Australian COVID-19 measures and its international investment obligations

• DOI: https://doi.org/10.1108/JITLP-10-2021-0055
• Published date: 11 April 2022
• Date: 11 April 2022
• Pages: 182-214
• Subject Matter: Strategy,International business,International business law,Economics,International economics,International trade
• Author: Tanjina Sharmin,Emmanuel Laryea

Australian COVID-19 measures

and its international

investment obligations

Tanjina Sharmin and Emmanuel Laryea

Faculty of Law, Monash University, Melbourne, Australia

Abstract

Purpose –This paper aims to examine the prospect for internationalinvestment disputes in the aftermath

of the COVID-19 pandemic due to measures implemented by the Australian government to tackle the

pandemic.

Design/methodology/approach –Doctrinalresearch. Contains qualitative analysis.

Findings –This paper finds that claims based on the protections in the International Investment

Agreements (IIAs) signed by Australiaare unlikely to succeed and that Australia’s COVID-19 measures can

be justified as necessary measuresunder the general and security exception clauses included in morerecent

IIAs and under customaryinternational law.

Originality/value –In the context of the COVID-19 pandemic, scholars have written papers

apprehending possible claims by international investors against emergency measures ado pted by host

countries to face the pandemic which might also have damaged the interest of the foreign investors.

The existing literature is too vague and general. To the best of the authors’knowledge, this is the first

paper that draws some specific conclusions in this regard applicable to the COVID-19 regulatory

measures taken by Australia. While the existing literature projects the possibility of such investor

claims, this paper argues that at least no such claim would succeed against the COVID-19 measures

taken by Australia.

Keywords COVID-19 measures, Australian measures, Investor-claims, Investor-state arbitration,

Obligation under IIAs

Paper type Research paper

1. Introduction

Australia ranks highly as an attractive destination for foreign investors globally (DFAT,

Australian Government, 2021a, 2021b), [1] and it is host to substantial foreign

investments (UNCTAD, 2021, p. 5). The relationships between Australia and most of its

foreign investors are governed not only by Australian domestic law but also

international investment agreements (IIAs) that Australia has concluded with the home

states of the investors [2].

During the outbreak of the COVID-19 pandemic, Australia, like many countries around

the world, implemented emergency regulatory measures aimed at containing the spread of

the virus and protecting the Australian people. These measures include the closure of

Australian domestic and international borders, lockdown and stay-at-home orders, closure

of shops, restrictions on the opening hours for certain businesses and restrictions on the

The authors wish to sincerely thank Professor Andrew Mitchell and Associate Professor Caroline

Henckels, both of the Monash Law Faculty, for their insightful comments on an earlier draft of this

article. The authors also thank the anonymous reviewers for their comments on the submitted

manuscript. The article has benefited greatly from all the comments.

JITLP

21,2

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Received15 October 2021

Revised16 February 2022

24February 2022

Accepted25 February 2022

Journalof International Trade

Lawand Policy

Vol.21 No. 2, 2022

pp. 182-214

© Emerald Publishing Limited

1477-0024

DOI 10.1108/JITLP-10-2021-0055

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/1477-0024.htm

number of people in hospitality and recreationalvenues (Chaisse, 2020, pp. 123–136). Many

of these measures have had (and some continueto have) adverse impacts on various sectors

of the economy, including sectors with substantial foreign investments. Although the

COVID-19 measures seem popular with Australians, they may leave Australia exposed to

claims by businesses under the existing international investment law regime (Arato,

Claussen, and Heath, 2020,p.628)[

3]. As noted by the United Nations Conference on Trade

and Development (UNCTAD), COVID-19 containment measures implemented by countries

“create friction with existing IIA obligations”(UNCTAD, 2020, p. 5). Regarding Australia,

Chaisse, for instance, has argued that Australia’smeasures restricting the export of hygiene

products (such as face masks and hand sanitisers) may be viewed as breaching some of

Australia’s IIA obligations (Chaisse, 2020)[

4]. If so, these may expose Australia to foreign

investor claims in investor-statearbitration (ISA) [5].

Most of the existing literatureso far supported the view that state measures implemented

to contain COVID-19, in general, may result in breachesof IIA obligations (UNCTAD, 2020).

These studies mostly drew broad general conclusions outlining IIA provisions that may

have been breached and the defenses host states may invoke (Vadi, 2021, pp. 323–324) [6].

This article focuses on Australia,examining Australia’s COVID-19 measures in the light of

its international investmentlaw obligations to draw some specific conclusions. The analysis

is done with reference to Australia’sIIAs that are in force (UNCTAD, 2022) and contain ISA

provisions. This article examines three specific measures by the Australian government,

namely, banning the export of face masks and hand sanitisers, domestic and international

travel restrictions and lockdowns. It must be noted that given the limited scope of this

article, the analysis on export restrictions in this article will be undertaken only in the

context of international investment law although the measures might be more likely to

violate internationaltrade law.

This article is divided into four parts, including this introduction. Section 2 discusses

Australia’s COVID-19 measures, investors’losses and prospects for investment claims.

Section 3 examines whether claims based on fair and equitable treatment (FET) and

expropriation are plausible. This sectionalso examines the regulatory space reserved in the

Australian IIAs. It argues that claims based on FET and expropriation are unlikely to

succeed. Section 4 concludes the article. The article finds that the COVID-19 regulatory

measures taken by Australia do not satisfy the necessarythreshold for a successful claim of

breach of FET and expropriation and that regulatory space preserved in some of the

Australian IIAs allowsAustralia to take such regulatory measures.

2. Australia’s COVID-19 measures, investor losses and prospects for investor

claims

This section briefly gives an overview of Australia’s COVID-19 regulatory measures,

outlines the adverse impactof such measures on foreign investments and develops potential

cases that foreign investorsmay bring against Australia.

2.1 Australia’s regulatory measures during COVID-19

As mentioned before,Australia, like most countries, adopted measures to containCOVID-19.

These include an international border closure, intermittent restricted inter-state travel,

restrictions on the exportof essential personal protective equipment such as face masksand

hand sanitizer (Australian Border Force, 2020), and price control measures on certain

products deemed criticalto the containment of the spread of COVID-19 [7].

Most of Australia’s COVID-19 measureswere taken under emergency proclamations [8].

These were done by different statesand territories under their respective legislation relating

Australian

COVID-19

measures

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to health, and by the federal government under national legislation on matters in which it

has jurisdiction [9]. For example, Victoria proclaimed an emergency invoking the 2008

Public Health and Wellbeing Act of Victoria,[

10] legislation that had not been used in this

way before the outbreak of COVID-19(Justice Connect, 2020a). New South Wales invoked its

2010 Public Health Act,[

11] to declare a state of emergency during COVID-19 to impose

similar restrictions as that of Victoria(Justice Connect, 2020b)[

12]. The federal government

restricted passenger entry into and exit from Australia (Australian National Audit Office,

2021)[

13]. The federal government also adopted emergency measures regarding the

screening of incoming foreign investments (Australian Government Productivity

Commission ResearchPaper, 2020, pp. 9–10) [14].

As previously stated, regulatory responses by states to contain the spread of COVID-19

(including lockdowns, other compulsory restrictions on business activities and export

control on medical goods) may “leave states exposed under the existing international

economic law regime”(Aratoet al., 2020, p. 628). IIAs allow investors to seek relief for losses

arising from host state measuresin breach of the protection standards contained in the IIAs

(Arato et al.,2020, p. 628), such as FET, National Treatment, protection against unlawful

expropriation and guaranteefor full protection and security.

IIAs protect investments in a wide range of forms (Arato, 2019, p. 1) such as an

enterprise, shares, stocks and other forms of equity participation in an enterprise, real

property and intellectual property.They often define investments in a very broad language.

For example, the 2018 Comprehensive and Progressive Agreement for Trans-Pacific

Partnership (CPTPP) defines investments as “every asset that an investor owns or controls,

directly or indirectlythat has characteristics of an investment”[15]. Once an investmentfalls

under the definition of investments inan IIA, the next elementsare, whether the investment

has been impaired (e.g. incurred loss due to a regulatory measure) and whether the

regulatory measure and resultantinvestment loss breached the host state’s obligation to the

investor (in other words, whetherthe loss is compensable).

Undoubtedly, some of Australia’s COVID-19 measures have harmed foreign investors.

We are not yet aware of foreign investor claims for any such losses having been initiated

against Australia and this article is not about a currentor past specific case. This article is

forward-looking.The full adverse economic implications for investorsand their investments

stemming from Australia’s COVID-19measures are still unfolding. In fact, some COVID-19

measures still remain in place, and so it might be premature for investors to commence

claims. This article examines the potential grounds on which foreign investors may claim

against Australia and the strength or likely success of such claims. The analysis in the

article would therefore be useful in considerations for investor claims and defensibility of

such claims, as well as to provide scholarlyanalysis.

Section 2.2 provides examples of losses incurredby foreign investors in different sectors

in Australia due to the COVID-19 regulatorymeasures.

2.2 Losses due to the COVID-19 measures

Almost all economic sectors have suffered losses because of the COVID-19 restrictions

imposed by the Australian government. There is evidence of loss suffered by businesses

that attract foreign investments. For example,Australia attracts foreign investments in the

sector of agriculture andfood service activities. A research report by the Australian Bureau

of Agriculture, Resource Economics, and Sciences (Greenville et al., 2020) shows how

COVID-19 restrictions have harmed this sector. Although every Australian business that

attracts foreign investments has not published reports on its loss due to COVID-19

restrictions, itis obvious that most businesses have suffered a loss.

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