International Trade and Business Law Review: Volume XIII

Articles - Abstracts

An Introduction to Investor-State Arbitrations
by Gordon Smith
This article introduces the reader to the intricacies of international investment treaties and investor-state arbitration. Bilateral Investment Treaties (BITs) are the most common type of international investment treaty whereby contracting states agree to promote and protect investments made in their territory by investors of the other contracting state. They generally provide for disputes arising under the treaty to be resolved through investor-state arbitration by ad hoc arbitration under the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules or under the Convention on Settlement of Investment Disputes between States and Nationals of Other States 1965 (the ICSID Convention).

This article describes the key provisions typically contained in BITs, and discusses common issues that arise during arbitration of claims under these treaties. Parties to investor-state arbitrations frequently object to claims on procedural and substantive grounds. It is also common for tribunals to arbitrate disputes over the interpretation of dispute resolution provisions.

All BITs typically cover the same grounds, but the specific wording of individual BITs can vary. As a result, the level of protection provided by individual BITs varies. ‘Forum shopping’ is common because international investors frequently find that an investment in a given host state is covered by several international investment treaties.


Foreign Direct Investment: An Australian Perspective
by Leon Trakman
Foreign Direct Investment (FDI) is both an opportunity to contribute to economic and political development and a hindrance. On the one hand, FDI represents an opportunity to extend public participation in international investment and to promote access to FDI by private investors. On the other hand is concern that FDI may be predatory, invasive of Australia’s public interests and impact negatively on some domestic industries. Resolving these tensions is not self-evident. The regulation of FDI needs to be not only stable and even-handed, but also sensitive to domestic socio-cultural, economic and political demands. It should have a coherent structure and yet be flexible enough to suit the FDI regime in issue. Australia’s dilemma is to establish its economic interdependence within a global coalition of investing nations without becoming unduly dependent on foreign infrastructures and resources. Its challenge is to strengthen its domestic economy with support of foreign investment without threatening vulnerable and sensitive sectors of the economy in the process.

This article explores these issues in light of customary principles of international investment law, trade and investment conventions, such as the United National Commission on International Trade Law (UNCITRAL). It considers the decisions of international investment tribunals such as the International Centre for Settlement of Investment Disputes (ICSID) and the domestic restrictions imposed on FDI through the police and related powers of domestic countries, including but not limited to Australia. It also emphasises the development of Free Trade Agreements (FTAs) and Bilateral Investment Agreements (BITs), such as under Ch 11 of the North American Free Trade Agreement (NAFTA), and the more recent Australia-United States Free Trade Agreement (AUSFTA).

This article gives particular emphasis to the need to appreciate salient differences in investment treaty protocols, the distinctive manner in which state-investment tribunals have construed them in the event of FDI disputes, and how these constructions may influence FDI practices in the future. Given the fluidity of FDI and its international and domestic regulation, the article does not present wholly predictable legal responses to investment conduct. Instead, it focuses on developing an understanding about key issues involved in FDI planning, including giving due account to different investment treaties and the prospect of FDI practices being treated differently in different international and domestic legal contexts.


Canada and Foreign Direct Investment in Latin America and the Caribbean: Evolution of an International Investment Agreement Framework
by Linda C Reif
Canadian foreign direct investment (FDI) in Latin America and the Caribbean has increased in recent decades, although there is a long history of Canadian FDI in the region. To protect its FDI, Canada has entered into bilateral or trilateral international investment agreements (IIAs) with some countries in the region. These IIAs are of three generations: (1) early bilateral foreign investment protection and promotion agreements (FIPAs); (2) NAFTA’s investment chapter (Ch 11), FIPAs and free trade agreements (FTAs) based on NAFTA Ch 11; and (3) FIPAs and FTA investment chapters based on NAFTA Ch 11 experience. This paper examines the extent of coverage of Canadian IIAs in Latin America and the Caribbean and surveys the changing contents of the IIAs. While there are some differences between them, their written terms provide good protection for investors. However, their application in practice is uncertain due to their evolving contents that increasingly attempt to balance legitimate host-state regulation and foreign investor protection, the nature of the international arbitral process for investor-state disputes and the growth of anti-FDI movements in some Latin American states.


Chinese Investment in the Global Resource Sector, Utilising Australia as an Illustration: A Time for Reason, Not Fear
by Jonathan Greenacre and Thomas Chiu
China’s strong economic growth has led to massive global demand for resources. As a result, Chinese direct investment in the global resource sector has increased rapidly. Australian resource companies have been a particular target. Governments and resource companies have mixed feelings about the growing Chinese investment in resource companies. On one hand is the desire to encourage foreign direct investment and reap its associated economic benefits. On the other hand is the concern that Chinese direct investment is being funded and co-ordinated by the Chinese Government in order to secure China’s long-term strategic goals.

This paper describes various manifestations of Chinese state capitalism, such as the Chinese sovereign wealth fund, and examines the risks and benefits of encouraging Chinese direct investment. The paper then identifies three ‘Pressure Points’ in Australia’s foreign direct investment framework that are likely to cause tension between Australia and China. The authors argue that extensive public debate is required on this topic and that any reforms made to the Australian foreign investment system should be based on reason, rather than fear.


The Arbitration of Celebrity Domain Name Disputes
by The Honourable Neil Brown QC
The cult of celebrity and the arbitration of internet domain name disputes bring together two vibrant features of the modern age. Inevitably, celebrities’ names are in demand by those who want to trade on them commercially, by those who want to adulate or denigrate celebrities, and by the celebrities themselves.

This article describes the fast-track and compulsory arbitration process, known as the Uniform Domain Name Dispute Resolution Policy, or UDRP (the ‘policy’) that is open to celebrities to claim back a domain name alleged to have been registered improperly. The policy explains that the celebrity must show a trademark in the personal name at issue and how to prove a common law trademark if it is not registered.

The claimant must then prove the three elements of a UDRP claim: that the domain name is the same as or confusingly similar to the trademark; that the registrant of the domain name has no right or legitimate interest in it; and that it was registered and used in bad faith.

Although both an ultra-modern problem and solution, cases will not succeed without compliance with a time-honoured principle: cases under the UDRP will be won or lost depending on whether the parties adduce evidence that really proves their case.


Legislating Evil: The Philosophical Foundations of the Nazi Legal System
by Augusto Zimmermann
This article is focused on the philosophical foundations of Nazi legal order and theory. The Nazis developed a theory of law in which ‘law’ was interpreted as a result of force and social struggle. Because the Nazis believed the ‘stronger’ have the ‘right’ to dispossess and destroy the ‘weaker’, a ‘master morality’ was developed, and it became meaningless to appeal to any higher law above the oppressive commands of the Nazi state. The ideology of National Socialism was forged primarily through the combination of a glorification of the all-powerful state through a nationalistic type of popular socialism, with a pseudo-scientific form of social Darwinism. The article examines each of these foundations, as well as the decisive role of the German juridical elite in the decline of justice and legality during the Third Reich. The correlation between the Nazi legal system and the complete disregard for the rights of the individual manifested itself most glaringly in the contribution of legal academics, judges and lawyers. During that time, most German judges and lawyers were authoritarians who rejected the concept of basic human rights as defined by classical natural law theory. This article demonstrates that judges, lawyers and legal academics were all disproportionately supportive of the Nazi cause.


Bank Mergers in Australia: The Past, the Present and the Possible Future Impact of the Global Financial Crisis
by Leela Cejnar
This article provides an overview of the laws and policies that play a part in regulating bank mergers in Australia. In particular, the article focuses on the way in which bank mergers are treated under the Trade Practices Act 1974 (Cth) (Trade Practices Act).

In Australia, bank mergers are subject to assessment by the Australian Competition and Consumer Commission (ACCC) under the Trade Practices Act. The Federal Treasurer also has powers under the Banking Act 1959 (Cth) (Banking Act) to review, and if necessary, to prevent, mergers between banks.

In 2008, two significant bank mergers were allowed: Westpac Banking Corporation and the St George Bank Limited; and Commonwealth Bank of Australia and BankWest and St Andrew’s Australia. Both mergers took place in the context of one of history’s worst financial crises, raising concerns about whether, going forward, the Australian banking sector will see a shift in merger law and policy such that the importance of preserving financial stability will come at the cost of competition.

This article provides a historical overview of bank mergers that have taken place in Australia since 1995 and also considers the possible future impact of the global financial crisis, including the impact of ‘rescue packages’, on competition between the banks, and how this could affect bank mergers going forward.


Corporate Governance Dynamics and Tax Compliance
by Nicola Sartori
This article addresses the effects that corporate governance dynamics may have on corporate tax compliance. It critically investigates the interactions between corporate governance and taxation, limiting the analysis to the theoretical effects that corporate governance rules and principles may have on corporate tax behaviours. The purpose of the research is to analyse the connection between corporate governance and strategic tax behaviours, investigating how corporate governance rules can reach a higher level of corporate compliance with the tax system.

The first section offers an overview of the general relationship between corporate governance and taxation; the second section defines corporate governance principles; and the third section investigates possible corporate governance designs that aim to decrease corporate tax compliance and influence corporations’ tax attitudes.

The conclusion of the article is that good corporate governance dynamics have a positive impact on tax compliance, discouraging corporations from engaging in aggressive tax planning strategies. 

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The Domestication of the UNCITRAL Model Law in Australia
by Nicola Nygh and Sam Luttrell
On 17 April 2009, the Standing Committee of Attorneys-General (SCAG) announced that the ‘uniform’ state Commercial Arbitration Acts (1984–5) (CAAs) of the Australian states will be replaced by new statutes based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration (the Model Law). With Model Law State Arbitration Acts, local users of arbitration will have more freedom to agree on the procedures they will use to resolve their dispute. If the parties make the right choices, their dispute will be resolved faster and with less expense than it would have been had they gone to court. Supporting the parties’ broad autonomy, state courts will have less power to intervene in arbitration. After the close of proceedings, the grounds upon which the arbitral award may be set aside will be more limited than they are under the current system. The purpose of this chapter is to introduce the Model Law, briefly compare it to the current state Acts, and consider some of the possible adaptations that will be made to the UNCITRAL template when it is introduced in the states.


Free Movement of Capital and Golden Shares: A New Perspective on Corporate Control? (Joined cases C-463/04 and C-464/04, Federconsumatori and Others v Comune di Milano)
by Alessandro Spano
This case note comments on the judgement delivered by the European Court of Justice in Federconsumatori and others v Comune di Milano (Joined Cases C-463/04 and C-464/04) concerning the compatibility of Art 2449 of the Italian Civil Code with the free movement of capital. In this judgment, the court confirms its previous jurisprudence on golden shares and clarifies the impact that the freedom has on national provisions which, by derogating from ordinary company law, confer special rights directly on the State or public bodies. The relevance of the free movement of capital for national company law, however, goes far beyond the retention of special rights in listed companies by public entities. Restrictions on the freedom may also arise from the application of provisions of national law by private parties or from decisions taken by the company’s shareholders which try to restrict access to the market in corporate control.

Book Reviews

Authors: Hanneke van Schooten and Jonathan Verschuuren (eds)
International Governance and Law: State Regulation and Non-State Law
Review by: Claire Vinten

Author: D Mitchell
Legal Principles in WTO Disputes
Review by: Dean Tingey

Author: Gerard McCormack
Corporate Rescue Law — An Anglo-American Perspective
Review by: Michael Browne

Author: Gordon Blanke
The Use and Utility of International Arbitration in EU Commission Merger Remedies
Review by: Kara Churchward

Authors: Jan Wouters, Bart De Meester
World Trade Organization: A Legal and Institutional Analysis
Review by: Dean Tingey

Author: Professor Leonard F M Besselink
A Composite European Constitution
Review by: Kara Churchward

Authors: Hans Christian Bugge and Christina Voigt (eds)
Sustainable Development in International and National Law
Review by: Michael Browne

Author: John Shijian Mo
International Commercial Law (4th ed)
Review by: Kara Churchward

Authors: Robin Burnett and Vivienne Bath
Law of International Business in Australasia
Review by: Claire Vinten