Australia inks new BIT with Uruguay, trade and investment deals with Hong Kong

Australia has signed a new BIT with Uruguay and an investment deal with Hong Kong. The agreements feature some changes or clarifications to past deals’ provisions on ISDS and on government regulations designed to fulfill public policy objectives, such as health.

The new Uruguay agreement, on taking effect, would terminate the 2001 BIT, while overriding that agreement’s duration, termination and survival clauses. The new BIT, signed in April 2019, includes preambular language on the states’ right to regulate and flexibility to “set legislative and regulatory priorities.” Its exceptions article notes that “nothing in this Agreement shall be construed so as to prevent a Party from adopting or enforcing measures” essential for certain public policy objectives.

Australia’s new investment agreement with Hong Kong, signed in March 2019, has a dedicated article on “investment and environmental, health and other regulatory objectives.” Parties will not be precluded from pursuing “any measure otherwise consistent with this agreement” that aims at ensuring that investments are “sensitive to” certain public policy objectives. It features exceptions articles similar to the Australia–Uruguay BIT.

Once the new Australia–Hong Kong investment agreement is in force, the prior Australia–Hong Kong BIT will immediately be terminated. The original BIT has a 15-year survival clause. Under the new agreement, existing investments would be covered under the original BIT’s terms for 10 years from the date of entry into force of the new BIT.

Both treaties have drawn the attention of investment watchers, particularly over whether they would adapt their wording around ISDS and the right to regulate following the investment disputes that emerged under the existing Australian and Uruguayan BITs on involving tobacco plain packaging and control measures. Australia and Uruguay also have a shared history in pursuing these and related public health measures.

In November 2011, Philip Morris launched a case under the Australia–Hong Kong BIT, claiming that Australia’s Plain Packaging Act amounted to an expropriation of its intellectual property and led to the company’s Australian investments to lose much of their “real value.” An arbitral tribunal dismissed the case on jurisdictional grounds in December 2015. Australia has also faced complaints at the WTO and under its own constitution over the plain packaging legislation.

Uruguay is also a long-time proponent of tobacco control, including through plain packaging. While these measures were challenged by Philip Morris in 2010, the case was ultimately dismissed and the tobacco giant was ordered to cover some of Uruguay’s legal fees, along with all costs of the arbitration itself.