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The United Kingdom (“UK”) is in the market for trade
deals, with potential new benefits for a number of States and both
inbound and outbound investors. As of 1 January 2021, following its
exit from the European Union (“EU”), EU trade agreements
no longer apply to the UK. It is now in the process of finalising a
UK-Australia trade deal and a UK-New Zealand trade deal, having
recently published an Agreement in Principle for each of them.
In the same vein, the UK is negotiating trade deals with the 11
Pacific Rim States forming the Comprehensive and Progressive
Agreement for Trans-Pacific Partnership (“CPTPP”). It has
also expressed an interest in joining the US-Mexico-Canada trade
pact and in trade deals with other States, such as India. This
follows recent new trade deals signed with Japan in late 2020 and
with Norway, Iceland and Liechtenstein in July 2021.
UK-Australia trade deal
On 17 June 2021, the UK and Australia published an Agreement in
Principle, setting out broad terms of their deal. It followed the
launch of negotiations between the UK and Australia from June 2020.
The UK government expects to publish the legal text of the deal by
the end of 2021, although Australia has not yet shared any timing
The deal will include the following:
- significant liberalisation of tariffs on trade in goods;
- “Most Favoured Nation” provisions (covering services
and investment). These require that if the UK or Australia provide
more generous access for investment from other States, this will
also be extended to Australian and UK investors;
- protection for UK and Australian investors, including from
unfair or discriminatory treatment and expropriation of assets
without due compensation, reflecting the customary international
standard of protection;
- a provision confirming that economic sanctions are not impacted
by the commitment to allow free transfers of funds by investors;
- certain provisions from the CPTPP, such as Prohibition of
Performance Requirements included in the CPTPP.
Notably, the UK is the third largest source of foreign direct
investment in Australia, with foreign direct investment valued at
$123 billion in 2020. The UK is likewise the second largest
recipient of Australian foreign direct investment.
Despite the agreement’s wide-ranging investment provisions,
the UK-Australia trade deal will not include any investor-State
arbitration provisions. As such, the UK-Australia trade deal will
not allow Australian or British investors directly to commence
investor-State arbitrations against the UK or Australia
UK-New Zealand trade deal
On 20 October 2021, the UK and New Zealand also published an
Agreement in Principle, setting out broad terms of their deal. It
followed the launch of negotiations in June 2020 and, as expected,
closely resembles the UK-Australia trade deal in multiple key
respects. The deal will include, for instance: significant tariff
liberalisation; Most Favoured Nation provisions and protection for
UK and New Zealander investors, including from unfair and
discriminatory treatment and expropriation of assets without due
compensation. As with the UK-Australia trade deal, the UK and New
Zealand have agreed not to include any investor-State arbitration
provisions. Indeed, they have gone even further to agree
prospectively that, if and when the UK accedes to the CPTPP, the
investor-State arbitration provisions in the CPTPP also will not
apply between the UK and New Zealand.
The New Zealand government aims to conclude the UK-New Zealand
free trade agreement by the end of 2021, although the UK has not
yet shared any timing expectations.
UK membership in the CPTPP
On 28 September 2021, the UK attended its first meeting with the
11 members of the CPTPP to negotiate the UK’s potential
accession. This followed the UK’s formal application to join
the CPTPP on 1 February 2021.
The CPTPP is a £9 trillion free trade area of 11 States:
Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New
Zealand, Peru, Singapore, and Vietnam. In broad terms, it removes
95% of tariffs between its members. The UK has expressed its hope
that CPTPP membership will help secure exports to CPTPP
members’ growing markets, which are home to some 500 million
people and include some of the world’s biggest current and
future economies. Even if approved, the UK is unlikely to achieve
accession to the CPTPP before 2022 at the earliest. In addition to
the UK, n 16 September 2021, China also officially applied to join
Under the CPTPP’s investment terms, States that are party to
the CPTPP undertake to treat each other’s investors and their
investments in accordance with a number of substantive treatment
standards. These include the fair and equitable treatment standard
and the prohibition on expropriation without compensation. The
CPTPP also contains provisions on investor-State arbitration. In
the event of an investment dispute, those provisions allow
qualifying investors from one CPTPP State party to commence an
investor-State arbitration directly against the other CPTPP State
party, in which their investment is located.
The negotiation and signing of new trade agreements by the UK
was an anticipated consequence of Brexit. Their impact on foreign
investment will depend on the final terms of the deals, but is
likely to include a number of significant benefits to the relevant
States and their investors.
Under both the UK-Australian trade deal and the UK-New Zealand
trade deal, based on the Agreements in Principle, provisions on the
protection of investments will be included, even though access to
investor-State arbitration will not be part of the treaties.
Pending the UK’s possible entry into the CPTPP (and beyond, in
the case of New Zealand), certain investors in the UK and other
CPTPP member States may wish to consider, on a proactive basis, the
optimal structuring of their investments to protect against
possible adverse measures. States are also well-advised to consider
the protection of investors under international law regardless of
whether investor-State arbitration appears immediately
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guide to the subject matter. Specialist advice should be sought
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