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US anger over ICAC asset grab

The head of the main US business lobby group in Australia has warned that Australia has not yet felt the full repercussion of an ICAC-initiated expropriation of American assets.

That expropriation, which took effect in 2014, had been recommended by the NSW Independent Commission Against Corruption and triggered loses of more than $90 million among US institutions and about $200m for Australian shareholders. Those losses arose after the NSW government, under the leadership of former premier Barry O’Farrell, enacted legislation that stripped NuCoal Resources of the mining exploration licence that had been its primary asset.

There has been no finding of wrongdoing against NuCoal by ICAC or any court. Because the expropriation was not followed by compensation, the head of the American Chamber of Commerce in Australia, Niels Marquardt, believes it breaches the Australia-US Free Trade Agreement.

“I don’t think the impact has been felt yet,” he said. “If it’s not fixed, there is no limit to the damage it could do to perceptions about the rule of law in Australia.” While the incident had been triggered by the actions of the government of NSW, Mr Marquardt said foreign investors were likely to attribute them to Australia as a whole.

“Most people don’t believe this could have happened in Australia. But when you start to realise that it did happen, and how it happened, it is just simply outrageous,” said Mr Marquardt, who is a former US consul general in Sydney.

“This is the exception that proves the rule about the high quality of our relationship (with Australia),” he said. “It deserves attention. It needs to be fixed and the investment climate in Australia will not be restored to its full health until that happens.” The American Chamber of Commerce has discussed the affair with the office of the US Trade Representative, Michael Froman, and with the Australian Department of Foreign Affairs and Trade.

He had been pleased to learn that the US Trade Representative’s office viewed the incident “virtually the same as we do — it’s outrageous”. He said he was concerned that the state constitutions in Australia permitted state governments to take private property without compensation, while the federal constitution prevented such an action by the federal government.

“How that is addressed is a matter for Australians to decide,” he said. “This is a country that is highly dependent on foreign investment — always has been, always will be — and has in place a lot of policy setting designed to facilitate foreign investment.

“If you did not have foreign investment you would not be the wealthy country you are today. “So if this isn’t fixed it could have, over time, a fundamentally negative impact on the Australian quality of life.” Mr Marquardt said the affair had also revealed how important it is for free-trade treaties to include what is known as investor-state dispute settlement provisions. These provisions make it possible for foreign companies to initiate arbitration of disputes with countries whose policy decisions damage their investments.

Australia’s relations with US companies are now covered by such a provision in the newly approved Trans Pacific Partnership. But the Australia-US Free Trade Agreement, does not include such a provision, and this treaty was in force when NSW expropriated NuCoal’s licence.

Mr Marquardt said that when it was agreed not to have an investor-state provision in AUSFTA “everybody said we don’t need that provision because we have the rule of law in our countries and everybody has been very self-congratulatory about that”. But he said the NuCoal affair indicated that it would have been better if an investor-state provision had been included in AUSFTA.

He said free-trade talks on May 4 between Australia and the US were a consultation in which he expected the US would suggest to Australia “that the current situation [concerning NuCoal] cannot be allowed to stand”. Honest investors in the US and Australia had invested in the company after undertaking due diligence and their main asset had been removed by the NSW government.

“At the same time, ICAC had made clear that NuCoal was an innocent party and should be compensated,” Mr Marquardt said.

“This is not going to go away. This is just going to get worse and worse and worse unless somebody steps up and compensates these people.

“It’s going to take hundreds of millions of dollars out of someone’s budget, and it probably ought to be the NSW government’s, to make good for these investors.”

 

Chris Merritt- The Australian

(WTF used with permission)

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