Svetlana Portman<\/strong><\/a>, Associate at Debevoise & Plimpton<\/strong><\/a>
Mihika Gupta<\/strong>, Associate at Hunton Andrews Kurth (UK) LLP<\/strong><\/a> <\/p>\n\n\n\n
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The Comprehensive and Progressive Agreement for Trans-Pacific Partnership<\/a> (\u201cCPTPP<\/strong>\u201d or the \u201cAgreement<\/strong>\u201d) stands as a significant free trade agreement between 12 countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the United Kingdom (the \u201cUK<\/strong>\u201d). Originating as the Trans-Pacific Partnership Agreement (\u201cTPP<\/strong>\u201d), with the United States initially involved, the landscape shifted when the Trump administration withdrew from the negotiations. Subsequent to this withdrawal and prior to ratification, the agreement underwent substantial revisions by the remaining nations, culminating in the establishment of the CPTPP, which came into force in 2019. The primary objective of the CPTPP is the facilitation of trade liberalisation among its signatories, involving measures such as the elimination of tariffs<\/a>. <\/p>\n\n\n\n In a notable development as of July 2023, the UK emerged as the most recent signatory to the CPTPP. Remarkably, the UK is the inaugural European country and the first non-Pacific region member to join the CPTPP. Currently representing approximately 15% of the global GDP<\/a>, the member nations of the CPTPP play a pivotal role in shaping international trade dynamics. <\/p>\n\n\n\n The backdrop to the UK\u2019s entry into the CPTPP<\/a> is rooted in the aftermath of Brexit, which led to a decline in trade with the European Union (\u201cEU<\/strong>\u201d). Positioned within the context of a post-Brexit reality, the UK’s decision to join the CPTPP aligns strategically with the nation\u2019s Indo-Pacific tilt<\/a>. The Indo-Pacific tilt, elucidated in the Prime Minister\u2019s foreword<\/a> to a parliamentary policy paper, underscores the UK\u2019s commitment to fostering robust and enduring ties in the Indo-Pacific region, designating it as a fundamental pillar of the country\u2019s international policy. Framed as a gateway to the broader Indo-Pacific and the Americas, the CPTPP is poised to unlock novel prospects for British enterprises. The government stated<\/a> that CPTPP accession will not only bolster employment opportunities nationwide but will also play a pivotal role in shaping the trajectory of global trade rules. Embracing the CPTPP, the UK aspires to extend its influence across a more extensive portion of the Indo-Pacific region, exemplified by initiatives such as the launch of the British International Investment\u2019s Singapore hub, deployment of a UK Carrier Strike Group and two offshore patrol vessels to the region, and co-launching the Partners in the Blue Pacific initiative. <\/p>\n\n\n\n Within the framework of the CPTPP, the UK anticipates substantial advantages through enhanced market access and diminished trade barriers. Over 99% of exported goods to CPTPP member nations are poised to qualify for zero tariffs<\/a>, as the Agreement eliminates impediments like tariffs, fostering the exchange of physical goods among member states. Furthermore, the CPTPP addresses barriers to digital trade and data flows, dismantling constraints such as data localization requirements and ensuring the unhindered flow of data between the UK and other CPTPP members. The Agreement also beckons opportunities<\/a> for the UK’s service sector to broaden its reach to other member states, removing market access barriers and ensuring equal treatment of UK service providers alongside local counterparts. This alignment has the potential to streamline operations for UK businesses, potentially reducing bureaucratic hurdles and providing greater certainty<\/a> on trade terms. As a result, the UK anticipates a 0.08%<\/a> increase in GDP post-accession to the CPTPP. <\/p>\n\n\n\n Chapter 9 of the CPTPP<\/a>, which delves into investment, sets out the investment protections (Section A) and ISDS provisions (Section B), featuring a multitier dispute settlement mechanism. Key provisions: <\/p>\n\n\n\n The UK expressed confidence in the CPTPP\u2019s ability to safeguard its investors from unfair, arbitrary or discriminatory treatment, due to the Agreement\u2019s robust dispute resolution provisions, emphasising that the Agreement contains a \u201cmodern and transparent<\/a>\u201d ISDS mechanism. <\/p>\n\n\n\n While endorsing ISDS as an effective dispute resolution mechanism, the UK has retained the right to regulate specifically in areas such as environment and labour standards, where public interest is concerned. Similarly, investment screening decisions undertaken by the UK on national security (e.g.<\/em>, under the National Security and Investment Act 2021), or under public interest grounds, are excluded from the scope of the ISDS provisions of the CPTPP and cannot be challenged. The UK has entered into side letters providing similar investment screening carve-outs<\/a> for Malaysia, Singapore and Vietnam. The UK has also entered into side letters with Australia and New Zealand to specifically disapply the ISDS provisions against each other. <\/p>\n\n\n\n The inclusion of ISDS mechanisms in investment treaties has sparked substantial debate<\/a> in recent years, raising various concerns, including transparency, the cost of proceedings, inconsistent decision-making, perceived unfairness, and the potential for a chilling effect on regulatory changes.\u202f In light of these concerns, the EU is actively shifting away from conventional ISDS, striving to establish a multilateral investment court<\/a> system featuring a permanent cadre of judges and an appellate court. <\/p>\n\n\n\n In contrast, the UK maintains investment agreements containing ISDS provisions with over 90 trading partners<\/a> and, in a summary on the CPTPP, has reiterated<\/a> that ISDS is an effective means of resolving investment disputes, emphasising its crucial role in protecting British investors abroad. In the same summary, the UK government seems to address the criticisms of ISDS, asserting that the CPTPP overcomes these criticisms. <\/p>\n\n\n\n Notably, while the EU charts its course away from ISDS, the UK seems prepared to take on a more measured stance, creating a discernible contrast in approaches within the European region. The question arises as to whether the UK\u2019s acceptance of the ISDS provisions under the CPTPP signifies a departure from the EU\u2019s pursuit of institutional reform. The evolving dynamics in the realm of ISDS warrant close observation, particularly as the UK navigates its path in the post-Brexit era, revealing potential implications for future international trade relations. <\/p>\n\n\n\n ABOUT THE AUTHORS:<\/strong><\/p>\n\n\n\n Svetlana Portman<\/strong><\/a> <\/strong>is an Associate in the International Dispute Resolution Group of Debevoise & Plimpton<\/strong><\/a>. She represents private clients and states across multiple jurisdictions in investor-state and international commercial arbitrations governed by various substantive laws and conducted under the auspices of the major arbitral rules, including ICSID, LCIA, ICC and UNCITRAL. She is admitted as a solicitor-advocate in England & Wales and to the bars of New York State and Israel. <\/p>\n\n\n\nRationale for the UK\u2019s Accession<\/strong> <\/strong><\/h2>\n\n\n\n
CPTPP provisions on Investor State Dispute Settlement (\u201cISDS\u201d) and the UK\u2019s Approach <\/strong> <\/h2>\n\n\n\n
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Takeaways and Ramifications for the UK\u2019s Stance on ISDS<\/strong> <\/strong><\/h2>\n\n\n\n
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