"Could future changes to the renewable energy target or carbon farming schemes give rise to liabilities under this dispute mechanism?": Penny Wong.
"Could future changes to the renewable energy target
or carbon farming schemes give rise to liabilities under this dispute
mechanism?": Penny Wong. Photo: Andrew Meares

Academics, Labor and Greens senators have warned about a
controversial and little-understood clause in the new China-Australia
free trade agreement that will allow Chinese corporations to sue the
Australian government.

The deal struck between China and Australia on Monday will
contain a so-called Investor State Dispute Settlement (ISDS) mechanism
that will allow Chinese corporations to sue Australia's government if a
change in Australian law can be claimed to have harmed their investments
in Australia.

Labor and Greens senators warned on Tuesday there will be
unintended consequences from the deal and the government ought to
explain why it was included in the FTA.

Labor senator Penny Wong and Greens senator Peter
Whish-Wilson both asked the Abbott government on Tuesday if the ISDS
mechanism would allow Chinese investors, including state-owned
enterprises, to "take action" against the Australian government if their
profits were harmed.

"Could future changes to the renewable energy target or
carbon farming schemes give rise to liabilities under this dispute
mechanism?" Ms Wong asked.

But Liberal senator Eric Abetz said the ISDS mechanism was in
20 similar international trade agreements, including ones the former
Labor government had negotiated.

"This is the sort of immature and very un-Australian approach
that Senator Wong is taking to these free trade agreements," Mr Abetz
said in the senate on Tuesday.

"The Labor Party are very sensitive to be reminded that these
ISDS provisions are common in these agreements - agreements to which
the Australian Labor Party themselves signed up the Australian nation.
We agreed with that approach. Now that we do it, the Labor Party cannot
reciprocate," he said.

But Dr Kyla Tienhaara, from the Regulatory Institutions
Network at the Australian National University, told Fairfax Media that
such mechanisms had been used by corporations in the past to challenge
legitimate public policy measures – such as Australia's tobacco plain
packaging laws – and there was no reason why the mechanism in the
China-Australia FTA could not be used for similar reasons.

Ms Tienhaara said Australia would now also have to revisit
its trade agreement with Japan because that deal stipulated that if an
ISDS mechanism was included in an FTA with China then it would like to
have one in its FTA with Australia too.

"Corporations can challenge pretty much anything under these agreements," Ms Tienhaara said.

"Investor state dispute settlements are not the appropriate
forum for companies to sue governments. These things should happen under
the existing democratic processes and court systems that we have."

Prime Minister Tony Abbott and Trade Minister Andrew Robb
knocked back criticism of the ISDS mechanism on Tuesday, saying the
mechanism was benign and would allow Australians to invest in China
"with greater confidence."

"The ISDS provisions contain strong safeguards to protect the
Australian Government's ability to regulate in the public interest and
pursue legitimate welfare objectives in areas such as health, safety and
the environment," Mr Abbott and Mr Robb said in a joint statement.

But Dr Patricia Ranald, the Coordinator of the Australian Fair Trade and Investment Network (AFTINET), said on Monday that the text of the agreement remained secret and the details could therefor not be scrutinised.

Ms Ranald said the full text of the agreement ought to be
released for public and parliamentary scrutiny before it was signed next

"We could face a scenario where Chinese investors could sue
local, state or federal governments for damages over a change in
environmental or other regulation," Dr Ranald said.

"We have also opposed this provision in the Trans-Pacific
Partnership Agreement with the US, Japan and nine other Pacific Rim
countries, because ISDS is clearly against the national interest."

Craig Emerson said the mechanism would give superior legal
rights to multinational corporations to sue the Australian government.

"The detail has not been provided to show what are the
protections or carve-outs for the Australian government [from foreign
corporations]," he said.

"It means, effectively, that the Abbott government will have
to include an ISDS mechanism in the Trans-Pacific Partnership agreement
with the US," he said.