Background
5.1
This Chapter discusses issues relating to:
intellectual property (IP);
electronic commerce (e-commerce); and
Investment
5.2
According to the National Interest Analysis (NIA), the Regional Comprehensive Economic Partnership Agreement (RCEP) would provide a strong platform to expand trade in services and to promote investment throughout the region.
5.3
The investment provisions in RCEP contain obligations to:
provide market access to foreign service suppliers;
provide the same treatment to local and foreign investors and suppliers alike;
for the first time, apply Most Favoured Nation Treatment provisions to RCEP Party investors and suppliers;
prohibit imposing certain performance requirements on investors;
prohibit requirements to appoint certain nationalities to the board of directors and senior management positions in the businesses of covered investments;
provide fair and equitable treatment and full protection and security to RCEP Party foreign investments;
prohibit expropriation or nationalisation of covered investments unless carried out:
in accordance with due process of law;
in a non-discriminatory manner;
for a public purpose; and
upon payment of prompt, adequate, and effective compensation; and
allow all transfers relating to a covered investment to be made freely and without delay into and out of each Party’s territory.
5.4
RCEP contains new investment commitments from: China, Laos, Cambodia, Myanmar, Thailand, the Philippines, and Malaysia.
5.5
RCEP could also provide advantages in particular single markets over and above any preferential arrangements that might have been negotiated with a country bilaterally. Mr James Baxter from the Department of Foreign Affairs and Trade (DFAT) cited the example of China:
… the RCEP agreement does secure the right of Australian investors in China to invest in a number of sectors where that right is not currently guaranteed, because it's not addressed in our bilateral FTA [Free Trade Agreement]. That means that Australians have the right to invest in those sectors, and their investments attract all the protections that are available in the RCEP chapter... [but which are] not addressed in our bilateral FTA with China, because at that point China was unwilling to make commitments on those sectors in an agreement with Australia.
5.6
The RCEP investment provisions are subject to state-to-state dispute settlement procedures contained in Chapter 19 of RCEP with the exception, amongst others, of decisions made by investment screening authorities, such as those under Australia’s Foreign Investment Framework.
Investor-State Dispute Settlement (ISDS) and dispute settlement
5.7
Investor-State Dispute Settlement (ISDS) is an international arbitration procedure that is intended to be an impartial, law-based approach to resolving conflicts between countries and foreign investors.
5.8
RCEP does not include an ISDS mechanism, although Article 10.18 identifies that the Parties shall enter into discussions on an ISDS mechanism no later than two years after RCEP’s date of entry into force.
5.9
The outcome - introduction of an ISDS mechanism - requires unanimous Party agreement.
5.10
Many participants in the inquiry welcomed the absence of ISDS from RCEP, but there was also some support for including ISDS.
5.11
The inquiry participants opposing ISDS were united in their concern that RCEP permitted the later inclusion of ISDS, and opposed inclusion in RCEP at a later date.
5.12
The Australian Council of Trade Unions (ACTU) submitted that ISDS infringed on Australia’s sovereignty and favoured foreign investors over governments:
ISDS clauses are a restriction on national sovereignty and the ability of governments to regulate in the public interest and impose an unnecessary cost burden on Australian taxpayers. They should not be included in any trade agreement that Australia enters into, including in this case, the RCEP.
5.13
The ACTU also stated that ISDS lacks ‘basic principles of fairness and consistency’ because:
There is no independent judiciary, and no appeal mechanisms or system of precedent. ‘Judges’ can preside over one case while acting as a paid advocate in another, even if claimants and clients overlap between the two cases – a clear conflict of interest.
5.14
Similar views were expressed by ActionAid, which said it ‘welcomes the exclusion’ of ISDS, but was concerned that there ‘remains a risk that this will still be included in the agreement, with governments agreeing to review this within two years’.
5.15
The Northern Territory Government was concerned that ISDS could have a negative impact on policy making at the state and territory level if it was added to RCEP:
If ISDS is included in the RCEP in future, Australia could face both state-to-state disputes and ISDS disputes if State and Territory governments increase regulation of carbon emissions.
5.16
The Australian Chamber of Commerce and Industry (ACCI), on the other hand, expressed support for an eventual inclusion of an ISDS mechanism in RCEP:
… it's important for us to try to have those mechanisms. RCEP only has in it an intent for further conversations around that. So we'll have to see where that goes. But because we've already got some of the other agreements where these ISDS and other mechanisms are already available they'd be things that we'd like to see brought through just for consistency, because we don't see a lot of risk in it for Australia and it's probably beneficial to investors.
5.17
Noting its recommendation in Report 193 that the Government brief the Committee biannually on the status of upcoming and current free trade agreement negotiations, the Committee expects that the potential inclusion of an ISDS in RCEP at the two-year review period would be covered as part of such regular briefing.
Intellectual property
5.18
According to the NIA, Chapter 11 of RCEP affirms the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The NIA Attachment III – Key Outcomes, stated that the IP provisions in RCEP would:
… provide increased certainty to rights holders and users by establishing a strong platform for the development of consistent Intellectual Property (IP) rules throughout the region …
5.19
TRIPS, which came into force in 1995, contains internationally applicable provisions that protect:
producers, recorders, performers and authors of sound recordings;
producers, recorders, performers and authors of visual recordings;
geographical identifiers, such as wine appellations;
the layout of integrated circuits.
5.20
The IP provisions of RCEP are intended to reduce distortion and impediments to trade and investment though the effective and adequate creation, utilisation, protection and enforcement of IP rights, while recognising:
RCEP Parties have different levels of economic development and capacity, and different national legal systems;
the need to promote innovation and creativity;
the need to maintain a balance between the rights of IP right holders and the legitimate interests of users and the public interest;
the importance of facilitating the diffusion of information, knowledge, content, culture and the arts; and
that establishing and maintaining a transparent IP system, and promoting and maintaining adequate and effective protection and enforcement of IP rights, provides confidence to right holders and users.
5.21
Each type of IP is given its own set of protections in TRIPS, and this approach is reflected in RCEP. The IP protections for the various types of IP follow a common pattern which can be summarised as follows:
the right of IP owners to use, profit from, perform, produce, and prevent misuse of their IP;
the right of nation states to impose limitations or exceptions in accordance with their laws and regulations, for example on public health, religious or moral grounds;
the entitlement of persons who are not rights holders to use IP for legitimate purposes, such as education, research, criticism, comment, news reporting, and facilitating access to persons who are print disabled;
the ability of IP rights holders to pursue civil legal action to prevent the misuse of their IP; and
the ability of the state to pursue criminal legal action to prevent the misuse of IP.
5.22
In addition to developing consistent IP standards, Chapter 11 of RCEP obliges Parties to:
treat nationals of other RCEP Parties no less favourably than they would their own nationals; and
accede to the following additional IP related multilateral treaties:
the Paris Convention for the Protection of Industrial Property;
the Berne Convention for the Protection of Literary and Artistic Works;
the Patent Cooperation Treaty;
the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks;
the WIPO Copyright Treaty;
the WIPO Performances and Phonograms Treaty; and
the Marrakesh Treaty to Facilitate Access to Published Works for Persons Who are Blind, Visually Impaired, or Otherwise Print Disabled.
5.23
In addition to the above treaties, Parties must also endeavour to accede to the Budapest Treaty on the International Recognition of the Deposit of Micro-organisms for the Purposes of Patent Procedure.
5.24
Chapter 11 also permits Parties to:
adopt measures necessary to protect public health and nutrition, and promote the public interest in sectors of vital importance to its socio-economic and technological development, provided they are consistent with the Chapter;
interpret and implement Chapter 11 in a manner supportive of each Party’s right to protect public health and promote access to medicines for all; and
in implementing Chapter 11, adopt transition periods for the Least Developed Country Parties.
5.25
The following Least Developed Country Parties have identified transition periods:
Cambodia identified transition periods of 10 years in relation to a number of multilateral agreements related to IP, some aspects related to electronic rights, protection of new varieties of plants, and some aspects of the enforcement measures;
Lao Peoples Democratic Republic identified transition periods of between 10 and 15 years in relation to a number of multilateral agreements related to IP, and trademark protection;
Malaysia identified a transition period of five years in respect of the Marrakesh Treaty to Facilitate Access to Published Works for Persons Who are Blind, Visually Impaired, or Otherwise Print Disabled;
Myanmar identified transition periods of between three and ten years in relation to a number of multilateral agreements related to IP, trademark, Geographical Indications, new varieties of plants registration and protection, and certain aspects of the enforcement provisions;
Philippines identified a transition period of five years in relation to the trademark protection of sounds;
Thailand identified transition periods of between three and five years in relation to a number of multilateral agreements related to IP, the exclusive rights of performers, and certain aspects of the enforcement provisions;
Vietnam identified transition periods of between three and five years in relation to a number of multilateral agreements related to IP, the exclusive rights of performers, and electronic applications for processing trademark applications.
5.26
Professor Kimberlee Weatherall described the IP provisions in RCEP as:
… far less prescriptive than many other trade agreements I've analysed. Both the IP chapter and the e-commerce chapter are much less detailed than, say, something like the CPTPP [Comprehensive and Progressive Agreement for Trans-Pacific Partnership], and this is a good thing.
5.27
However, Professor Weatherall was critical of the general approach to IP adopted by the Government and expressed through trade agreements like RCEP:
The RCEP texts are … based on an old model of IP chapters that have their roots in IP lawmaking in America in the late 1990s. Like every IP chapter I've reviewed over the last 15 years, it does little to address the actual challenges for Australian firms trading internationally. It does little to promote consistency of rules and nothing to ease trade in legitimate and licensed products.
5.28
Some participants in the inquiry were supportive of the IP provisions in RCEP. The Chief Minister of the Australian Capital Territory (ACT) highlighted that the IP provisions in RCEP would be especially beneficial to the ACT:
Intellectual property is an important component of value to businesses, universities and other organisations across every Key Capability Area of our economy. RCEP's rules on IP protection - which broadly reflect Australia's own - will give more confidence to our exporters in RCEP markets.
Electronic commerce
5.29
According to the NIA, RCEP’s Chapter on e-commerce (Chapter 12) is aimed at supporting digital trade and would align domestic regulations on e-commerce to the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Electronic Commerce 1996.
5.30
The NIA outlined that both consumer confidence and safety online are fundamental for the functioning and facilitation of digital markets, which are supported through RCEP’s targeted obligations.
5.31
RCEP is expected to improve e-commerce through general obligations on inter-Party cooperation, as well as specific requirements for Parties to support paperless trading by accepting electronic authentication and signatures.
5.32
To promote cross-border e-commerce RCEP includes articles that constrain Parties from imposing data localisation requirements on businesses and ensure the free flow of data across borders.
5.33
Exceptions to these obligations include measures necessary for the protection of essential security interests or to achieve a legitimate public policy objective; as defined by the implementing Party.
5.34
The NIA stated that regulatory measures under the Privacy Act 1988 and My Health Records Act 2012 would not be impacted by RCEP.
5.35
RCEP Parties also retain an exception to data management and storage obligations in relation to financial services.
5.36
To create a regional environment conducive to e-commerce, RCEP includes obligations on:
Online Consumer Protection, requiring the adoption or maintenance of laws or regulations to provide customer protections in e-commerce, and the publication of documents outlining how remedies may be pursued and businesses may comply with regulations;
Online Personal Information Protection, requiring the adoption or maintenance of legal frameworks that ensure personal information protections for users of e-commerce;
Unsolicited Commercial Electronic Messages, requiring the adoption or maintenance of measures that ensure consent and minimisation of unsolicited e-commerce messages, as well as measures to enable recourse against non-complying suppliers;
Domestic Regulatory Framework, requiring the adoption or maintenance of legal frameworks governing electronic transactions, while avoiding unnecessary regulatory burdens;
Customs Duties, preventing Parties from imposing customs duties on electronic transmissions;
Transparency, requiring the publication of all relevant measures pertaining to or affecting the operation of RCEP’s e-commerce Chapter; and
Cyber Security, recognising of the importance of cyber security capacity building and the inter-Party exchange of best practices.
5.37
The NIA advised that the RCEP e-commerce provisions are less ambitious than the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP); which includes a dispute settlement mechanism.
5.38
The analysis of Professor Jane Kelsey from the University of Auckland, included within Dr Matthew Rimmer’s submission, explained the reasoning behind RCEP’s e-commerce Chapter:
This retreat from the [Trans-Pacific Partnership Agreement] template reflects a more mature understanding of the implications of its rules and the need for governments to retain effective policy space to regulate the digital domain. However, the chapter still gives rise to concerns, and leaves unanswered the fundamental objection that rules on Internet governance, data, competition and privacy should not be negotiated in secret under the guise of ‘trade’.
5.39
Dr Rimmer was critical of RCEP’s e-commerce Chapter, describing the articles as ‘outmoded’ and ‘anachronistic’. Dr Rimmer stated that RCEP seemed to take a laissez faire approach to digital regulation, privacy and consumer rights. Dr Rimmer further noted that this approach is contradictory to Australia’s domestic pressure for stronger regional regulation of digital platforms.
5.40
Dr Rimmer pointed out that this pressure is identified across regulatory reviews and enforcement action initiated by the Australian Competition and Consumer Commission.