Second Reading Speech
Mr DUFFY (Attorney-General)I move:
That this bill be now read a second time.
The purpose of the Bill I am introducing today is to set the legislative framework in place for Australia to ratify the Convention on the Settlement of Investment Disputes between States and Nationals of other States.
The Convention provides a mechanism for settlement, by means of conciliation and arbitration, of investment disputes between a state party to the Convention, or any constituent subdivision or agency of that state, and investors from other States party. To this end the Convention established the International Centre for Settlement of Investment Disputes, better known as ICSID. Hence, the Convention is often referred to as the ICSID Convention.
The Convention, which is the outcome of the work of the International Bank for Reconstruction and Development, the World Bank, was opened for signature on 18 March 1965 and entered into force on 14 October 1966. There are currently 91 parties to the Convention including nearly all Australia's major trading partners. Australia signed the Convention on 24 March 1975.
The ratification of the Convention by Australia will be a further important step in advancing the Government's objective of developing Australia's role in international commercial dispute resolution. Honourable members will recall that in 1989 this Government introduced legislation to implement the model law on commercial arbitration, which had been developed by the United Nations Commission on International Trade Law (UNCITRAL).
The adoption of the model law was a major step towards enhancing Australia's position as a centre for international commercial arbitration. Ratification of the ICSID Convention will further enhance this position.
Australia already has two centres for international arbitration in Sydney and Melbourne, which have been operating for some time. The ratification of the ICSID Convention will enable Australia to build on the expertise developed in those two centres.
There are also significant advantages which flow from ratifying the Convention from which Australian investors could benefit. In particular, the facilities provided under the Convention for conciliation and arbitration are an appropriate means for settlement of claims by investors arising out of expropriation of private assets in overseas countries. Ratification may also help to promote foreign investment in Australia.
Content of the Bill
I refer now to some of the more salient features of the Bill. The Bill will implement the ICSID Convention by amending the International Arbitration Act 1974 and the International Organisations (Privileges and Immunities) Act 1963.
The International Arbitration Act currently gives effect to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitration Awards - the so-called New York Convention - which establishes rules governing the recognition and enforcement in Australia of international arbitral awards and agreements.
The Act also implements the UNCITRAL model law. The Bill will amend that Act by inserting a new part and a new schedule to that Act. Thus all Commonwealth legislation relating to international arbitration will be contained in the one Act. The Bill will amend the International Organisations (Privileges and Immunities) Act to enable effect to be given to certain privileges and immunities provisions of the Convention by extending the regulation-making power under that Act.
The Bill gives the force of law to the key provisions of the Convention. It also provides that arbitral awards will be binding and enforceable in the Supreme Courts of the States and Territories.
ICSID Convention
I now turn to the principal features of the Convention. The Convention established the Centre which incorporates an administrative council, a secretariat, a panel of arbitrators and a panel of conciliators. The administrative council comprises a representative from each contracting state. The President of the World Bank is ex-officio chairman of the council. The panels of conciliators and of arbitrators are made up of persons designated by the contracting states and by the chairman of the council.
The jurisdiction of the centre under the Convention extends to any legal dispute, arising directly out of an investment, between a contracting State and a national of another contracting State. No proceedings can be initiated under the Convention unless both the state and the investor have specifically agreed to accept the Centre's jurisdiction. However, once the parties have given their consent, it cannot be withdrawn unilaterally. This will enable investment disputes between a State and a foreign investor to be dealt with under the ICSID Convention if the parties agree.
There is provision to designate constituent subdivisions of a State party and, in the case of Australia, it is proposed to designate those Australian States that agree to such designation. The effect of designation is that a State Government involved in an investment dispute with a foreign national will be able, if the parties so agree, to avail itself of the facilities offered by the Convention. All States except Western Australia have indicated their agreement to be designated.
The dispute is to be settled in accordance with the rules of law chosen by the parties or, if they fail to agree, the law of the contracting state party to the dispute and any applicable rules of international law.
Every contracting state is required to recognise arbitral awards as binding and to enforce such awards as if they were final decisions of a domestic court.
Financial Impact Statement
The International Bank for Reconstruction and Development provides the centre with accommodation and basic services free of charge in Washington DC. Under the Convention, parties making use of the ICSID's facilities are required to bear the expenses incurred by the Centre in connection with conciliation and arbitration proceedings. Only in the event that the expenditure of the Centre cannot be met out of charges for the use of its facilities, or out of other receipts, will contracting states be required to contribute towards any excess. It is accordingly anticipated that any impact on Commonwealth expenditure will be minimal.
I present the explanatory memorandum to this Bill. I commend the Bill to the House.
Debate (on motion by Mr Peacock) adjourned.