Possible elements of an ISDS protocol
The Waitangi Tribunal suggested the Crown outline steps we could take if an investor-state dispute settlement case which was likely to involve the Treaty of Waitangi exception was ever brought.
The Waitangi Tribunal, in its report on the Trans-Pacific Partnership Agreement (WAI 2522), considered the issue of the Treaty of Waitangi exception clause in New Zealand’s free trade agreements. While the Tribunal accepted that the clause offered a reasonable degree of protection to Māori interests under the Treaty of Waitangi, the Tribunal made a suggestion that the Crown develop a protocol on ISDS.
The Tribunal suggested that the protocol on ISDS would:
- be developed in dialogue with Māori
- be adopted by the Crown
- set out the procedures New Zealand would follow in the future if:
- an investor took an ISDS case against New Zealand; and
- the case was one which is likely to involve the Treaty of Waitangi exception.
While there has never been an ISDS case taken against New Zealand under a free trade agreement or bilateral investment treaty, the government has been considering the Tribunal’s suggestion.
Recently, we have been talking with a range of Māori groups and individuals that are either directly involved in the WAI 2522 case, or have interests in trade and investment, to seek their perspectives on the Tribunal’s suggestion and what procedures a protocol might set out.
While some do not consider a protocol to be useful, or consider that there are other issues of greater importance, a large amount of the feedback we have received has been supportive of developing a protocol. While our current view is that developing a protocol would be valuable, no formal decision has yet been taken. A final decision would only be made following further consultation.
Drawing from our initial consultation, we put together a paper which suggested potential elements for the protocol on ISDS. This paper was also circulated widely to iwi, Urban Māori Authorities, and other interested Māori groups.
The purpose of this elements paper was to seek views from any interested person or groups about the value of a protocol and what it could contain.
We consulted on possible elements of an ISDS protocol - for consultation [PDF, 185 KB] from 30 October to 21 December 2018.
We are now considering all feedback received, and using it to prepare a draft ISDS protocol. The draft protocol will be published on our website and circulated by email for any final feedback.
Has New Zealand ever been sued in an ISDS case under a free trade agreement or bilateral investment treaty?
What exactly would the ISDS protocol do?
If New Zealand is sued in an ISDS case in future, the ISDS protocol would apply. It would contain procedure and practices that the New Zealand government would put in place where the Treaty of Waitangi exception in our free trade agreements might be part of New Zealand’s defence.
What are some of the practices the ISDS protocol could contain?
The ISDS protocol could include a commitment to inviting a legal expert on the Treaty of Waitangi and related issues to be part of the Crown team in defending the case. It could set out how such a person could be selected. It could also make commitments about providing information publicly about the case as it progressed.
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.
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 opposes the inclusion of ISDS in future free trade agreement negotiations.
ISDS was originally developed in bilateral investment treaties as a way to ‘depoliticise’ disputes. Its greatest value is where local courts cannot be relied upon. However, it also provides foreign investors with an additional avenue for dispute settlement with the New Zealand government that is not available to New Zealand-based companies, and New Zealand companies are not active users of the existing ISDS clauses in our free trade agreements.
What additional protections relating to ISDS are included in the CPTPP?
Reciprocal side letters with Australia, Brunei Darussalam, Malaysia, Peru and Viet Nam mean that compulsory ISDS will not apply between New Zealand and these countries under CPTPP. These letters cover more than 80% of our overseas investment from CPTPP countries as a whole.
The scope of ISDS in the CPTPP is narrower than was the case in TPP in two ways:
- Suspensions in the Investment chapter mean that ISDS claims are no longer permitted in relation to breaches of investment contracts and approvals (called ‘investment agreements’ and ‘investment authorisations’ in the TPP) themselves. This means that private companies who enter into investment contracts with the Government concerning many core Government functions will not be able to resolve contractual disputes using the ISDS procedure under CPTPP; and
- Suspensions around the obligation to provide a minimum standard of treatment to investors in financial services further reduce the risk of ISDS claims in the CPTPP being taken successfully against New Zealand.
Find further information on ISDS in the CPTPP here.
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.
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 that aren’t covered by the ISDS protocol?
You can contact us about any trade agreement at any time at FTA_outreach@mfat.govt.nz. Find more information on how the government consults on trade agreements as well as recent and upcoming face-to-face consultation meetings here.