actions taken under conditions that are exempt from liability which are not exempt under other BITs (for example, a decision of the Australian government not to renew a subsidy or grant which is protected under Article 9.8(6) of the TPP).
2.4 ISDS mechanism
The TPP permits arbitration not only of claims for breach of the treaty’s substantive investment protections but also for breach of an investment authorisation or investment agreement. It provides for arbitration under the UNCITRAL, ICSID and ICSID Additional Facility rules, as well as under other rules agreed by both parties.
However, the TPP shows some deference to certain forum-selection clauses that might be contained in investment agreements. Annex 9-L prohibits arbitration of claims for breach of an investment agreement’s obligations pursuant to the TPP’s ISDS mechanism if the investment agreement already provides for arbitration under one of the following prominent arbitral rules - UNCITRAL, ICSID, ICC or LCIA - and the arbitration would take place outside the territory of the respondent and in a signatory to the New York Convention. Interestingly, this carve-out would not cover investment agreements which provide for arbitration under other, equally recognisable, arbitral rules, such as the rules of SIAC, AAA, HKIAC and ACICA.
Article 29.5 (Tobacco Control Measures)
Against the backdrop of threatened and actual ISDS following the introduction of tobacco plain packaging legislation in Australia, the TPP has introduced a special (and unprecedented) clause preventing tobacco companies making use of the TPP’s ISDS provisions. This is the first product-specific exclusion of its kind. Under Article 29.5, a Party can elect to deny the use of ISDS for claims challenging a tobacco control measure. A tobacco control measure is defined very broadly.41 The time at which such an election is to be made is effectively at large. If a Party has not elected to deny the use of ISDS with respect to such claims by the time a claim to arbitration is made (e.g. by domestic legislation), the Party can still elect to do so during the proceedings (even, it seems, after the hearing). By so doing, the claim will be automatically dismissed.
It is important to note that the carve-out is limited to ISDS only; the rights and obligations in the TPP still apply to tobacco. However, a tobacco company would have to rely on the host State’s courts to bring proceedings under Chapter 28 for any alleged breach of the TPP in relation to tobacco. Chapter 28 allows one State to pursue a dispute with another. Although this mechanism remains, it will be much harder for a tobacco company to initiate a claim. It is unlikely that a government (including the governments of the TPP member countries) would agree to bring such an action.
Procedural safeguards
Importantly, the ISDS provisions in the TPP offer ‘procedural safeguards’, some of which are common to investment agreements, some of which are new. These are summarised below.
Prior to initiating proceedings, the investor must first endeavour to resolve its dispute with the State through consultations and negotiations for at least 6 months, a time period which is typical of consultation periods in investment agreements.42 The investor must initiate proceedings within three and a half years from the date on which the investor first acquired, or should have first acquired, knowledge of the alleged breach.43 This limitation period is also typical.44
The notice of arbitration must be accompanied by a waiver, by the investor, of any right to initiate the claim before any other domestic domestic or international court or tribunal. This