Joint Interpretations Under a Divided TPP Investment Chapter

Abstract

Two aspects of a TPP investment chapter would be particularly noteworthy. First, a large number of States would participate in an investment chapter that likely would include joint interpretation mechanisms. Second, one of those States, Australia, likely would not participate in the dispute settlement section of that investment chapter.

Those two distinctive features give rise to two corresponding challenges with respect to the proper operation of joint interpretation mechanisms under a TPP investment chapter. First, how to ensure that such a large number of States are able to coordinate effectively when developing joint interpretations. Second, how to ensure the proper operation of TPP joint interpretation mechanisms, given that key provisions concerning such mechanisms would likely be included within the dispute settlement section that one of the TPP negotiating States had declined to join.

Given those challenges, this chapter makes two recommendations. First, for the issuance of joint interpretations, a TPP investment chapter should not require participation by senior political representatives of each Party, which would allow coordination to occur primarily at the staff level. Second, assuming that Australia does not join the dispute settlement section of a TPP investment chapter, the TPP negotiating States should express their shared understanding — whether in the text of the treaty or in some other source — with respect to the proper operation of TPP joint interpretation mechanisms. That shared understanding should address the following points: (i) whether, and under what circumstances, Australia can participate in joint interpretations of TPP provisions, (ii) whether joint interpretations are binding on TPP investment chapter tribunals, and (iii) whether investment chapter tribunals have authority to request joint interpretations from the TPP Parties of annex reservations or exceptions.

The establishment of an investor-State dispute settlement mechanism within a trade agreement that would reach economies representing nearly 40 percent of global GDP would be a highly significant development for international investment arbitration. The economic significance of a TPP agreement heightens the importance of ensuring the proper operation of a TPP investment chapter. Given a few distinctive aspects of the TPP negotiations, securing effective joint interpretation mechanisms under a TPP investment chapter will present a particular challenge, but one that can be addressed through careful drafting and the clear articulation of shared understandings.

Keywords: TPP, China, joint interpretations, investment arbitration, investor-State arbitration, investment treaty arbitration

JEL Classification: K33