Things To Think About
Investor-State Dispute Settlement
Chris Hamby reviews Investor-State Dispute Settlement (ISDS) for BuzzFeed. The story has been prompted, no doubt, by the current US debate over the proposed Trans-Pacific Partnership, and particularly, Sr Elizabeth Warren’s vocal criticism of its ISDS clause. (If you can ignore the background music, she provides a simple explainer here.) It’s essential to understand the ISDS system because it provides a mechanism for multinational corporations to frustrate, circumvent and unduly influence regulation, and, perhaps also to improperly interfere with the civil and criminal processes of a state. The UN records known ISDS arbitrations here; some remain private.
While the ISDS found in Australia’s favour in the one matter Australia has defended, as Hamby and others note, the mere threat of ISDS action can result in policy or legislation amendment. This is particularly so when the adjudicators are not independent, as in state courts, but lawyers who may sit in judgment one day, and advocate for a multinational before the panel the next. And in fact, if one reviews Philip Morris & Anor v Australia, the case provides no comfort at all to the state, as it indicates that if the tobacco companies in question had been located properly in Hong Kong, perhaps their claim may have succeeded. And defending the matter was no small inconvenience: how many staff hours were diverted to the case, in addition to $50M in legal costs? The Attorney-General’s department records the numerous legal challenges to Australia’s tobacco plain packaging laws here.
Accessorial Liability – A Need to Amend Legisation?
Professor Alan Fels has called for an expansion of the the definition of “accessory” to avoid the type of problems the FWO faced when litigating against 7-Eleven earlier in the year: “You beef up accessorial liability and strengthen the power and resources of the FWO, and you’ll get franchisors being a lot more careful about putting in place profit-sharing agreements which force franchisees to underpay to survive”.
In that case, it was s550 Fair Work Act 2009 under consideration, a civil liability provision. But the issue extends also to criminal accessorial liability. See also: Fels’ general comments on 7-Eleven.
Law & Policy Updates
ASIC has published its Corporate Plan for the next three financial years, including a “what does good look like” section for the first time. The ‘good’ Australian public company, is, according to the description, interested only in its investors’ interests and welfare.
Over in Canada, Ontario’s Ministry of Labour has rather helpfully published a model “Code of Practice to Address Workplace Harassment under Ontario’s Occupational Health and Safety Act” to assist businesses comply with new sexual violence and harassment laws. It’s not unheard of, but still unusual to see a regulator proffer a model code to the business community.
Notable Litigation & Regulatory Actions
Apple, Ireland And Taxes
The European Commission has concluded that Ireland gave Apple (see below) “state aid” via favourable tax rulings that were unlawful under EU law. Ireland is now required by the European Commission to recover the taxes that ought to have been paid by Apple, from 2003 to now, figured at some €13 billion, plus interest. Note that although the Commission believes the improper conduct commenced in 1991, it is only empowered to demand back-taxes for the ten year period preceding the commencement of its investigations, which was, in this case, 2013.
The Commission explains that it “concluded that the tax rulings issued by Ireland endorsed an artificial allocation of Apple Sales International and Apple Operations Europe’s sales profits to their “head offices”, where they were not taxed. As a result, the tax rulings enabled Apple to pay substantially less tax than other companies, which is illegal under EU state aid rules.”
As for the Commission’s requirement that Ireland recover the unlawful “state aid” from Apple, it says, “[a]s a matter of principle, EU state aid rules require that incompatible state aid is recovered in order to remove the distortion of competition created by the aid. There are no fines under EU State aid rules and recovery does not penalise the company in question. It simply restores equal treatment with other companies.”
“Apple”, is “Apple Sales International and Apple Operations Europe … two Irish incorporated companies that are fully-owned by the Apple group, ultimately controlled by the US parent, Apple Inc. They hold the rights to use Apple’s intellectual property to sell and manufacture Apple products outside North and South America under a so-called ‘cost-sharing agreement’ with Apple Inc.”
Both the Republic of Ireland and Apple “plan” to appeal the decision in EU Courts.
Apple, ACCC, and the Banks
More Apple news. For now, the ACCC has rejected the Australian banks’ request for authorisation to “engage in collective negotiation and boycott activities with Apple in relation to its e-commerce Apple Pay platform and with other third party wallet providers in Australia.”
The ACCC is seeking input on its draft Media Mergers Guidelines; comments due mid October.