Clive Palmer’s multibillion-dollar claims make a mockery of a tribunal that allows foreign investors to challenge court decisions

The billionaire’s last three cases are part of a growing global list from fossil fuel companies against government decisions to reduce carbon emissions

Despite the Australian billionaire Clive Palmer’s self-proclaimed patriotism through the Trumpet of Patriots party, he has registered his mining company, Zeph Investments, in Singapore and claimed to be a Singaporean investor. He then used foreign investor rights in two trade agreements with Singapore to sue the Australian government for a total of about $420bn in four separate cases before an international investment tribunal.

Palmer’s first claim was for $300bn after he lost a high court appeal against a Western Australian government decision to refuse an iron ore mining licence. The last three claims for a total of $120bn are because a Queensland court refused his coal mining licence and a licence for a coal-fired power plant for environmental reasons, including increased carbon emissions.

The tribunal has now dismissed Palmer’s claim to be a Singaporean investor in the first WA iron ore case and ordered him to pay the Australian government legal costs of $13.6m. The full decision has not yet been published and it is unclear if his other claims will proceed.

Palmer has added to the uncertainty by posting on social media that his legal team would challenge the tribunal’s decision in the federal supreme court of Switzerland as one of the seats of the international tribunal process. The Swiss court is not an appeal mechanism for the tribunal and cannot consider the broad merits of the case. In the meantime his other three coal-related cases may proceed.

Palmer’s cases use a little-known set of rights for foreign investors in trade agreements, called Investor-State Dispute Settlement. ISDS allows foreign (but not local) investors to claim compensation for law or policy changes if they can convince an international tribunal that the change will reduce their expected future profits, even if the change is in the public interest. ISDS originally developed in the post-colonial period after the second world war to compensate international investors for the direct expropriation or taking of property by governments.

However, over the past 60 years, foreign investor rights have expanded to include “indirect” expropriation and “legitimate expectations”, which do not exist in national legal systems. Investors can claim that they were not consulted adequately about the change or did not expect it when they made the investment. This has a chilling effect on democratically decided public interest policy. ISDS has been excluded from World Trade Organization agreements and is found only in some regional and bilateral agreements, but investors can reorganise the locations of their investments to maximise claims as Palmer has done.

Palmer’s claims expose the absurdity of ISDS, which allows investors to make multibillion-dollar claims against court decisions, legislation or policy changes. ISDS lacks the safeguards of national legal systems. There are no independent judges, as tribunal members can continue to be practising advocates, and there are no precedents or appeals, so decisions lack consistency. These special corporate rights are a threat to democratic rights to regulate in the public interest, especially on climate change.

Palmer’s last three cases join a growing global list of ISDS cases from fossil fuel companies against government decisions to reduce carbon emissions. A recent United Nations Report concluded that ISDS is a “major obstacle” to government action on climate change. Many governments are now withdrawing from ISDS arrangements. The European Union and the United Kingdom have quit the Energy Charter Treaty because fossil fuel investors are using its ISDS provisions to sue governments over phasing out fossil fuels.

Labor government policy excludes ISDS from future trade agreements and pledges to review it in 25 existing bilateral and regional agreements. This process is proceeding very slowly with reviews of three bilateral agreements. This review should be accelerated to prevent more cases like Palmer’s.

Labor should also use its proposed hosting of the United Nations Framework Convention on Climate Change conference in 2026 to expose the ISDS threat to climate action and support proposals for coordinated multilateral withdrawals from ISDS arrangements in trade agreements.

Cover photo:  Clive Palmer used foreign investor rights in two trade agreements with Singapore to sue the Australian government in four separate cases before an international investment tribunal. Photograph: Bianca de Marchi/AAP