made by Australian government ministers and the Australian High Court.
Such provisions – so-called Investor State Dispute Settlement – are common in international agreements. Australia has one in a treaty with Hong Kong. Tobacco giant Philip Morris fought Australia’s health minister all the way to the High Court over plain packaging and lost in 2012. It is trying again under the provisions of the Australia-Hong Kong treaty. The specially-constituted tribunal sitting in Singapore has become a super high court, on this one issue higher than Australia’s highest.
Concern about such a prospect made former Labor trade minister Craig Emerson vow never again to allow such a clause in any agreements. The Coalition’s record is mixed. John Howard successfully resisted pressure from the United States to include one in the Australia-US free trade agreement. The Coalition’s Andrew Robb allowed one in the Australia-Korea free trade agreement and kept one out of the deal with Japan.
If sovereignty matters for disputes about cigarette packets, it matters more for financial regulation. Australia survived the global financial crisis in part because our banks were in better shape than those overseas. An agreement that forces Australia to allow less-healthy overseas banks to set up here and to take over their Australian competitors exposes us to more risk. That an outside tribunal could force that upon us makes the increased risk hard to escape.
Australia may well be able to soften the provisions of the draft agreement. We might be able to ”grandfather” our existing rule which says that in normal circumstances no single shareholder can own more than 15 per cent of an Australian financial institution. But to agree to anything at all while we are in the middle of a financial system inquiry would be reckless. To let an outside body overrule our decisions about how we govern our financial institutions would be imprudent.