New Zealand's sovereignty is not endangered by the Trans-Pacific Partnership. That's the conclusion of research into investor-state dispute settlement (ISDS) provisions in the TPP and other free trade agreements.

There's been argument about whether such provisions would lead to New Zealand losing control of its law-making ability. So ExportNZ commissioned research by the New Zealand Institute of Economic Research on whether they do in fact pose a risk to our sovereignty.

The NZIER's report, ISDS and Sovereignty, indicates that risks have been overstated.

What are investor-state dispute settlement provisions?


These provisions within free trade agreements allow for arbitration if investors are unfairly discriminated against by a government and suffer damage as a consequence. Examples of discrimination include a government illegally confiscating or nationalising an investor's business assets.

Most claims that have been brought to arbitration involve rogue decisions by unpredictable governments in just a handful of countries. They tend to be countries with a poor record for bribery and corruption, with tendencies towards expropriation of investors' property, regulatory flip-flops and protectionist policies.

The vast majority of countries with good rule of law and strong institutions have no record of illegally confiscating or nationalising investors' property, and have not been subject to any claims for investor-state arbitration.

New Zealand is an excellent example of this. We have good rule of law, strong institutions, a global reputation for fairness and lack of corruption and a strong interest in encouraging foreign investment - so we are highly unlikely to be the subject of investor-state disputes.

As well as protecting investors' interests, dispute settlement provisions also uphold the ability of countries to make laws in their own interests. Modern provisions explicitly provide for countries' ability to regulate in the public interest, such as in health and the environment.

Opponents of free trade have implied that countries will not be able to legislate as they see fit once they sign up to TPP. But if that were the case, then no country would consider signing a free trade agreement.

In the TPP negotiations for example, all 12 countries will have wanted to retain their power to regulate appropriately, and will not have traded that power away. In this respect dispute settlement provisions actually serve to strengthen countries' sovereignty.

They help uphold honest dealing by both governments and corporations, and send very positive messages about safe investment and safe rule of law.


They provide assurance to New Zealanders who are making investments in overseas countries that their investments will not be stolen or misappropriated.

New Zealand export companies are increasingly investing in partnerships in other countries, allowing them to service overseas customers more efficiently, be more competitive and earn more export dollars for New Zealand. Dispute settlement provisions allow them to do this with confidence.

At the same time, we have many overseas investors investing in New Zealand. Our adherence to dispute settlement provisions lets those investors know they can invest safely in New Zealand.

New Zealand has a long history of negotiating ISDS provisions in our trade and investment deals.

They have been part of trade agreements with 13 countries and economies over the last 27 years during which time there has never been a claim for arbitration made against us.

International trade is very important to New Zealand. Because of our small population, we have to make a living by trading with others. We have much to gain from participation in free trade agreements that contain legal protections such as investor-state dispute settlement procedures.

The Trans-Pacific Partnership offers more to New Zealand than any other trade agreement we have so far joined. It offers access to huge markets and the dismantling of significant tariffs that discriminate against New Zealand exporters. Like any modern trade agreement, it includes robust ISDS protections.

Like the rule of law itself, the provisions are there to protect and uphold New Zealand's interests.