Alarm at the provisions of a leaked draft of the investment chapter of the Trans-Pacific Partnership agreement is premature to say the least, says Stephen Jacobi, executive director of the New Zealand International Business Forum.
Wikileaks has published a January 2015 draft of the chapter which deals with the controversial investor-state dispute settlement (ISDS) provisions of the 12-nation pact.
But Jacobi said it did not show what areas the full text of the final agreement would carve out from that avenue of redress for international investors, either through a general exclusion or through a schedule of "non-conforming measures".
More generally it was wrong for ISDS to be portrayed, as it often was, as a mechanism under which foreign investors could sue a government in an unaccountable tribunal over normal regulatory risk - policy changes which reduce their profits.
"It is about compensation for expropriation which is a much narrower, more technical thing and hardly an alien concept to our legal system," he said.
The leaked draft includes the "shared understanding" that "... the fact that an action or series of actions by a Party has an adverse effect on the economic value of an investment, standing alone, does not establish that an indirect expropriation has occurred", and that "Non-discriminatory regulatory actions by a Party that are designed and applied to protect legitimate public welfare objectives such as public health, safety and the environment, do not constitute indirect expropriations, except in rare circumstances".
Jacobi said business groups tended to support provision for international arbitration on the grounds that, while they might have confidence in the legal systems of the current TPP countries, they might be glad of it if the agreement were extended to additional states.
But Jane Kelsey, a law professor at Auckland University who specialises in international investment agreements and who opposes TPP, said that, as the recently signed agreement with South Korea demonstrated, lists of non-conforming measures or areas negotiated into an agreement only excluded them from some of its rules. "They do not apply to the rules that foreign investors rely most on to sue governments, for example in current investment disputes over Australia's plain packaging of cigarettes, Quebec's moratorium on fracking, or the Canadian courts' denial of a patent for a medicine."
The cases companies took to tribunals tended to rely on the requirement for "fair and equitable treatment".
But that, critics of ISDS say, is a very broad and elastic concept which gives the arbitration panels a lot of latitude in interpreting it, and there was no appellate body to enforce consistency in their interpretation.
"With no consistent rulings, no appeals and arbitrators who often have serious conflicts of interest, the rule will continue to pose a high risk for governments," Kelsey said.
As for relying on a general exception that would protect areas like public health and the environment, Kelsey said the United States had never agreed that the general exception provision should apply to the investment chapter in its previous agreements. "Having followed the negotiations closely for the past five years I can see nothing to suggest that position has changed," she said.
Kelsey said another controversial, and as yet unresolved, area related to contractual agreements between a government and an investor.
If the contract has in it a provision for how a dispute is settled, such as going to domestic courts, proposed but not agreed language in the draft chapter would allow the ISDS mechanism to be used instead of what is in the contract.
Another provision in square brackets, which indicates that as of January 15 it had not been agreed, would exclude from ISDS Australia's Pharmaceutical Benefits Scheme, Medicare Benefits Scheme, Therapeutic Goods Administration and the Office of the Gene Technology Regulator. If New Zealand has similar misgivings about Pharmac, they are not to be found in this part of the draft, although it does exclude Overseas Investment Office decisions.