The Howard government did not include ISDS in the US-Australia Free Trade agreement and the previous ALP government opposed it after advice against it from the Productivity Commission. The present Coalition government has agreed to include it in KAFTA but did not agree to include ISDS in the Japan trade deal signed last week.

The Trade Minister claims that there are “safeguards” in KAFTA that will prevent foreign investors from suing governments over laws that deal with public welfare, health and the environment. But the key “safeguard” clause begins with the words "except in rare circumstances”. This leaves a huge loophole that recent cases have used to advantage.

Another “safeguard” is a more limited definition of "fair and equitable treatment" for foreign investors. But tribunals have ignored these limitations and applied the previous higher standard. A third “safeguard” is a reference to the general protections for “human, animal or plant life” based on a clause in a World Trade Organisation Agreement. But the use of this article has been successful only in one out of 35 cases in the WTO that have tried to use it to safeguard health and environmental legislation.

These same “safeguards” have been included in other recent trade agreements, including the Peru-US Free Trade Agreement. But they have not prevented cases against environmental regulation. The US Renco mining company is using ISDS in the Peru-US Agreement to sue over a local court decision that it was responsible for pollution from its lead mine.

The US Lone Pine mining company is using ISDS to sue the Quebec government for $250 million because it conducted an environmental review of shale gas mining. Both cases are continuing and will take years to resolve. Even if governments win they will have paid millions in legal fees.