Australian companies encouraged to get educated on investor protection treaties

Sydney, 11 June 2008: National law firm Clayton Utz is encouraging companies that are operating or considering investing overseas, particularly in emerging markets, to familiarise themselves with Australia's investment treaties to protect their investments*.

Clayton Utz partner Doug Jones says unforeseen actions by the government of another country that target foreign investorsNational law firm Clayton Utz is encouraging companies that are operating or considering investing overseas, particularly in emerging markets, to familiarise themselves with Australia's investment treaties to protect their investments*. Clayton Utz partner Doug Jones says unforeseen actions by the government of another country that target foreign investors ― for example, changing the regulatory regime in relation to tax or licensing arrangements or even expropriation ― could significantly reduce the value of a company's investment.

Professor Jones says it is important that companies understand their rights when it comes to protecting their investments in foreign jurisdictions, including the option of arbitration if things go wrong.

"Rising commodity prices have led many companies, particularly in the energy and resources sectors, to invest in emerging markets. At times the potential risks of investing in some countries can outweigh the potential benefits, however there are ways that companies can minimise those potential risks" he says.

"Many companies don't realise that Australia's bilateral investment treaties and also the investment provisions of Australia's Free Trade Agreements provide a powerful means of protecting investments that investors can enforce directly against host states."

Australia has entered into bilateral investment treaties (BITs) that contain specific investor protection provisions with a number of countries around the world, including China, Vietnam, India, Indonesia, Laos, Philippines, Chile, Uruguay and Argentina.

Professor Jones says companies should take three main factors into account when structuring an overseas investment to maximise their investment treaty protection.

"Consider whether there is an investment treaty between Australia and the host country, what other protection is available under other investment treaties adopted by the host country, and think about including key investor protection clauses into any agreements between the investor and the host state," he says.

*Clayton Utz is hosting a panel discussion on 19 June 2008 on Protecting Foreign Investments which will cover the key issues in foreign investment outlined above, from legal, financial and regulatory perspectives. The panel will include presenters from Austrade, Clayton Utz, Zurich Financial Services Australia Ltd, JeantetAssociés and Ernst & Young.

The event is free of charge. Contact Vicky Feros on (02)9353 5304 or email vferos@claytonutz.com for more information if you would like to attend. RSVP essential.