Executive summary Investor-State Dispute Settlement (ISDS) is a legal provision in international agreements that enables foreign investors to take host states to an arbitral tribunal for alleged treaty breaches. • The goal of investor-state arbitration is to provide a de-politicised, unbiased and law-based adjudication forum to guarantee the investor’s rights against unlawful overseas government actions. • First and foremost, the case for investor-state arbitration lies in the strengthening of the rule of law — the quintessential feature of free markets and individual liberty, and indeed a cornerstone to human prosperity since Magna Carta. • The first ISDS agreement was signed in 1959 between Germany and Pakistan. Since then, investmentprotected international treaties have been gaining pace worldwide, from less than 500 agreements in 1990 to 2184 in 2000 to 3509 at the start of 2016. • Likewise, as globalised capital flows and international investment agreements proliferate, ISDS cases have accelerated since the turn of the millennium. From close to 100 proceedings initiated before 2003, the total amount of known ISDS cases are currently at 608. • Although most ISDS claims are brought against nondeveloped governments, the share of developed states responding in investor-state arbitrations is lately on the rise, currently accounting for almost a third of all cases. • Of the total 362 currently concluded ISDS cases, only 30% of rulings have been in favour of foreign investors, with the great majority ruled either in favour of the state or consensual settlement among the disputing parties. • Australia has agreed to ISDS protection in 21 bilateral investment treaties and seven free trade agreements. However, support for ISDS provisions in Australia has swung from full engagement in the 1990s to outright rejection during the Gillard administration, to the current ‘case-by-case basis’ approach. • In the past 30 years since Australia’s first ISDSprotected treaty, the world has become a safer place for Australian investors, with investor-state arbitration acting as a powerful and effective Sword of Damocles against unlawful foreign government acts — and in three occasions indeed providing a neutral and de-politicised forum to assert a just treatment to Australian interests overseas. • Domestically, ISDS brings little disruption, given the high standards of Australia’s rule of law culture: for example, the first and only ISDS case against the Australian government (on tobacco packaging legislation) has been recently dismissed. • Investor-state arbitration has been in the spotlight in Australia due to the current parliamentary discussions on ratifying the Trans-Pacific Partnership, with detractors questioning the introduction of ISDS provisions in the agreement. • This report recommends that Australia should fully embrace investor-state arbitration, including in the TPP agreement — given its transparent, welldelimited and legitimate use of ISDS provisions. • Moreover, responding to valid concerns, Australia should maintain its international efforts to implement an ISDS appellate mechanism, and whenever possible, to work with its trading partners to ensure that previous ISDS commitments are updated and fit for purpose, given the latest advancements in the field. • As part of an evidence-based and informed debate, this report debunks the seven major myths about investor-state arbitration
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