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University of New South Wales Faculty of Law Research Series

Faculty of Law, UNSW
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Leon, Trakman --- "Foreign Direct Investment: An Australian Perspective" [2010] UNSWLRS 4

Last Updated: 21 February 2010

Foreign Direct Investment: An Australian Perspective

Leon Trakman, University of New South Wales

This paper will shortly be available for download.


This paper was published in volume XIII of the International Trade and Business Law Review (2010).


Foreign Direct Investment (FDI) is both an opportunity to contribute to economic and political development and a hindrance. On the one hand, FDI represents an opportunity to extend public participation in international investment and to promote access to FDI by private investors. On the other hand is concern that FDI may be predatory, invasive of Australia’s public interests and impact negatively on some domestic industries. Resolving these tensions is not self-evident. The regulation of FDI needs to be not only stable and even-handed, but also sensitive to domestic socio-cultural, economic and political demands. It should have a coherent structure and yet be flexible enough to suit the FDI regime in issue. Australia’s dilemma is to establish its economic interdependence within a global coalition of investing nations without becoming unduly dependent on foreign infrastructures and resources. Its challenge is to strengthen its domestic economy with support of foreign investment without threatening vulnerable and sensitive sectors of the economy in the process.

This article explores these issues in light of customary principles of international investment law, trade and investment conventions, such as the United National Commission on International Trade Law (UNCITRAL). It considers the decisions of international investment tribunals such as the International Centre for Settlement of Investment Disputes (ICSID) and the domestic restrictions imposed on FDI through the police and related powers of domestic countries, including but not limited to Australia. It also emphasises the development of Free Trade Agreements (FTAs) and Bilateral Investment Agreements (BITs), such as under Ch 11 of the North American Free Trade Agreement (NAFTA), and the more recent Australia- United States Free Trade Agreement (AUSFTA).

This article gives particular emphasis to the need to appreciate salient differences in investment treaty protocols, the distinctive manner in which state-investment tribunals have construed them in the event of FDI disputes, and how these constructions may influence FDI practices in the future. Given the fluidity of FDI and its international and domestic regulation, the article does not present wholly predictable legal responses to investment conduct. Instead, it focuses on developing an understanding about key issues involved in FDI planning, including giving due account to different investment treaties and the prospect of FDI practices being treated differently in different international and domestic legal contexts.

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