As the latest round of talks on the Trans Pacific Partnership get under way today, leading trade lawyer Daniel Kalderimis says concerns about the mechanisms for handling disputes between investors and states are real, but they can be addressed.
"No one would sanely deny that there aren't risks," Kalderimis said.
"But the key question is are those risks a deal breaker or can they be mitigated? I think they can be mitigated."
Kalderimis was speaking at a TPP symposium in Auckland on Friday hosted by his firm, Chapman Tripp.
Speakers also included business leaders, academics and TPP opponents who highlighted a ruling in October in which Ecuador has been ordered to pay US$2.4 billion in damages to oil company Occidental.
The 15th round of TPP talks begins today in Auckland with 500 officials from New Zealand, Singapore, Chile, Brunei, the United States, Australia, Peru, Vietnam, Malaysia, Canada and Mexico expected to be met by protesters at the SkyCity Convention Centre.
The investor protection chapter, one of 29 in the deal, is highly contentious and Australia does not want any part of it.
Kalderimis, who has represented many firms in international disputes, has made a submission to New Zealand's trade negotiators.
He defined investor protection as the codification in treaties between countries of customary international law on the minimum standard of protection of aliens. Particularly since the 1990s, that law had been inserted into and embellished by bilateral investment treaties.
There were now 3000 of them including investment chapters in free trade agreements, Kalderimis said.
New Zealand already had such provisions in its China FTA. And it had them with every country in the Asean free trade agreement apart from Australia.
In the enforcement mechanism in most of them, investors can trigger their rights in an arbitration process directly against the state.
"That's what makes this controversial. It is not just codifying the rights," Kalderimis said. "It's giving the rights an enforceable mechanism for investors against states.
"That's where the risk arises and that's where intelligent thought needs to be applied."
The two biggest problems were around the definition of "fair and equitable treatment" for investors and the concept of "expropriation" which could trigger a claim.
He said arbitration tribunals did not rely on precedents in their rulings. They were accountable only to the individual agreements on which they were adjudicating and many tribunals had come up with "unreliable interpretations" of "fair and equitable treatment".
It should be tied to the customary international law minimum standard of treatment.
On the issue of expropriation - where states must compensate investors - he said states feared that their rights to regulate were imperilled by tribunals extending the concept to "regulatory or creeping expropriation".
He said the answer to that was to include an annexe that expressly set out the definition of "indirect expropriation" and which spelled out that proper exercise of state powers was not indirect appropriation.
He said the risks could be mitigated.
While people pointed to the possibility that Philip Morris could sue New Zealand over tobacco laws, "Philip Morris can already sue New Zealand".