Australian Prime Minister Julia Gillard was one of the first among world leaders to visit Japan, over 20–23 April, after the nation was stricken on 3 March by the ‘earthquake-tsunami-radiation triple disaster’.

But the Australian government was tactful and realistic in not placing emphasis on progressing bilateral Free Trade Agreement (FTA) negotiations at that time.

The negotiations had resumed in Tokyo over 7–10 February 2011 after stalling for almost a year, but a lack of progress — particularly over agricultural market access — then prompted the trade ministers to call for a high-level political summit to regain momentum. The ‘3-11’ disaster generated more urgent priorities for the Japanese government. Indeed, reversing a commitment to decide this question by end-June, in May the Kan administration announced it would defer any decision about whether to join with the nine nations (including Australia) now negotiating an expanded Trans-Pacific Strategic Economic Partnership (TPP) agreement.

Japan has good reasons to resume FTA negotiations with Australia in the wake of 3-11. The ongoing problems afflicting the Fukushima nuclear power plant north of Tokyo, devastated by the tsunami, have resulted in closure of the Hamaoka plant to the east, as well as delays in resuming operations at other plants while extra ‘stress tests’ are carried out. This means that only 19 of Japan’s 54 reactors are now working, leading to nation-wide efforts to limit electricity consumption and adverse effects on the economy and everyday life in Japan.

Japanese power companies are already major buyers of LNG and other natural resources in Australia, also taking equity stakes in mining developments. Australian producers are expanding production capacity in LNG, for example, responding to indications that Japan would need to boost imports. More demand is expected not just for this year’s summer peak period, but also over the long-term as enthusiasm wanes for nuclear power in Japan, as well as in some other parts of Asia. Concluding a bilateral FTA may well help improve energy resource security for Japan. Especially as countries like China, Korea and now India increasingly vie for Australian resources (such as LNG) — with Australia already negotiating bilateral FTAs with all three of those nations.

Liberalisation of agricultural market access remains a large stumbling block to concluding an FTA with Australia. In theory, the devastation unleashed by the 3-11 tsunami on agricultural capacity in five predominantly rural prefectures could create an opportunity to allow in more Australian imports over the short term. In practice, doing so would strike many Japanese as adding insult to injury to afflicted farming communities throughout the Tohoku region, viewed as exemplifying Japan’s stalwart communitarian spirit. Even accelerating and expanding the policy of direct payments to farmers, in exchange for selling off their most inefficient operations, runs up against the added budgetary stress on the Japanese government arising from the 3-11 disaster. Temporary shortages of foodstuffs after the tsunami have also revived old arguments about the need for greater ‘food security’ in Japan.

Yet, as Aurelia George Mulgan points out, there are some signs of hope — at least over the longer term — for FTA initiatives involving Japan and Australia:

The revival of the regional food industry (interlinking agricultural production, processing and distribution stages) will need the input of technology and funds from the industrial sector, which may contribute to the industrialisation of agriculture in that area and engender greater cooperation between the agricultural and industrial sectors rather than conflict (as in the case of the debate over the TPP).

Other factors may reinforce a shift in the dynamics of FTA discussions involving agricultural market access to Japan. Concerns are often expressed in Japan — by consumers, not just farmers and their political or bureaucratic supporters — about ‘food safety’ of imported goods. Ironically, it is locally-produced goods and safety regulations which are now being called into question — for example, by recent reports of irradiated beef from Tohoku getting into the domestic market. If I were in Japan, as I will be with my family over October–November, I would be limiting my consumption to imported beef. And to several other products from Australia, including even our green tea (particularly susceptible to excess radiation, according to random testing of food supplies being systematically carried out in Japan).

The Australian government should work tactfully but vigorously to re-emphasise the safety of its agricultural exports, like it did in the wake of Japan’s ‘mad cow disease’ outbreak. It can also highlight that Japanese firms have recently invested in major Australian food companies. To further appeal to Japanese consumer interests, and indeed Australian consumers who are also increasingly concerned about product safety issues, both governments should add mechanisms in their proposed FTA that require and facilitate product risk information-sharing.

The shadow cast by the existing TPP negotiations may galvanise Japan to conclude first a bilateral FTA with Australia. The US is reportedly pushing strongly for an expanded TPP agreement, bringing in Japan. Yet, in practice, regional agreements — like AANZFTA — often end up preserving liberalisation measures (such as tariff rates) similar to those agreed in bilateral deals.

A resumption of more active FTA negotiations at any level will depend also on political leadership in Japan. The Japanese government became active in concluding FTAs from 2001, coinciding not just with the collapse of multilateral WTO Round negotiations but also with initiatives taken by then PM Koizumi to centralise decision-making and reduce scope for veto-players such as the Ministry of Agriculture. Unfortunately, support for Prime Minister Kan has dropped significantly in recent months (after a brief uptick after 3-11). Indeed, he has promised to step down soon after enactment of legislation related to disaster relief. Kent Anderson suggests that people in Japan may increasingly view this year’s problems as now more of a regional problem, one that does not imply radical rethinking and institutional change on the scale of the transformations occasioned by the ‘9-11’ disaster in the US. From that perspective, it may end up more like ‘business as usual’ for Japan’s FTA negotiations after all.

A final complication is that Australia’s policy on FTA negotiations has seemingly changed direction, with the announcement of the ‘Gillard Government Trade Policy Statement’. The Statement is a curious mixture of political and economic rhetoric. It blames the previous Howard government for over-indulging in bilateral and regional FTAs, for limited economic gain (presumably those with smaller partner economies, in particular) and/or for geopolitical objectives (presumably, in particular, AUSFTA). The Statement attempts to regain the high ground by urging greater efforts to achieve multilateral trade and investment liberalisation. It draws partly on a Productivity Commission report last December on FTA strategies and policy recommendations, but the Statement also argues that this sounder economic approach was a focus — along with unilateral liberalisation and deregulation — of the Hawke/Keating governments. The new policy direction raises the question of whether this Gillard government will want to press strongly for an FTA even with a very large economy such as Japan.

Another stumbling block in negotiations arises from the Statement’s views on investor-state arbitration (ISA). On one interpretation the Gillard government wishes to eschew completely the incorporation of such protections for foreign investors in all future treaties, even with developing countries. A more contextual interpretation would still allow ISA to be included on much more restrictive conditions than in previous FTAs or investment treaties concluded by Australia. Yet ISA protections are found in almost all of Japan’s treaties, and in the February talks DFAT itself reported that ‘progress on the investment chapter was slower, as key areas of difference remain, including Japan’s priority request to include an Investor-State Dispute Settlement mechanism’.

After 3-11 Japan may agree to exclude or sharply limit ISA protections if Australia presses the point. That seems likely especially now that Australia has been subjected to its first-ever arbitration claim (under its treaty with Hong Kong, brought by the subsidiary of an international tobacco company). More careful drafting of ISA provisions is sensible. But many TPP partners (especially the US, also keen on ISA) will be concerned about the message sent by excluding or watering down ISA provisions in a new major bilateral treaty in the region. And Australia’s stance will certainly slow down the Australia-Japan FTA negotiations. Potential Australian investors into Japan, including now perhaps Jetstar, may also come to regret the omission of conventional ISA protections in such treaties.

Luke Nottage is Associate Professor at Sydney Law School and founding Co-Director of the Australian Network for Japanese Law (ANJeL). This comment is based on his posting to ‘The Conversation’ and the ‘Japanese Law and the Asia-Pacific’ blogs. It draws on research for the project, ‘Fostering a Common Culture in Cross-Border Dispute Resolution: Australia, Japan and the Asia-Pacific’, supported by the Commonwealth through the Australia-Japan Foundation which is part of the Department of Foreign Affairs and Trade.

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3. Japan enters TPP negotiations

In its recent review of Bilateral and Regional Trade Agreements (BRTAs), the majority report from Australia’s Productivity Commission remained opposed to including treaty provisions for investor-state dispute settlement (ISDS).

Recommendation 4(c) advised that Australia should not include ISDS ‘provisions in BRTAs that grant foreign investors in Australia substantive or procedural rights greater than those enjoyed by Australian investors.’

This threshold would exclude ISDS in almost all situations, at least where host states — like Australia and 145 others — are party to the 1965 Convention on the Settlement of Investment Disputes (ICSID) between States and Nationals of Other States. This is because subsidiary BRTAs or Bilateral Investment Treaties typically allow investors from those treaty partners to commence arbitration against host states through the World Bank’s ICSID facility, established by the 1965 Convention. The arbitral award then enjoys a special regime for enforcement: it can be reviewed for serious irregularities by other ICSID arbitrators, but not by host state courts. By contrast, local investors seeking remedies for their own state’s illegal interference with their investments must generally sue in local courts.

The Productivity Commission is therefore implying that Australia should never allow ICSID arbitration in its BRTAs. Arbitration administered under the Rules of the International Chamber of Commerce, for example, would be acceptable: such awards cannot obtain the special enforcement mechanism provided by the ICSID. This is contrary to Australia’s investment treaty practice, and to the spirit of the ICSID Convention to which Australia is party. Australian investors will also no longer be able to enjoy protection under ICSID when partners illegally interfere with their own investments abroad.

The Productivity Commission also insists that the obligations imposed on Australia as host state go no further than those already stipulated in local Australian law. Yet it is often difficult to compare the two, especially as both treaty and local law are continuously evolving. Further, if a potential treaty partner (such as the US) adopts a similar policy, and its local law protections are higher than those under Australian domestic law, then no investment treaty can be concluded involving ISDS. The partner will want its higher standards built into the treaty to protect its own investors, but the Australian government is now unable to provide them.

The Productivity Commission suggests that ‘other options are available to investors’ to protect their investments abroad. But host state courts and domestic law are usually unattractive. The court system may be unreliable and provisions may be idiosyncratic even if offering substantive law protections similar to those found in the home state. Litigation procedures are unfamiliar and may involve more scope for appeals than international arbitration. Judges will also be less specialised in cross-border investment dispute resolution and hearings will often be in a foreign language.

An alternative suggested by the Productivity Commission is political risks insurance. But coverage is typically narrower than under treaty protections and governments often support such schemes anyway. Another given is an investment contract between an investor and the host states, but these involve considerable transaction costs (possibly including lateral pressure brought by the investor’s home state), and such contracts are much less feasible for smaller investors or projects.

A further option is the inter-state claim process that the home state can invoke, on behalf of its affected investor, against the host state. The main problem is that the home state retains discretion and control over this claim process, and again it is less likely to be invoked for smaller investors or projects. An alternative would be to structure an investment through a third country that has an investment treaty with the destination state, which includes full ISDS protections. But the transaction costs and inefficiencies will be large.

The Productivity Commission’s analysis and recommendations are therefore unconvincing, and hopefully will not be followed by the rest of the Australian Government — let alone others in the region. The Commission’s concern that inefficient foreign investors might enter Australia due to artificial advantages created by treaty protections seems more theoretical than real and its proposed responses lack practicality. Concerns over adverse effects from investor-state arbitration are better addressed by drafting exceptions more carefully and building other innovations into investment treaties. Active engagement by Australia in refashioning the investment dispute resolution system in such ways is also crucial to promote its legitimacy, not just its efficiency advantages. This is particularly true for the Asia Pacific region, where investor-state arbitration provisions have become increasingly pervasive in treaty practice.

Luke Nottage is Associate Professor at Sydney Law School, The University of Sydney.

This is based on research for the project, ‘Fostering a Common Culture in Cross-Border Dispute Resolution: Australia, Japan and the Asia-Pacific‘, supported by the Commonwealth through the Australia-Japan Foundation which is part of the Department of Foreign Affairs and Trade. For further arguments and references, see also http://blogs.usyd.edu.au/japaneselaw/.

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The over-sensationalising of Australia’s alleged ‘Secret Dealing on Whale Hunts’, in Australian media reports last week drawing on documents released by WikiLeaks, has been correctly criticised by Tim Stephens. Yet his contribution has engendered further public debate over whaling, including the case recently initiated by Australia against Japan (with New Zealand also intervening) before the International Court of Justice (ICJ).

The Japanese government appears confident about winning the case, basically because the Whaling Convention was set up to permit (sustainable) whaling. Rather than withdrawing from the Convention (like Iceland) after the moratorium on commercial whaling, they want to restore the regime to what they see as its original and plain meaning. They got nowhere in International Whaling Commission (IWC) negotiations because a growing number of states have changed their views on whaling since the 1970s. Charlotte Epstein explains carefully how this shift occurred in her 2008 book.

The Japanese government now relies on the ‘scientific whaling’ provision to keep up the pressure. Yet there is a risk for Japan that even sticking to its literal terms will be found by the ICJ to amount to an ‘abuse of rights’. This is the sort of thing the Australian government is gambling on. It could work if their lawyers can appeal to the Court to adopt an interpretation of the Convention which is less bound by its strict terms and original intent, and instead more liberal or ‘progressive’. It is quite a risky strategy even in an international court, where such appeals tend to be easier to make than in national courts like the (current) High Court of Australia.

The situation is reminiscent of the Australian government’s recent comprehensive defeat in the WTO — the ‘apples case’ brought by New Zealand. The government always had a weak case because Australia’s quarantine restrictions, blocking imports based on fire blight in NZ, were similar to those applied by Japan against US apples — which the WTO had earlier concluded were an overreaction and an illegal barrier to trade. But Australia still tried to run an argument for a broader interpretation of certain WTO agreement provisions. This failed before the WTO (both the panel and the appellate body) but the government was (and still is) able to draw out liberalisation of apple market access — a win for domestic political reasons (for example in Tasmania).

A judgment from the ICJ will not truly resolve the whaling issue. The law applies a particular logic to social complexity — viewing ‘science’ through its own lens, for example — which may or may not add much value to the existing public debate. We still need an outcome that balances science, law, ethics, (short-term and long-term) economics, culture, etc.

Perhaps the Japanese and Australian (and indeed New Zealand) governments will be able to reach a negotiated settlement after full submissions have been presented to the ICJ from both sides, and at least some ICJ judges provide a few hints about their preliminary views on the case. A parallel formal or informal conciliation process, facilitated by a neutral mediator, might help too (after all, compromises are quite often reached in cross-border commercial and investment disputes involving Japanese interests). But other IWC states may not approve of a settlement reached among these parties, so further disputes may arise. And the challenges of sustaining marine resources generally require multilateral (or at least regional) responses — although it would also be helpful if citizens around the world could pressure their national governments to stop subsidising fishing fleets even on a unilateral basis.

Luke Nottage is Associate Professor at the University of Sydney Law School and founding Co-director of the Australian Network of Japanese Law (ANJeL).

This article is adapted from a post on his ‘Japanese Law and the Asia Pacific’ blog. It draws on research from the project ‘Fostering a Common Culture in Cross-Border Dispute Resolution: Australia, Japan and the Asia-Pacific‘ supported by the Commonwealth through the Australia-Japan Foundation which is a part of the Department of Foreign Affairs and Trade.

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2. Whaling a small issue in relations between Australia and Japan
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The Productivity Commission (PC) last month released a Draft Report for its Review of Bilateral and Regional Trade Agreements to reconsider the Australian government’s policy in negotiating Free Trade Agreements (FTAs). The report acknowledges the inefficiencies of preferential agreements compared to multilateral approaches and pragmatically suggests various means to maximise benefits in the short-term.

Unfortunately, that ideal is unlikely to be achieved – risking perverse implications throughout the Asia-Pacific, where Australia has concentrated its FTA activity – if the PC’s Final Report includes all of the suggestions in its Draft Recommendation 5.

Draft Recommendation 5 states:

1. Where the legal systems of partner countries are relatively underdeveloped, it may be appropriate to refer cases to third party dispute settlement mechanisms.
2. However, such process should not afford foreign investors in Australia or partner countries with legal protections not available to residents.
3. Investor-state dispute settlement procedures should be subject to regular review to take into account changing international best practice and the evolving legal systems in partner countries.

As explained in my submission to the PC, I have no great difficulty with the last point, although I suggest that one way to achieve that goal would be for Australia to develop and update a Model Bilateral Investment Treaty (BIT). I have much more difficulty with the PC’s second recommendation, but I have focused on problems identified with the first as it is particularly relevant to Australia’s policy position regarding the Asia-Pacific, especially Japan.

The PC’s Draft Report (at para 3.12) expresses concern about Australia being exposed to claims if FTAs or separate International Investment Agreements (IIAs) allow foreign investors to bring arbitration claims directly against the host state (investor-state dispute settlement or investor-state arbitration (ISA)). But even without ISA, the foreign investor’s home state may bring an international law claim against the host state, with Australia’s FTAs typically providing consent and quite elaborate rules. The investor admittedly faces the disadvantage of having to persuade its home state to act, which is not always easy as the home state may have more important diplomatic agendas vis-à-vis the other state. However, if Australia leaves out ISA from its IIAs, this ‘filtering’ problem conversely afflicts its own investors encountering illegal interference by host states abroad.

A problem of equity arises too, as it has in the WTO context: big firms are more likely than smaller ones to influence the home state’s decision whether to proceed with a claim on their behalf. This implies that when negotiating IIAs, the Australian government should investigate the size and nature of Australian investors (presently or potentially) active in the other state, not just their total investments abroad compared to the total from the other state’s investors.

The Draft Report focuses on whether the host state’s legal system is underdeveloped, rather than its economy – or whether the host state is a net capital importer. An underdeveloped legal system certainly promotes the case for including ISA protections, which are provided through an international process.

But even where developed legal systems are involved, ISA can be justified. Admittedly, investors can usually bring lawsuits in the host state’s courts based on local law, but these standards may vary somewhat from the international law standards. More importantly, local law may cost more to ascertain and argue in court, and disputes will likely be heard by judges with far less expertise in complex trans-border investment disputes than international arbitrators. Further, even developed countries’ legal systems can create problems for foreign investors. Canadians experienced that in the Loewen ‘runaway jury’ claim under NAFTA, for example, and the US-based AbitibiBowater recently settled a claim against Newfoundland.

Yet how likely are investors from developed countries to claim successfully against developed host states? In the context of Australia and the US negotiating to join the Trans-Pacific Partnership Agreement (‘TPP’, which may end up including ISA), the Draft Report states (para 3.12) that the PC ‘understands that no US business has been unsuccessful in pursing [sic] an ISDS claim against a foreign government.’ In fact, the appendix to my submission lists at least 16 unsuccessful claims involving US firms or interests. US and Canadian investors have filed claims against each other’s countries, but have rarely succeeded (as ultimately in Loewen, or recently the Chemtura claim against Ontario). All this suggests, holding constant the other factors already mentioned, that Australia should be open to including ISA even in treaties with developed countries – providing further protection to investors for the most egregious cases of host state interference.

Further supporting that stance, several (more or less) developed countries with sophisticated legal systems have concluded treaties providing for ISA: the Hong Kong – Japan BIT, the Japan-Korea BIT, the US-Singapore FTA, the Hong Kong – UK BIT, the Japan-Switzerland FTA, the Australia-Singapore FTA, the Australia-Chile FTA, the ASEAN-Australia New Zealand FTA (albeit with an Australian-NZ carve-out as they complete negotiations for a bilateral FTA investment chapter), and the Energy Charter Treaty (with Japan as a member and Australia already a signatory).

Note that this list includes Asia-Pacific jurisdictions – especially Japan – and sees the emergence of regional agreements. If Australia really wants to achieve a multilateral end-game despite the WTO impasse, then ‘open regionalism’ will need to progress even further. And it will be harder to incorporate ISA into regional agreements if ISA is tainted by the idea that it is only a device for developed countries to beat up on developing countries. There is already too much criticism along those lines, often ill-informed. Already, a few South and Central American countries are stepping back from full engagement, and some now call for a return from treaties to individually-negotiated investor-state investment contracts. Yet that would dramatically increase complexity and transaction costs – good for lawyers, but probably not for taxpayers. There are instead many ways to keep improving the treaty-based investor-state arbitration system from within.

This opinion is premised on developed countries acting responsibly, keeping firmly in mind both the short-term and long-term advantages as well as the disadvantages of ISA, and addressing these concerns in treaty practice as well as by other means. From past treaty practice, as well as the fact that Japan remains a very large net FDI exporter into Australia, we can expect Japan to press for ISA to be included in the bilateral FTA under negotiation since 2007. Some good broader arguments to justify that approach have been presented here, for consideration by the Australian government as well as other policy-makers in the region.

Luke Nottage is Associate Professor at the University of Sydney Law School and founding Co-director of the Australian Network of Japanese Law (ANJeL).

This article is adapted from a post on Luke Nottage’s ‘Japanese Law and the Asia Pacific’ blog. It is based on research for the project, ‘Fostering a Common Culture in Cross-Border Dispute Resolution: Australia, Japan and the Asia-Pacific,’ supported by the Australia-Japan Foundation which is part of the Australian government’s Department of Foreign Affairs and Trade.

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Privately-supplied alternative dispute resolution (ADR) services are increasing in Japan. This is partly explained by a  shift in self-image among many bengoshi lawyers, linked to the increasing presence of corporate law firms.  In 2004, the ‘Law to Promote the Use of Out-of-Court Dispute Resolution Procedures’ which followed a Judicial Reform Council (JRC) recommendation in 2001, was rapidly enacted.

Despite its slow start, this law has been successfully promoting privately-supplied ADR services.

Court-annexed mediation and recent improvements in the litigation process have, however, met with a conservative backlash among bengoshi.

The election of the new Japan Federation of Bar Associations (JFBA) President is likely to further hinder the growth of private ADR services and institutions. To combat this, private suppliers will need to develop niche markets promoting more facilitative (not evaluative) forms of ADR. This is a common characteristic of ADR in Australia, developed in response to ballooning litigation costs.

The reform debates regarding the 2004 Law highlighted a view that promoting ADR was consistent with the rule of law – the ultimate aim of judicial sector reform. ADR could complement court proceedings if it could bring disputing parties closer together ‘in the shadow of the law’, supplemented by an improved system of courts (and predictable substantive law). ADR could also advance the vision of the JRC (and the government generally) of more informed and active citizens, taking greater responsibility for their own actions rather than passively relying on guidance from public authorities.

A second debate that emerged, particularly within the Study Group set up in late 2001 to propose concrete elements of the new legislation to promote ADR, was whether ADR providers should be licenced, certified or completely deregulated. (For both debates and the following summary of the outcomes, see Yamada, Aya (2009) ‘A.D.R. in Japan: Does the New Law Liberalize A.D.R. from Historical Shackles or Legalize It?’, Contemporary Asia Arbitration Journal 2 at 15-16).

Ultimately the Group and the Law provided a MoJ certification scheme. The rationale was that this was needed to promote public trust in ADR, given already the active use of Court-annexed conciliation on the one hand, and on the other the continuing involvement of yakuza gangsters and other undesirable providers of dispute resolution ‘services’ in Japan. This view prevailed over those who argued that liberalisation would have been more consistent with promoting private ADR and the broader deregulatory program of the government. Liberalisation was also seen as too great a shift from the status quo, which was close to licencing: Art 72 of the Lawyers Law (criminally) prohibited legal services provided other than by bengoshi except when (i) not offered on a (continuing) business basis, (ii) a legitimate act, or (iii) other legislation provided differently.

The Law’s certification scheme represented a compromise aimed to placate bengoshi by coming within exception (iii), while appealing to those sceptical about excessive government control over the ADR services industry. It offers a ‘carrot’ (to encourage certification by ADR providers) rather than using a ‘stick’ (forcing providers to get licenced before they provide services). Providers do not need to become certified, although then there is a risk that they may violate the Lawyer’s Law unless they fit within another exception to Art 72. But if they do get certified, they obtain three specific advantages:

1. If their procedure ends without the parties settling and one sues within a month, the prescription period is calculated as if the suit had been brought on the date the claim was filed with the certified ADR procedure (Art 25);
2. If a suit is pending but parties agree to use the certified procedure or it is already underway, the court may suspend litigation proceedings for up to four months (Art 26; cf court-annexed conciliation, where there is no time limit);
3. Parties can use certified ADR instead of the court-annexed system (Art 27) if other legislation requires conciliation before litigation (eg land or building rent disputes under Civil Conciliation Law Art 24-2(1) or divorces under the Domestic Relations Adjudication Law – kaji shimpan ho).

Certification also shows the public that the private institution (or individual) has fulfilled minimum standards detailed in Art 6, and is not disqualified under Art 7 (for example, a yakuza member). These standards are mostly procedural and mostly consistent with international standards.

After a slow start (only 5 by November 2007) there has been an almost exponential growth in certified ADR providers (26 by January 2009 and 61 by March 2010).

There is no comprehensive data on whether certification has led to increased filings and cases being resolved through these providers of ADR (which the law defines as processes to encourage settlement, thus excluding arbitration from its scope). Anecdotal evidence suggests that this has not yet occurred, and that public knowledge and trust remains lower than for court or government-administered ADR. Businesses, however, do seem to be settling cases more often at an earlier stage through the certified bodies (or even in direct negotiations) in order to avoid a formalised mediation process .

A second effect is a growing diversification in ADR providers. Many certified are smaller and/or newer bodies specialising, for example, in labour or social security related disputes. The Japan Industrial Counselors Association also adopts a more facilitative style of mediation, in contrast to Court-annexed (and even Bar Association Centre) evaluative mediation. Other government agencies have become more interested in privately-supplied ADR. For example, METI in 2008 allowed those certified under the MoJ to obtain further METI certification to become involved in mediations under the Law on Special Measures for Industry Revitalisation.

Thirdly, due to the certification standards the providers have become more conscious about the need for transparency and structure in designing and implementing ADR processes. For example, in the industry-association based PL ADR Centres for consumers’ product defect related claims (two of which are now certified), many cases have been resolved without proceeding to a cheap but formal mediation thanks to Centre staff engaged in ‘shuttle diplomacy.’ They are, however, now more conscious of the need to maintain due process standards (including confidentiality, adopted voluntarily by the centres) even at this stage.

Lastly, networking is emerging among ADR providers. For example, the (certified) Osaka Bar Association tries to work with other providers, as do some of the Ho-terasu offices. Mediators registered under the Civil Conciliation Law are also starting to up-skill through training offered by private certified ADR providers.

These changes may seem small, but they are very significant. They will encourage the involvement of bengoshi in privately provided ADR, although not necessarily so much in Bar Association ADR Centres. Yet the traditional, court-annexed ADR is extremely well-established due to its long history, public trust in the judiciary, and low cost (with registered mediators so far accepting low wages for the honour and opportunity of serving in civil conciliation law proceedings).

Another challenge to (even certified) privately-provided ADR services comes from a further round of reforms to the Code of Civil Procedure, in effect from 2004. This opens more avenues to the courts and may also make it easier to settle disputes within the litigation process. For example, these amendments:

• - allow parties to seek opinions from expert advisors before formally lodging suit;
• - encourage more use of expert witnesses (kanteinin) during proceedings; and 
- introduce a system of ‘expert commissioners’ (semmon i’in) who can provide explanations in writing or orally before the parties and, with their consent, even attend settlement conferences to facilitate settlement or attend witness examinations to ask questions.

This article is adapted from a post in the ‘Japanese Law and the Asia Pacific’ blog.

LuKe Nottage is Associate Professor at Sydney University Law School and founding Co-Director of the Australian Network of Japanese Law (ANJeL).

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Imagine a transnational regime with these institutional features:

• Virtually free trade in goods and services, including a ‘mutual recognition’ system whereby compliance with regulatory requirements in one jurisdiction (such as qualifications to practice law or requirements when offering securities) basically means exemption from compliance with regulations in the other jurisdiction. And for sensitive areas, such as food safety, there is a trans-national regulator.

• Virtually free movement of capital, underpinned by private sector and governmental initiatives.

• Free movement of people, with permanent residency available to nationals from the other jurisdiction – not tied to securing employment.

• Treaties for regulatory cooperation, simple enforcement of judgments (a court ruling in one jurisdiction being treated virtually identically to a ruling of a local court), and to avoid double taxation (including a system for taxpayer-initiated arbitration among the member states).

• Government commitment to harmonising business law more widely, for example consumer and competition law.

No, this is NOT necessarily the European Union (EU). These aspects characterise the Trans-Tasman framework built up between Australia and New Zealand, particularly over the last two decades. Sometimes this has been achieved through treaties (binding in international law), sometimes in softer ways (such as parallel legislation in each country), and sometimes even through unilateral abrogation of national sovereignty (New Zealand regarding film classifications!). Both countries are also actively pursuing bilateral and now some regional Free Trade Agreements (FTAs), especially in the Asia-Pacific.

So, why can’t these Trans-Tasman initiatives, and perhaps even some EU developments, provide a template for a true ‘Asia Pacific Community’ – beyond even what Australian Prime Minister Kevin Rudd apparently has in mind, or for an ‘East Asian Community’, as suggested by the new Japanese PM, Yukio Hatoyama?

The region certainly remains very diverse in terms of social and legal or political systems. Yet economic integration has burgeoned since the 1980’s, and will intensify even further as pan-Asian production networks have been forced to turn away from European and US markets in the wake of the Global Financial Crisis (GFC). The ‘diversity gap’ is narrowing significantly as the EU itself expands and becomes more diverse, at least when compared to the more developed democracies of East Asia, Australia and New Zealand. Indeed, the EU’s ‘Eastern Enlargement’ is forcing a marked reconceptualisation of its initial political motivation, which was to engage economic integration to maintain peace not only among major powers like Germany and the UK, but also to counterbalance the new Communist bloc within Europe.

The Cold War has also now thawed in most of Asia, which suggests the need for a similar rethink about why and how ASEAN was established – in the shadow of tensions in and with Vietnam. The 2008 ASEAN Charter as well many initiatives in economic policy particularly since the 1997 Asian Financial Crisis indicate some significant shifts away from traditional informal ways of promoting integration among the 10 member states. And who would have predicted in the 1990s the recent inauguration of the ASEAN Intergovernmental Commission on Human Rights?

Anyway, true respect for diversity within Asia-Pacific countries should include acknowledgement of subgroups that do exhibit greater convergence. For example, Australia and New Zealand share many commonalities with Singapore and even Malaysia, not only in terms of legal systems but also increasingly in standards of living. The economic parallels are even stronger with countries like Japan and now the Republic of Korea, with their originally ‘civil law’ traditions also undergoing significant transformations particularly over the last decade. These three pairs of countries could conceivably join in some more intense forms of economic partnership over the next decade. This has already occurred in the Trans-Tasman context – albeit with a sense of ‘back to the future’ for those two former British colonies.

Appreciation for the potential of subgroups is also found, moreover, within the EU system. It helps get around the problem that we are dealing with dual and fast-moving targets – in Europe and in the Asia-Pacific. In drawing inspiration already from the EU, we should also appreciate that ‘Brussels was not built in one day’. Various institutions have been grafted on or modified, through trial and error, and only some (or new variants) may prove useful for (some) countries nowadays within the Asia-Pacific region.

Countries like Australia need to examine the EU system more comprehensively to identify how such features might be adapted. We must get away from preconceptions generated, for example, by negative experiences in dealing with agricultural trade policy. For its part, the EU needs to overcome difficulties in projecting just what it stands for, particularly in Asia. Ironically, this problem is exacerbated by the EU’s internal diversity and the fact that broader foreign policy powers have been largely left to member state sovereignty.

More generally, the GFC has led to a reassessment of market liberalisation policies themselves. Rudd has consistently protested about the excesses of market fundamentalism, although it remains to be seen whether for example how far this will translate into reforms to consumer protection legislation in Australia (and New Zealand). Such views underpinned his electoral victory in 2007 (although a windback of labour market deregulation was a much higher profile issue). But there was a similar backdrop to Hatoyama’s election victory in Japan this August – what Arthur Stockwin described recently as a ‘political earthquake’. The new Japanese government appears likely to intensify measures to promote consumer rights and product safety, while simultaneously promoting actively both the WTO system and bilateral or regional FTAs. And the former EC Commissioner and now WTO Director-General, Pascal Lamy, has long pointed out that both East Asia and the EU share an appreciation not only of diversity, but also the need to balance free markets with other social and political values (Philomena Murray, ed, Europe and Asia: Regions in Flux, 2008, p7).

What is likely therefore to emerge – or, at least, what we should now be encouraging – is deeper and broader economic integration in the Asia-Pacific (or at least Australasia) that simultaneously incorporates regulatory safeguards to meet the challenges and expectations of our brave new post-GFC world. These innovations may be built into FTAs or negotiated out alongside them, but it needs to be done in a more concerted and comprehensive manner. Collaboration in regulating consumer product safety, financial markets, environmental protection, labour standards and investment regimes are only some of many possibilities explored in my Sydney Law School Research Paper downloadable here.

And, if it is still too difficult to use the ‘E’ word in contemporary discussions about an Asia-Pacific Community, surely there exists more scope to highlight some EU-like analogies already found in the Trans-Tasman context. Indeed, ignoring that context reminds me of the scene in Moliere’s comedy where a main character suddenly exclaims:

‘Good heavens! For more than forty years I have been speaking prose without knowing it! [Par ma foi, il y a plus de quarante ans que je dis de la prose, sans que j'en susse rien!]’ (‘Le Bourgeois Gentilhomme’ [1670] Act II, Scene iv).

1. Where does Australia really want regional architecture to go?
2. Emerging regional architecture in Asia
3. Competing visions: EAS in the regional architecture debate

Mainstream Australian media provided distressingly meagre coverage of Japan’s exciting general election for the more powerful lower House of Representatives, which saw a remarkable about-face. The centrist Democratic Party of Japan (DPJ) went from 115 to 308 seats, with allies Social Democratic Party (SDP) (the small leftover of the once-powerful Japanese Socialist Party) and the New Party Nippon taking another 7 and 3 seats respectively. Overall, these and other former Opposition parties took 340 seats, whereas the conservative ruling coalition suffered a massive defeat. The Liberal Democratic Party (LDP) dropped to 119 seats, from 300 before the election (and 296 in 2005, the previous election called by Junichiro Kozumi who then retired as Prime Minister). The Komeito dropped from 31 to 21 seats, meaning that the former ruling coalition now only has 140 seats. In short, the tables have turned almost completely since 2005, in a country famous for its aversion to abrupt political changes.

This piece is a reflection on this result and the potential implications it has for policy and law reform in Japan.

Newspaper coverage in English tends to suggest that this is the first time the LDP has really lost power since 1955. Commentators usually do mention its loss in 1993, but add that this was only for a year. This overlooks the fact that the SDP led a coalition incorporating the LDP from 1994-6, which saw some significant political developments (eg a major settlement of the long-running Minamata Disease litigation). More importantly, the year the LDP was completely out of power generated important legislation ranging from measures promoting transparency in administrative procedures through to strict liability for defective products. It also laid the groundwork for further substantive law reforms in similar areas, such as the Official Information Disclosure Act of 2001 and the Consumer Contracts Act 2000.

Most importantly, the LDP’s fall from power in 1993 made them and the bureaucracy reassess their close relationship. LDP politicians realised that even once back in power, they might lose again. From that perspective, a political process more open to diverse stakeholders – including ‘opposition’ interests – became more attractive. As part of this ongoing rethink, from the late 1990s the ‘deliberative council’ system for law reform certainly became more transparent, and alternative law-making processes developed as well (eg private Members’ Bills).

The LDP, prompted also by the Komeito, also began incorporating many centrist policies into its own program – trying to steal the DPJ’s thunder. Such developments provide a partial explanation for the counter-intuitive situation of a conservative coalition pressing ahead with major judicial reforms from 2001, These covered not just civil justice (which at least some business interests also wanted), but also criminal justice (including the new quasi-jury system, with its first trial recently concluded in the Tokyo District Court).

These shifts – accommodating concerns of a wider voter base, in a more porous process serving as a back-up plan in case the LDP lost power again – seemed to be working out quite well, especially as the Japanese economy finally returned to a growth path from 2002-7. But then came the global financial crisis and economic stagnation that is potentially far worse than during Japan’s ‘lost decade’ of the 1990s, because it was driven by the world-wide collapse of all Japan’s major markets for both exports and investment (including even China). Those who had already suffered from major socio-economic reforms and Japan’s banking crisis in the late 1990s became increasingly concerned about the LDP’s capacity to address these even larger challenges. One such group comprised the burgeoning numbers of ‘involuntary non-regular workers’, young men and others who no longer had the option of one day joining the elite ‘lifelong employee’ cadre rather than deliberately choosing not to take up that life. (This group was highlighted in the recent lecture on ‘flexicurity’ presented at Sydney Law School by former Tokyo University Law Dean, Emeritus Professor Kazuo Sugeno). Unsurprisingly, despite LDP-led law reform in 2007 aimed at part of this group, the DPJ was able to attract a much higher proportion of younger voters.

All this means that we may not witness now huge changes in both the style and substance of law reform in Japan. This will not merely be because the DPJ government is new and relatively inexperienced, or due to reactionary forces, but also because some significant changes were already afoot. It is interesting, for example, to compare the pre-election manifestos of the LDP and the DPJ (themselves one indication of broader transformations in Japanese politics over the last decade) and other policy statements. On the other hand, it is certainly worth examining the DJP’s manifesto ‘promises’ to get a better idea of the new government’s likely legislative program for the next few years.

The DPJ’s policy summary (not necessarily identical to their manifesto distributed during the election compaign) is still currently only available in Japanese. While the pace of change may be slow, the DPJ states policies relating to a wide variety of areas of law reform. Particularly, the recognition of Ainu as an indigenous people, allowing married couples to retain separate surnames, placing limits on amakudari [descent from heaven], ie retiring from government into private sector jobs, greater devolution and citizen involvement in governance, securing better conditions for non-regular workers, and preventing and resolving disputes based on the Labour Contracts Act.

1. Japan: Is the DPJ the party of economic reform?
2. Japan: Hatoyama is the problem with his government
3. Reversing reform: How special interests rule in Japan

The Prime Minister, Kevin Rudd, has just contributed a long essay with this title to the Sydney Morning Herald (25-6 July 2009). Here are some extracts that should be connected to ongoing initiatives and discussions about consumer credit and consumer law more generally:

1. Rudd’s grand plan now for the forthcoming ‘building decade’:

‘It will take time to build the foundations of Australia’s long-term global competitiveness. But we must take time to do it thoroughly. We must take time to invest in the infrastructure of the future, the skills of the future, the competitive tax system we need for the future, an ambitious agenda for competition and regulatory reform, and to maintain the best national balance sheet of major advanced economies.’

2. On ‘causes of the current crisis’:

Similarly to the US, ‘Australian consumers also spent up big. Between 1996 and 2007 there was a 460 per cent increase in credit card debt, a 340 per cent increase in household debt, a 450 per cent increase in corporate debt and a 200 per cent increase in net foreign debt.’

3. On ‘the ideological hypocrisy of the right’:

‘As I have argued elsewhere, the boom-and-bust economic cycle of the past decade has been an unavoidable consequence of a decade of neo-liberal free market fundamentalism that reinforced a culture of corporate greed and excess in the financial sector. The central principles of this extreme form of capitalism are that markets are self-regulating; that government should get out of the road of the market altogether and that the state itself should retreat to its core historical function of security at home and abroad.

This fundamentalist ideology of self-regulating markets has imploded comprehensively with the current crisis. We have seen spectacular market failure requiring equally spectacular government intervention in the economy to effectively save the system from itself.’

4. As for ‘new challenges of recovery’:

‘This crisis has shown we have reached the limits of a purely debt-fuelled global growth strategy. Not only will the neo-liberal model of the past not provide growth for the future, its after-effects will make recovery more difficult. Mountains of global public and private debt, global imbalances, and a weakened global financial system will drag on global growth for a long time.’

5. Out of ‘five key areas to boost productivity’ and hence Australia’s new global competitiveness, ‘First, regulatory and competition reform’ (plus Infrastructure, Innovation, Skills and Tax – then a broader reform agenda including savings and retirement income):

‘Competitive markets encourage business innovation and productivity. Sound regulation can bring many benefits to consumers and businesses by promoting employee welfare, consumer safety, fair competition and protecting property rights. Poor regulation, however, can damage wealth creation, stifle business innovation and hamper our ability to deliver core public services. Efficient regulation strikes a balance that encourages competition but protects employees, consumers, small businesses and macro-economic stability. That is why the Government has launched a comprehensive regulatory reform agenda under the Council of Australian Governments.’

To my mind, it is heartening that Rudd hasn’t recanted from his critique of market fundamentalism in policy formation and implementation, despite the considerable controversy it engendered (for various more thoughtful responses, see the May 2009 issue of The Monthly).

But ‘consumer safety’ gets only a bare mention from Rudd. And that comes in the context of CoAG’s broader (BRCWG) regulatory reform agenda. The latter in fact looks rather like business as usual – ‘the reduction of the regulatory burden on businesses by accelerating and broadening the regulation reduction work program, and improving processes for regulation making and review’. Especially since this BRCWG agenda also now includes a more conservative government in New Zealand.

Rudd’s essay also doesn’t mention unfair consumer contract terms legislation, perhaps because the Trade Practices Amendment Bill was tabled already in late June. But we know from the Victorian state legislation from 2002 and the 1993 EU Directive that the success of such legislation is very dependent on commitment by regulators (and therefore their political masters and mistresses) to follow-up with publicity, guidance and enforcement activity. Even more surprisingly, Rudd doesn’t mention the broader ‘Australian Consumer Law’ project led now by the Treasury, nor its National Consumer Credit Law proposal. The latter includes new ‘suitability rules’ for lenders that should significantly restrict their ability to take advantage of increasingly obvious psychological biases and heuristics that have underpinned the burgeoning consumer over-indebtedness highlighted again by Rudd in this essay.

Do such omissions mean that these reform initiatives already have so much backing from the Prime Minister and his Cabinet (including a new Consumer Affairs Minister) that the reforms are expected to be implemented without any problems? Or instead do the omissions indicate consumer law’s low priority for this Government, as well as Howard’s over 1996-2007, despite Rudd’s renewed call now for a more level playing field in policy-making overall? We should be able to judge this better by next year’s election, when the entire Consumer Law and consumer credit packages are supposed to have been enacted. The answer has important repercussions not only for Australian consumers, businesses, and governments. It also matters to those close trading partners already increasingly integrated in regulatory harmonization extending beyond the scope of classic WTO/FTA agreements (such as NZ) or potentially so (such as Japan).

1. Consumer over-indebtedness in Japan, Australia and the US
2. Australia’s lethargic law reform: how (not) to revive consumer spending
3. The long and rocky road to global recovery

Peter Drysdale’s weekly editorial,  along with related postings to this blog and enormous media attention in Australia and elsewhere, focuses ‘on the continuing detention of Rio Tinto executive, Stern Hu, in Shanghai on allegations of espionage’. Drysdale signposts some future analysis of ‘the legal framework under which Hu’s detention has taken place’. He also emphasises that we need ‘a cooperative framework—bilaterally, regionally and globally’ for ‘China’s authorities to avoid damage to the reliability of markets and for Australia to avoid the perception of investment protectionism’.

The most pressing legal (and diplomatic) issues concern China’s criminal justice system, especially when ‘national security’ is allegedly involved. But we need to consider some broader ramifications, including investment treaty protections. Part of the backdrop to the Hu saga could be that nations retain considerable sovereignty when it comes to deciding on the operational ambit of foreign investments. Investment treaties – which may be bilateral or regional, stand-alone or folded into broader Free Trade Agreements – now often entrench substantive liberalisation. But these treaties maintain exceptions for national security or subject investments to national interest tests. So even if Australia and China conclude their current FTA negotiations making it broadly easier for firms from either country to invest in the other, that sort of exception could be invoked by Australia, for example, to block or restrict an investment like the now scuttled proposal by Minmetals to acquire Oz Minerals back in March 2009.

Explicit restrictions along these lines had diminished considerably since the 1990s, especially in developed countries like Australia, as competition for FDI burgeoned world-wide. But now they appear to be on the rise again. Concerns have grown about sovereign wealth funds, for example, as well as China’s push to secure resources directly (rather than through long-term contracts combined with smaller equity stakes, the longer-standing approach pursued by Japanese companies in Australia). And after an initial period where countries were desperate to attract funds after the GFC, those market collapses are perhaps forcing a rethink of (explicit or mostly implicit) models based on the merits of lightly regulated markets.

However, part of the recent shift may be due to the growing importance of investor-state arbitration provisions in investment treaties. Under these procedural rights, the investor can claim directly against the host state for breaching substantive protections (such as expropriations, or transparent ‘fair and equitable treatment’) for investments that have been made. Thus, for example, the NZ-China FTA contains an exception for certain ‘essential security interests’ (Art. 201) but also full investor-state arbitration provisions.

Even without such provisions, the foreign investor may be more likely nowadays to be able to get their home state to bring a claim in public international law (say before the International Court of Justice) against the host state, with any compensation obtained from the host state then passed on to the investor. This indirect means of protecting investors was less popular when states tended to temper economics with politics or broader strategic issues. But nowadays in the WTO, for example, they often sue each other over economic issues, with interested industries or firms egging them on (think of Microsoft and the US enforcing TRIPS obligations). And investment disputes, thanks to burgeoning arbitrations that are brought directly by investors against hosts, are increasingly seen as economic rather than political or diplomatic disputes, likewise resolved through a much more ‘judicialised’ procedure.

Either way, the indirect or increasingly direct threat of a claim about an investment that has been made provides an incentive for a host state to rely more on residual exceptions to allowing investments in the first place, such as the national security exception. If so, however, we are likely to see more cases like that involving Stern Hu. That is, the (more broadly frustrated) home state of a frustrated investor reacts – even in a later context – against what it may have perceived as over-eager invocation of the national security exception. The irony in this case, perhaps intentional, is that China is now using its own national security law against a citizen of Australia. But it would be particularly unfair to be making an example of an individual for the actions of his country, particularly when employed by a firm (Rio Tinto) not involved in Australia’s original invocation of the national security exception currently retained in its FDI legislation.

These sorts of issues are likely to become even more acute in light of some very recent developments in investment treaty arbitration practice (Investment Arbitration Reporter 2(11), 29 June 2009). In cases involving treaties with Russia and now China, tribunals have ruled that provisions that seemed to restrict arbitrations to quantification of compensation amounts should be read to extend arbitrability to the question of whether expropriation took place. Thus, even first- or second-generation investment treaties with China (including Australia’s dating back to 1988) may already apply far more extensively than almost everyone had thought (cf. e.g. Gallagher and Shan, Chinese Investment Treaties, OUP 2009). In any event, China is renegotiating such treaties or concluding ones with new partners (like NZ) that clearly allow arbitrability of all issues. The backdrop is that China is now a major FDI-exporter, whose investors are already beginning to bring claims abroad – although so far no investor (or law firm wanting to do other business in China) has risked claiming against China (see my paper with Romesh Weeramantry on this here [pdf]).

If these trends continue, namely direct investor-state arbitration provisions are concluded or reinterpreted to restrict the ability of home states to have second thoughts about foreign investments once they have been accepted, it seems to me that they will be more careful in allowing in FDI. But when they do, somewhere down the line, they may get a ‘Hu’ reaction from the frustrated home state. If so, then how Australia now reacts to China’s detention of Hu will be very important for the evolving field of investment treaties.

This post originally appeared on the Japanese Law and the Asia-Pacific blog

1. The real costs and benefits of investment treaties
2. What future for investor-state arbitration provisions in Asia Pacific treaties?
3. Getting foreign investment policy and China right

Dr Malcolm Cook and Mr Andrew Shearer at the Lowy Institute in Sydney published last month a short analysis entitled Going Global: A New Australia-Japan Agenda for Multilateral Cooperation:

To help both governments navigate [a] more complicated and uncertain international environment, the paper offers a agenda for enhanced Australia-Japan multilateral cooperation organised around:

- support for American global leadership, and
- reforming post-war multilateralism.

Three areas of international policy are particularly well suited to closer Australia-Japan cooperation in pursuit of these goals: climate change and energy security; nuclear non-proliferation; and official development assistance.

I have doubts about these two foundational principles, especially over the mid- to long-term, given America’s own longstanding ambivalence about multilateralism, and its relative decline particularly since the GFC.

In the short term, however, it seems worthwhile to think more deeply and creatively about three of their seven specific recommendations:

- Leverage APEC and the East Asia Summit more to act as caucuses in multilateral bodies like the WTO …
- Better coordinate Australian and Japanese aid policies and programs …
- More ambitiously, develop and pursue an Australia-Japan agenda for reform of the
multilateral system. (p2)

Mostly implicit in the analysis is the rise of China, although that the paper does mention that specifically (at p5) – along with the rise of India – as ‘changing power balances in the region’. Ian Castles has disagreed recently with the foreign editor of The Australian on ‘Measuring China’s Size and Power’, even in economic terms. How quickly China grows relative to the US will partly define the ‘short term’ for both Australia and Japan.

Already, Tobias Harris reports that PM Aso alluded recently in Beijing to the possibility of a Japan-China FTA. If this eventuates before any Japan-US FTA, what does this bode for the ‘support for American global leadership’ advocated by Cook and Shearer?

Nor should we forget India, as Bill Emmott argued in Rivals last year. Even in the short term, Raghbendra Jha remains ‘guardedly optimistic’ about its growth prospects – and everything, especially nowadays, is relative. Already, Japan has commenced bilateral FTA negotiations with India.

The point is that the world is becoming increasingly multi-polar, especially as the GFC and recession hit the US particularly hard. Hitching our wagon to America may well leave us behind. It might be better for Japan and especially Australia to support other economic powerhouses in leadership bids, on a more ad hoc basis. Similarly, regarding at least some security matters (like invasions of Iraq), but I leave that to the experts.

Another point is that America itself has hardly been exemplary in promoting ‘post-war multilateralism’, whether in security or economic affairs. (Think of its pre-WTO approach to market access in Japan and elsewhere, its slow implementation of adverse WTO rulings, and America’s active involvement in bilateral and regional FTAs – beginning with NAFTA.) That’s understandable for a great power, and the US may be – or turn out to be – better than others like the EU or large countries in Asia. But we don’t yet know for sure, and meanwhile it leaves a tension between the two guiding principles proposed by Cook and Shearer.

In the (truly) short term, however, this approach could be useful in some fields. For example, Australia and Japan could include balanced investor-state arbitration provisions in the FTA they are currently negotiating. These could serve as a template for those in the Trans-Tasman Partnership Agreement, which both Australia and the US wish to join. A permanent Appellate Body and improvements in state-to-state dispute settlement could be added to such Agreements, which in turn might promote useful reforms to the WTO’s Dispute Settlement Understanding at the multilateral level. But even in this process, note that the US could not call all the shots, even with the support of Australia and Japan. Other countries are already involved, and pragmatic accommodations reached. All the more so, if trying to include further APEC or East Asian Summit members.

A second area where the latter two countries could collaborate is ‘legal technical assistance’, within their ODA programs. For example, AusAID programs increasingly emphasise long-term sustainability, as with Sydney Law School’s program to promote human rights awareness among police and prosecutors in Nepal. As well as ‘training the trainers’, as in that program, it would be useful to be able to commit to follow-ups with other grants through agencies like JICA in Japan. More simply, the two ODA agencies could cooperate in a one longer-term project. This, in turn, might be better coordinated with regional or multilateral initiatives.

But note again that the vision of the perfect ‘rule of law’ in the US is not necessarily identical to that which has evolved over the centuries in Australia, from the original English variant of the common law tradition. Let alone the vision found in the countries like Japan, with a legal system that has borrowed heavily from continental European law traditions. So, once again, bilateral cooperation may come up against a trade-off between American leadership and a new multilateralism.

1. Chinese multilateralism: implications for Sino-US relations
2. Multilateralism in the Asia Pacific: What might have been, and what could be
3. Australia’s trade policy returns to multilateralism