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Arup, Christopher --- "The US-Australia FTA: Law making on the frontier" [2004] AltLawJl 7; (2004) 29(1) Alternative Law Journal 27

Law making on the frontier


Australia and the United States have struck a Free Trade Agreement (FTA). Only the basic features have been revealed. Nonetheless, we can say that the agreement (AUSFTA) is not just an accord between two like-minded countries, it is another step in a strategy to remake law when multilateral ism fails to satisfy. These contemporary FTAs make law, first a strategic kind of public international law, and then domestic law as the parties implement their prescriptions. Where will the accountability lie when law is made this way?

Legal impact

Government negotiators from two states make law when they clinch a deal. The deal trades off advances and concessions in different sectors, mixing economic and political considerations. When the confidential negotiations prove to be conclusive, they result in a legal regime that locks in future governments and communities, reducing their autonomy to fashion domestic regulatory options responsive to changing circumstances. In Australia, there is no requirement for the agreement to be submitted to parliament for ratification.

The impact of the FTAs is cumulative. Consistent with the Most-Favoured Nation (MFN) principle of non­ discrimination, some obligations must be extended immediately to the nationals of third countries. Others become the standard setter for further agreements. Many of the previous US agreements have been made with developing countries. While small beer, the agreement with Australia is significant because it is between two developed nations; it may establish a model for FTAs with bigger countries and the European Communities (EC).

Once bilateral agreements were modest arrangements, safeguarding fair and equitable treatment for foreigners who had become involved in other countries. In the 1990s, the US stepped up the action with a series of bilateral investment treaties and intellectual property agreements. Now the contemporary FTAs match, and in some respects exceed, the ambitious substantive coverage of the multilateral trading system. Their characteristic norms and disciplines make inroads into local policies and practices that we traditionally associate with cultural activities, social services, health and environment-and domestic law making.

This article focuses on the prescriptions for domestic law. My material will be the FTAs that the US has struck with other countries already, together with the information that has become publicly available about Australia's agreement.[1]

Some comments are necessarily speculative. The text remains to be finalised and some items require further negotiation. The opposition parties might oppose changes that require implementation through legislation. Some changes will be executed administratively. It is possible that the parties have kept some controversial items out of the agreement while undertaking informally to make changes in the future.

The main thrust of trade liberalisation is to rollback local regulation that disadvantages or just stands in the way of foreign traders. Not all regulation is eliminated in this process, so the FTAs strive to discipline the content and form of the remaining domestic regulation. Furthermore, along some dimensions such as intellectual property, the FTAs demand that governments re-regulate. Consequently, we can say that an FTA makes new law for domestic legal systems.

The legal bedrock of an FTA is the set of basic norms with which all trading nations should conform. They often begin by reiterating the obligations of the WTO agreements fashioned in the Uruguay Round of negotiations. But we should note that bilateral FTAs make more pointed prescriptions. At least one side of the two-country equation seeks to bring the other's legal system more into line with its own laws and practices. For example, the US FTAs contain specifications for private rights, law enforcement practices and judicial processes. They nominate tribunals for dispute settlement As these tribunals develop a jurisprudence, they offer a further opportunity to export regulatory preferences to another state.


I shall use three examples, the first being the protection of investment. The FTA is in fact a trade and investment agreement The investment chapter might well be the most substantial addition to the international law governing Australian domestic policy making. At the end of the Uruguay Round, the WTO Agreement on Trade-Related Investment Measures (TRIMS) agreement was narrowly confined to certain performance requirements placed on those manufacturing goods locally. Since then, the WTO membership has not been prepared to negotiate a full-scale investment agreement. As we know, the Multilateral Agreement on Investment (MAl) proved too stringent a regime for even the industrialised countries in the OECD to accept; the agreement was shelved.

Proponents argue that, if we are to build a constitution for a world economy, investment protections are a crucial component Goods and services trade is now difficult to distinguish from investment activity, think for example of financial trades or mergers and acquisition activity. Foreign direct investment helps constitute the networks through which corporate groups and alliances coordinate manufacturing, servicing and distribution on a global scale. A sizeable proportion of cross-border 'transfers are conducted intra-firm. The networks become so complex, rt can be hard to tell what is foreign and what is not.

Yet national governments still seek to control the level of foreign participation in those sectors they identify as sensitive or strategic. They do so for a range of reasons, which include national security, economic self-sufficiency and cultural integrity. National differences have not wholly disappeared. Multinationals continue to export distinctive management practices, cultural values and social policies from their home bases; natural resources, processed goods and financial profits are transferred back home from the host countries.

While they generally welcome foreign investment, host governments still seek to apply local performance requirements to investors from time to time. So too they want to ensure that their domestic regulatory standards are observed. The host location should benefit from foreign participation. As multinationals do not have the same attachment to the jurisdiction as locals, special measures may be needed to ensure they are accountable.

We know that Australia has a liberal policy of accepting foreign investment at home. It also supports liberalism in order to promote opportunities for Australians to invest abroad. Nonetheless, it does choose to screen proposals for acquisition or establishment, both in sensitive sectors and across he board if they are of large economic proportions. AUSFTA will raise the threshold for such reviews. Treasury also retains discretion to attach conditions to approvals on the recommendation of the Foreign Investment Review Board (FIRB). In exceptional situations, it blocks proposals if it is not confident such conditions will safeguard the national interest.


Such special measures run counter to the trade norms of non-discrimination. In particular, the principle of national treatment asks government to extend no less favourable treatment to foreign traders and investors than it gives to its own nationals. Proponents suggest national treatment is a minimal constraint National governments retain the discretion to adopt any regulatory policy they see fit, just so long as the policy is applied even-handedly to foreigners and locals alike.

However, the norm works more subtly than this would suggest. Apart from measures that single out foreigners, measures that treat them, on the face of it, the same as locals (eg by requiring local capitalisation, qualification, registration or incorporation) can be regarded as less favourable treatment [2]

In any case, the investment chapters of the FTAs are not confined to such general norms. They address the particulars of domestic regulation. For instance, they prevent the parties from imposing certain performance requirements on foreign investors. Their main target is requirements that foreign establishments source content locally and export product from the host country. In the recent US-Chile FTA, for example, technology transfer requirements are also proscribed, unless the requirements satisfy the compulsory licensing provisions of the WTO Agreement on Trade-Related Intellectual Property Rights (TRIPs) or they represent a judicial remedy for anti-competitive conduct.

This FTA will not even allow the parties to impose such requirements as a quid pro quo for obtaining an advantage from the host government (such as a public procurement or tax concession). However, a party may link the offer of advantages with requirements that the investor establish a presence in the host country, train or employ workers locally, or carry on research and development

Performance requirements seek to gain some local traction on the corporate groups that manage production, distribution and financing according to transnational strategies. We should not forget that these groups have the power to impose their own 'regulatory' requirements. For instance, they might assert their intellectual property rights in order to partition markets around the world. They are usually opposed to parallel importation.

In recognition, the new FTAs make space for the government parties to apply their competition laws domestically, without cutting across their provisions. In truth, governments are unable to act effectively without the support of positive international regulation. They lack the legal jurisdiction or the political power to make these groups accountable for restrictive business practices. One reason that the MAI lacked legitimacy was because its proposed corporate code of conduct was only to be voluntary.

Indirect expropriation

The current generation of FTAs contain a broader challenge to domestic regulation. They create special protections for foreign investors that transforrn common, non-discriminatory regulatory policy into an issue of investment expropriation, triable at the investor's initiative by international commercial arbitration. In this respect, they are ahead of multilateral trade law.

Such provisions are attracting opposition. I would argue that too much significance might be attributed to these provisions. They are not working in isolation from trends in domestic policy making. For instance, the Australian constitution contains its own safeguards against nationalisation of industry; the compulsory acquisition of property is subject to the payment of adequate compensation. The Crown and other areas of government are increasingly liable to suit for damages, as well as to review according to administrative law. When essential services are drawn back into the public sector these days, it is because the private operators have voluntarily relinquished them.

We should also appreciate that the foreigner's access to opportunities to compete commercially often starts with a domestic policy of liberalisation and privatisation. So too, the new national competition policy regimes offer private operators, including foreigners, the right to obtain access to essential facilities and to counter cross­ subsidisation by local incumbents. Under a principle of national treatment, foreign private operators should have the same access as their local counterparts.

Nevertheless, there is genuine concern that broad FTA protections may make commonplace, across the board policies subject to challenge. The investor suits, which have challenged health and environmental policies under chapter I I of the North American Free Trade Agreement (NAFTA), fuel this concern. The main stimulus is the notion that expropriation may be indirect or by equivalent means to nationalisation. just what does this notion require, beyond decisions that might affect the profitability of investments? The expansive definitions of investment give further cause for concern. Thus, suits have been brought for interference with such intangible 'assets' as the expected benefits of a contract, the use• of land for development, and the exploitation of intellectual property.

The concern stems not just from the expansiveness of the definitions but also from the perspective of the supra-national tribunals that might make the choices about interpretation and application. The FTAs establish tribunals for settlement of government to government disputes over compliance. But NAFTA went further; giving investors the right to bring suit directly against a host government; the sponsorship of their home government is not required. The tribunals to which they have access under NAFTA, such as those appointed under the aegis of the International Centre for the Settlement of Investment Disputes (ICSID) or the United Nations Commission on International Trade Law (UNCITRAL), are more used to arbitrating private commercial cases rather than ruling on public regulation.

Again, a note of caution is appropriate: the record does suggest that many of the NAFTA claims are about lack of equal and fair treatment rather than expropriation.[3]

Nevertheless, there is evidence that cases are being run speculatively, with respondent governments under pressure to settle some claims rather than contest their legalities. Another suggestion is that they make governments reluctant to introduce new regulations.

The US FTAs specify that issues in dispute are to be decided in accordance with the text of the FTA itself, together with the applicable rules of international law. The US-Chile FTA stresses that, for expropriation disputes, the governing law is intended to reflect customary international law. But the notion of indirect expropriation is largely untested and there is apprehension that the jurisprudence will import the distinctively United States constitutional doctrine of 'regulatory takings'.

In the US-Chile FTA, an appendix to the investment chapter addresses this concern. The Department of Foreign Affairs and Trade (DFAT) suggested we would see a similar refinement in an AUSFTA. The appendix contains a shared understanding that 'except in rare circumstances, non-discriminatory regulatory actions that are designed and applied to protect legitimate public welfare objectives such as public health and safety and the environment do not constitute indirect expropriation'.

The appendix also provides that whether actions of a government constitute an indirect expropriation must depend on a case-by-case, fact-based inquiry. The economic impact of an action will be a factor but an adverse effect on the economic value of an investment does not alone establish an expropriation. However, two other factors to be taken into account are the interference with distinct, reasonable investment­ backed expectations and the character of the government action. These factors are reminiscent of US jurisprudence.[4]

We should appreciate that these investment agreements have allowed government only one exception to the bar on expropriation. The expropriation, whether direct or indirect, must be: (a) for a public purpose (b) in an non-discriminatory manner (c) on payment of prompt, adequate and effective compensation and (d) in accordance with due process of law and fair and equitable treatment and full protection and security.

The Australian Government publicity says that AUSFTA will include strong investor protection provisions. But, reflecting the fact both countries have robust, developed legal systems for resolving disputes between foreign investors and government, the agreement does not include any provisions for investor - state dispute settlement It remains to be seen whether th1s means only that investors will not have direct access to a supra­ national tribunal.


Services are an increasingly important part of world trade. At the same time, they carry messages and facilitate transactions that challenge local economic, political and cultural arrangements. As they do in relation to investment, national governments limit and condition the foreign supply of services in sensitive sectors.

The FTAs require the government parties to' respect national treatment. The agreements go further; seeking to rollback non-discriminatory controls on market access to increase the opportunities for private suppliers to compete. Thus, they tend to pursue a neo-liberal agenda of regulatory reform. This demand may be graduated. The FTAs tend to follow the lead of the VVTO General Agreement on Trade in Services (GATS) in earmarking 'quantitative limitations' on market access, such as limits on the number of suppliers and on the range of business structures that suppliers may adopt Qualitative limitations, for example, technical requirements and licensing qualifications, will gain attention later.


In regulating both investments and services, the national government must enter reservations if it wants to cut across the norms of the FTA. In the argot of trad talks, this approach is characterised as negative listing.

So far as the norms demand, the government party commits to liberalisation of its regulatory regimes. The reservations mark out its remaining options. The contrast is the positive listing approach of the GATS. No liberalisation occurs, except to the extent the parties undertake to do so in their schedules of commitments. In this sense, the FTAs are 'GATS-plus'.

While providing a vital outlet for each party's local concerns, the negative listing approach is a powerful impetus towards liberalisation. The onus is on the national government to mark out the measures it wishes to have available to it in the future. Thus, the conclusion of the FTA becomes a last chance saloon to retain key regulatory strategies. Success rests with the bargaining process, even with the policy coordination and technical skill within the government's capacity at the time of negotiation and drafting.[5]

The onus is eased somewhat by the opportunity, not just to list existing measures (called stand-still), but also to designate areas in which it might adopt new measures in the future. Otherwise, the government will sign away the freedom to make existing measures more restrictive because circumstances have changed, or to introduce measures in newly emerging sectors. A ready example is the ability to respond to innovations and convergence in the media and communications sectors.

How does the listing work? The US-Chile FTA splits the reservations between two appendices, so does the Australia-Singapore agreement The first sets out those of each party's existing measures it wishes to preserve and the second nominates the areas in which the each party wishes to maintain existing measures or adopt new or more restrictive measures.

A format is prescribed for the entries. Their scope is first delineated by the nomination of the sector; sub-sector or activities to which the reservation relates, such as the 'cultural industries'. Note that the reservation may be across the board, that is, it may apply in all sectors, as does a screening of all acquisitions by foreign investors or a requirement that all foreign service suppliers obtain entry visas.

Then, the obligations with which the measures will not have to conform are identified, harking back to the norms of the investment and services chapters. Thus, national treatment, most-favoured-nation-treatment and market access can be limited, and performance requirements can be imposed. But the protection against expropriation cannot be qualified.

The entry nominates the level of government at which the measure will be maintained. Finally, the existing measures are listed. If they are projected, they are given a general 'non-binding' description.

In this approach, perhaps the most critical listing decision is the designation of the sectors and the description of the measures to which the reservation will apply, a difficult task when the ground is shifting. What, for example, are we to include in the field of cultural endeavour; when content and media are reconfiguring so rapidly? In the US-Chile FTA, Chile provided a long list of 'cultural industries'; the Australia-Singapore FTA is notable for Australia's elaboration of the creative arts, cultural heritage and other cultural industries, together with broadcasting and audiovisual services.

The parties propose a characterisation that serves their interests. The preference of the United States has been to subsume much of the activity in these sectors under the heading of 'electronic commerce'.[6] Such a characterisation favours economics over culture, recommending the WTO policy that, as a new frontier; electronic commerce should be free of government restrictions and impositions. Yet, critics argue that the use of digital electronics is not a distinguishing feature, it is just another means by which to conduct transactions and communications, in some cases to convey goods and services.

The Australian Government publicity says that AUSFTA includes a reservation for a range of regulatory measures to be applied in relation to both existing and emerging media. But other reports raise questions how far this reservation extends; the entry appears to be hedged by particulars, not all in favour of retaining options especially in relation to new media (Australian Financial Review, 10 February 2004).

Local content for Australian media is not the only sensitive issue in the service sectors. As a result of domestic policy changes and international commitments, Australia has already liberalised commercial participation in key sectors such as financial services, professional services,. and telecommunications. Now it must be careful to preserve its autonomy to regulate the supply of essential public and social services, including water and environmental services, education, health care, law enforcement and social welfare. Even in those sectors it has exposed to private competition, such as financial, gambling or professional services, it retains regulatory objectives. One reservation crucial to regulatory competence is the right to insist that operators establish a local presence of some kind, rather than supply services across the border from abroad. We shall need to see the detail of the agreement

Intellectual property

Protection for intellectual property is now one of the strongest sub-sets of public international law. International law becomes a fundamental consideration in any national policy for innovation and access to intellectual resources.

The multilateral WTO agreement, TRIPs, did much more than insist on non-discrimination when a country sets its own levels of protection for intellectual property. It required all members to observe substantive levels of protection across key categories such as copyright and related rights, patents, trade marks, geographical indications, and undisclosed information. There were specifications for the subject-matter of protection, the rights which control various uses of the property, the term of protection, the nature of liability for infringement, and the scope of exceptions (both to the subject-matter and the rights) TRIPs was also notable for its prescription of the procedures and remedies which were to be made available (administratively and judicially) for the effective enforcement of rights.

While TRIPs was a major convergence in protection across the world, it held back from legislating in some areas, such as the on-line media and traditional knowledge and folklore. It allowed countries discretion to pick their own level of protection in others. So did the 1996 World Intellectual Property Organisation (WIPO) Treaties, while extending copyright and related rights for the authors of works, the producers of phonograms and performers into the digital environment

As a major producer of intellectual property, the US is concerned to ensure other countries fully comply with TRIPs, also that they sign up to the WIPO Treaties. But it pursues a 'TRIPs-plus' agenda as well.TRIPs was not cast as a code and its first article says members are legally free to institute more extensive protection than is required by the agreement.

In its bilateral initiatives, the US has been pressing the developing countries, particularly those in Latin America, to forgo their allowances under TRIPs. These forbearances include the phase-in periods for implementation, the right to except plants and animals from patentability, and the right to adopt a sui generis system of protection for plant varieties other than the 1991 version of the International Convention for the Protection of Plant Varieties (UPOV).[7]

With historically high levels of protection, Australia is much closer to the US position. Nevertheless, the US wants Australia to tighten protection so as to suit US products such as patented pharmaceuticals, entertainment with copyright content, and brand names that are well-known marks. However; while Australia favours a pro-property, liberal legal regime, it imports more intellectual property than it exports. The DFAT has said it is negotiating on the basis that Australia remains free to determine the appropriate legal regime for implementing agreed intellectual property standards, maintaining a balance between the holders of intellectual property rights and the interests of users, consumers, communication carriers and distributors, and the education and research sectors. Several US demands will be the measure of this discretion.

Patents and pharmaceuticals

TRIPs requires members to make patents available and patent rights to be enjoyable without discrimination as to place of invention, the field of technology or whether products are imported or locally produced. For developing countries, a major change was to give patent protection to pharmaceuticals. Australia makes no major exceptions, except for human beings and the biological means for their production'.

For Australia to comply with TRIPs, a major change was to extend the term of patent protection from 17 to 20 years. In some sectors, inventions have a brief currency. But, due to a combination of factors, including levels of investment, regulatory approval times, rates of profit and ease of copying, pharmaceutical companies greatly value the full term.

At the WTO recently, patent protection has been at odds with access to essential medicines. In issue is the freedom with which the developing countries may licence the production of cheaper generic versions while the patent runs. The membership has adopted interpretations of TRIPs that enable compulsory licensing, including, most recently, the licensing of production off-shore when the developing country in need of the drugs does not have local manufacturing capacity. The US has been the main source of resistance to this guarded adjustment in the balance between property and access.[8]

The public program, PBS, is evidence Australians too can find the market price of patented drugs prohibitive.

But the government does not use compulsory licensing powers, it waits until patent protection runs out before it supports generics. The issue in contention now is how quickly users (and the PBS) can get access to generics as the term expires.[9] The availability of generics makes a big difference to the cost of essential medicines.The issue is in relief right now because major drug lines are coming out of patent Fewer replacements are in the offing and patenting re-badged variations may encounter legal opposition. Australia has been tightening the technical criteria for granting patents.

The US Trade Representative notified Congress that the negotiations would, in areas such as patent protection and protection of undisclosed test data, seek to have Australia apply levels of protection and practices more in line with US law and practices.The US wants FTA partners to offer extensions to the patent term for pharmaceuticals. The US-Chile FTA says extensions should be made available, if the applicant has encountered unreasonable delays in the granting of the patent, or if there was an unreasonable curtailment of the normal term due to the time it took to obtain marketing approval for the patented version. Past US pressure means Australia has already gone down this track; the question is whether the provisions should be more accommodating.

At the same time, the US wants Australia to cut back on its allowances for secondary producers to 'springboard' off the intellectual property of the original producer. The background to this demand is a WTO dispute settlement decision.[10] The EC challenged two Canadian provisions assisting generics to get onto the market quickly. The WTO panel considered one exception to patent infringement to be inconsistent with TRIPs, one that permitted generics to be manufactured and stockpiled ready for release as soon as the term expired. But the other exception was upheld, which was to test and trial the drugs for the purpose of obtaining regulatory approval.

The US-Chile FTA now insists that the parties control the use which may be made of the subject-matter of a subsisting patent, in order to support an application for marketing approval for the generic version, They should extend the period of 'data exclusivity' before the secondary producer is permitted to take advantage of the original producer's undisclosed test data. Furthermore, a US paragraph 4 style requirement would insist that competitors not be granted marketing approval until after the patent term expires. Such provisions would also extend the life of patents.

It remains to be seen how much of this US agenda is adopted. The Australian Government publicity says that the agreement will introduce transparent procedures into the marketing approval process for pharmaceutical products coming off patents. Further work is to be done to reduce differences in laws and practices relating to patents (as well as trade marks and designs).

The US negotiators also wanted changes to the PBS directly. The US based pharmaceutical companies have argued that Australia's increasingly restrictive regulatory and budgetary schemes effectively diminish the intellectual property rights granted to innovative pharmaceutical and biotechnology producers. The Minister for Health has responded by pointing out that the PBS is a subsidy rather than a rationing system (The Australian, 27 October 2003). It does not deny the intellectual property, nor does it close off market access to the patented lines. Indeed, by subsidy, it can place the lines within reach of more consumers, while using its purchasing power to bargain down their prices. It sponsors the legal generics if they prove to be more cost effective. Here, interestingly, the US is also fighting a rear guard action, against the cost of drugs in its home market.

It remains to be seen whether these arguments were enough to satisfy the US negotiators. The later reports suggested that, among other requirements, they wanted US style administrative law to be applied to the PBS drug listing and reference pricing decisions. It appears that AUSFTA includes provisions for the decisions to be subject to legal appeal and review (Australian Financial Review 10 February 2004).

Copyright and related rights

Everyone appreciates that the US is the major exporter of popular entertainment, including games, films, videos, and sound recordings. The interests of content producers are a high priority and the Office of the United States Trade Representative is seeking to enhance the level of protection in new areas of technology, such as Internet service provider (ISP) liability.

As a matter of principle, first TRIPs and then the 1996 WI POTreaties advanced the owners' legal rights to control the proliferating means of access to content. These means include cheap copying, rental, and communication and call up on-line. Again, these rights are not foreign to Australia's legal system. Australia played a constructive role in the conclusion of the Treaties, even if it has taken its time ratifying them.

From the US, one clear TRIPs-plus demand was that the term of copyright be extended from 50 to 70 years (plus the life of the author in the case of an individual).This demand exports the late great Sony Bono's legislative initiative on being elected to the US Senate. Recently, and disrespectfully, it has been called a Mickey Mouse change because it will delay the Disney character's entry into the public domain (Australian Financial Review, 8 December 2003).

Effective enforcement remains the owners' major problem, especially against the many individual end users who are infringing from home. Owners want further government regulation to be applied at practical intervention points in the distribution of content. The US FTAs target the activities of intermediaries.

Circumvention of technological protection measures

To spread popular entertainment products and services, it is necessary to make content readily accessible to the household consumer. Yet that same accessibility creates opportunities to pass the content onto those who will not pay the owner a fee.

Technological measures are becoming the first line of defence against unauthorised access. The law supports this strategy by making legally liable those who manufacture and distribute devices that enable the measures to be circumvented. The WIPO Treaties obliged signatories to enact such offences and the US FTAs are at pains to give them a practical implementation.

However, the force of this strategy is giving rise to concerns about the balance between property and access. As a matter of public policy, copyright law has coupled the rights to control certain uses of the content with exceptions to infringements for legitimate purposes. In Australia 'fair dealing' provisions permit unauthorised and unremunerated use for such purposes as individual research and study or criticism and review. Research libraries and educational institutions play an intermediary's role in fair dealing, though they also have a more controversial role in multiple copying and communication, where equitable remuneration is meant to be paid.

Advocates of public access fear that the technological measures will give the owners the power to close off access altogether, making no distinction for legitimate use, except on their own terms. One school of thought argues that contract is sufficiently expressive to determine the conditions of access, but this approach would privatise the present fair dealing entitlements. The US FTAs asks partners to accept their own carefully expressed exceptions to liability for circumvention. The Australian Government publicity suggests that the parties have agreed to consider public interest exceptions and to take submissions on them.

Limited as they may be, entitlements to access may also promote a competition policy. Once the technology is inviolate, the content provider might be able to lock consumers into affiliated products and services. As Laurence Lessig has demonstrated, code is a form of private regulation.[11] For example, a recent Federal Court case revealed that Sony was engineering PlayStation consoles to partition content markets regionally, so that software games and DVDs bought cheaper. but legally, elsewhere, could not operate locally.[12]The government claimed that Sony's success in this case against the supplier of mod chips was reassuring. It showed that it would not be necessary to strengthen our legislation in order to comply with the FTA (Australian Financial Review, 21 July 2003).

ISP liability

Despite the rights given to content producers by the WI PO Treaties, the Internet remains a powerful means to free access. The most prominent source of aggravation has been the Napster style music banks, more decentralised now with the appearance of the Kazaa type file share services that do not gather content at a central point but put users in touch with each other to transmit directly. The producers see the Internet service providers (ISPs) as an intermediary that might control traffic across the network Of course an ISP could initiate an infringement itself directly, but the sensitive point is its responsibility as a third party who assists or authorises another's infringement.

The WIPO Treaties left the extent of third party liability to be determined at the level of national legislation. The Copyright Act 1968 (Cth) is in line with international practice, listing four factors to be taken into account in determining responsibility in the particular case. Not satisfied, AUSFTA is likely to target the ISPs' role in transmitting, caching or storing material and linking users. Such an FTA will require changes to be made to the Australian legislation (Australian Financial Review, 28 November 2003).

The US-Chile provisions specify in detail what the ISPs needs to do to avoid being liable to the copyright owners for monetary relief. While the provisions do not require the ISPs to investigate or monitor infringements, they must cooperate with the measures the owners are taking to protect their rights, including control of access. They must be prepared to terminate the infringers' Internet access accounts and take steps to block access to infringing material. News of AUSFTA suggests they will be required to give details of infringers to the copyright owners in order to facilitate legal action against them (Australian Financial Review, 10 February 2004).


We should note then that the FTA will contain specifications for strengthening the rights of copyright and trade mark owners to take civil action. It will demand that government agencies actively intervene, employing the powers and penalties of criminal law to combat trade in counterfeits and pirated versions.


A US-Australia FTA would cover a range of trade topics and involve a number of trade-offs between sectors.

The examples taken from the investment, services and intellectual property chapters suggest that Australia is also entering into a partial, yet powerful process of law making. Space does not allow exploration of other topics with implications for law making, such as sanitary measures, labour standards, professional services and government to government dispute settlement. I have not mentioned Australia's demands, which may include legal requirements.

It is in the nature of public international law to constrain the options of nation states, while feeding off their authority to commit their citizens. It would be easy to say that the FTAs are just another factor in the fluid contemporary mix of global governance and legal pluralism. Nonetheless, the FTAs are distinctive: the state party becomes accountable to another. stronger, state; its prescriptions reach into the particulars of domestic law; and private investors and traders obtain the benefits of legal rights against the state and its citizens. Though trade law often seems arcane, the substance of AUSFTA is worthy of our continued attention.

[*] CHRISTOPHER ARUP teaches law at Victoria University of Technology.

©2004 Chris Arup

[1] News of the FTA negotiations and, in time, the texts of the agreements are made available at the official government websites. For Australia, the Department of Foreign Affairs and Trade <

negotiations>; for the US, the Office of the United States Trade Representative <>.The US is accumulating agreements, the most recent are US-Chile, US- Singapore and an agreement with four Central American countries. For material supportive of the FTA. see, eg, the Australia United States Free Trade Agreement Bus1ness Group <'NWW>: for critique, the Australian Fair Trade and Investment Network < au>, also the composite site <>.

[2] For discussion, see C Arup, The New World Trade Organization Agreements (2000), especially ch 3

[3] For handy information about the cases, see Liberty Victoria and the Catholic Commission for Justice, The Big Chill? Concerns About the Investor/State Provisions in the Proposed Australia-US Free Trade Agreement, Briefing Paper,1 November 2003, <>

[4] J Starner, 'Taking a Constitutional Look. NAFTA Chapter II as an Extension of Member States' Constitutional Protection of Property' (2002) 33 Law and Policy in International Business 405.The claims are interesting also for the fact that they cut across other International agreements, companies challenge their host countries' efforts to implement agreements With their home countries

[5] Rather forlornly, the Senate Foreign Affairs, Defence and Trade Committee recommended against a negative listing approach, see Voting on trade. The General Agreement on Trade in Services and an Australian-US Free Trade Agreement, 26 November 2003 <http://www.aph>

[6] J Gwen, America's Pie Trade and Culture After 9/11 (2003).

[7] P Drahos, 'Bits and Bips Bilateralism in Intellectual Property' (2001) 6 Journal of World Intellectual Property 791

[8] C Arup, 'TRIPs. Across the Global Field of Intellectual Property' [2004] European Intellectual Property Review 7.

[9] See the Australia Institute, 'A backdoor to higher medicine prices? Intellectual property and the Australia-US Free Trade Agreement' (report prepared by B Lokuge, T Faunce and R Denniss) November 2003 <>.The Institute has also reported on the likely impact on the PBS.

[10] Canada-Patent Protection for Pharmaceutical Products, WT/DS/114/R, March 17, 2000.

[11] I. L Lessig, The Future of Ideas The Fate of the Commons in a Connected World (2001)

[12] Kabushiki Kaisha Sony Computer Entertainment v Stevens (2003] FCAFC 157 (30 July 2003).

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