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Why we developed an ISDS Protocol
In its report on the Trans-Pacific Parntership Agreement (WAI 2522), the Waitangi Tribunal suggested the New Zealand Government adopt a protocol, in dialogue with Māori, to govern New Zealand procedure should New Zealand become a party to an ISDS case in which the Treaty of Waitangi exception would be relied upon.
While there has never been an ISDS case taken against New Zealand under a free trade agreement or bilateral investment treaty, the Government considered that the development of a protocol would be a valuable way of strengthening New Zealand’s ability to respond to such a case, should it arise.
Engagement with Māori
In order to develop such a protocol, MFAT engaged with interested Māori groups and the public. We received constructive feedback and engagement, and made changes to the protocol at each stage of the process in light of this.
In 2018 we began talking with Māori groups and individuals either directly involved in the WAI 2522 case, or with interests in trade and investment. Specifically, we asked for their perspective on:
- the Tribunal’s suggestion, and
- what procedures a protocol might set out.
Based on feedback received, we put together a paper which suggested potential elements for the protocol on ISDS [PDF, 185 KB]. This paper was circulated widely to iwi, Urban Māori Authorities, and other interested Māori groups for feedback and consultation between 30 October and 21 December 2018.
MFAT considered the feedback received and developed a draft ISDS protocol [PDF, 131 KB]. A further round of consultation was conducted from 23 January to 28 February 2020. This draft ISDS protocol was accompanied by an explanatory note [PDF, 108 KB] setting out why some elements of feedback during the previous consultation period had been adopted and others were not. This sets out the general themes of feedback received during our consultations and explains our response.
Further changes were made to the text after consideration of the feedback received, and the ISDS Protocol was finalised in 2022.
The ISDS Protocol text
The protocol includes a commitment to inviting a Pūkenga/expert on the Treaty of Waitangi and related issues to be part of the Crown legal team in defending a case. It also:
- sets out how a Pūkenga/expert would be selected,
- the qualifications sought in a Pūkenga/expert,
- their role, and
- sets out commitments by the Government to provide information about the case as it progresses.
Questions and answers
What is ISDS?
Under several of New Zealand’s existing free trade agreements, New Zealand, and its partners, have committed to a framework of investment obligations, which set out the treatment they must provide to each other’s investors. Where a dispute arises about the implementation of these obligations, investors can directly resolve their dispute through a mechanism called ‘investor-state dispute settlement’ or ‘ISDS.’ Under ISDS, a covered foreign investor may be able to bring a claim against the New Zealand government before an international arbitral tribunal.
There are two types of ISDS mechanisms – compulsory ISDS and consent-based ISDS. Compulsory ISDS means New Zealand has provided prior consent to arbitrate disputes, whereas under consent-based ISDS provisions investors require consent from New Zealand to proceed to arbitration. This follows the general principle that a State must consent to be held accountable in a court of law outside its own jurisdiction.
While ISDS has been included in a number of New Zealand’s existing free trade agreements (for example, in the CPTPP and in the China-New Zealand FTA), the Government has opposed the inclusion of ISDS in future free trade agreement negotiations since 2018. There is no ISDS in the Regional Comprehensive Economic Partnership (RCEP), the New Zealand-United Kingddom Free Trade Agreement, or the New Zealand-European Union Free Trade Agreement.
What additional protections relating to ISDS are included in the CPTPP?
While it was not possible to exclude ISDS entirely from the CPTPP given the late stage in negotiations, New Zealand was able to secure side letters with a number of CPTPP parties to exclude compulsory ISDS under the CPTPP. These letters cover more than 80% of our overseas investment from CPTPP countries as a whole. Read more about ISDS in the CPTPP.
What is the Treaty of Waitangi exception clause?
Each of our free trade agreements includes a range of safeguards which could be invoked by New Zealand to successfully defend a claim from an investor that New Zealand had breached its investment obligations. One of these protections is the Treaty of Waitangi exception clause, which has been included in all of New Zealand’s FTAs since 2001.
Combined with other provisions, this exception protects the Government’s ability to adopt policies that fulfil its obligations to Māori, including under the Treaty of Waitangi. The exception also excludes the interpretation of the Treaty of Waitangi by an arbitral tribunal.
How do I express my views about trade policy issues, including those covered by the ISDS Protocol?
You can contact us about any trade agreement at any time at FTA_outreach@mfat.govt.nz. See more information on how the government consults on trade agreements as well as recent and upcoming face-to-face consultation meetings.