Investment Protection Agreements Not Meant for the Civilised? – Indian Blog of International Law

Gidey Belay Assefa

The EU-Australia FTA: Investment Protection not Covered

On 24 March 2026, the European Union (EU) and Australia signed a Free Trade Agreement (FTA) aimed at removing tariffs and technical barriers to trade between themselves. The agreement, however, does not contain investment protection chapters. While the trade agreement is not yet public, the released memo states that “the agreement does not cover the protection of investments” while noting that MFN will be provided. It also seems that there will not be a separate agreement on investment protection.

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The EU justifies this omission by stating that they were found to be unnecessary “given the level of trust in the respective legal system of both parties”. This justification strengthens many critical scholars’ argument (see here and here) that investment treaties were designed to protect the capital of the North in Southern host States.

Omitting Investment Agreements: A Shift in Approach?

The omission of investment agreements is not a shift in the EU’s approach. The EU is not abandoning its investment protection provisions. Its recently signed FTAs show that separate investment agreements are negotiated while the FTAs are meant to focus on trade issues.

For instance, the EU entered into similar FTA with India, a couple of months ago – on 27 January 2026. Although that FTA does not contain investment protection provisions, it has been announced that a separate investment negotiation is undergoing. According to the EU, such a negotiation is aimed at securing a “predictable and secure investment environment”. It is expected to contain not only substantive protections such as non-discrimination, non-expropriation, fair treatment and transfer of returns but also “effective and state-of-the-art dispute settlement mechanism to enforce such rules”.

Similarly, the EU-Indonesia FTA has a separate investment protection agreement where it provides substantive protections. Like the EU-India FTA, the dispute settlement system is left for further negotiations that will include “state-of-the-art system” that will reflect international reforms in the area.

The dispute settlement system referred to as a “state-of-the-art system” is an investor-State dispute settlement and seems to refer to the multilateral investment court advocated by EU. The EU has been advocating for such a court with appellate mechanism including at the UNCITRAL Working Group III. Thus, the idea of having investment protection agreement along with investor-State dispute settlement mechanism is on the table of the EU, and it will continue to enter into such agreements.

This omission is not also because Australia does not want to have it. While Australia has expressed its intention not to include ISDS in its trade agreements, it has continued to enter into investment agreements without ISDS. The Australia-UAE agreement, entered into force in October 2025, can be an example.

Thus, as expressly provided by the EU, the only reason for not having an investment protection agreement with Australia seems to be because both parties have a mutual trust in the legal systems of each other.

Investment Agreements: For the South, not for the North

From the Third World Approaches to International Law (TWAIL) perspective, investment agreements and mainly their investor-state dispute settlement mechanism (ISDS) were designed to protect the capital of the North in the South. Miles describes international investment law as one rooted in colonialism and serving as a tool to “further the political and economic aspirations of European States”. Schneiderman argues the principles of international investment law are another form of the standard of civilised justice that “operate to the advantage of already economically powerful business firms and their home states” to the disadvantage of Southern States.

Embedded in this framework is the assumption that the Global South is incapable of providing protections in the standard of civilised countries. Because of the “uncivilised(ness)” of the legal system of the South, the North thought, an international minimum standard of treatment was necessary along with an external ‘neutral’ dispute settlement forum to protect investors. This minimum standard and external dispute settlement (international arbitration) are believed to reflect the standard of civilised justice. National treatment was found to be insufficient as Southern States may not provide justice of that standard. Investment treaties are products of this thinking.

The justification provided by the EU resonates with this critique of international investment law. While a separate investment agreement was found to be necessary for secure and predictable investments in India and Indonesia, it was not necessary for their investments in Australia. The domestic legal system of the North is ‘civilised’, capable of delivering the European-standard protection, while India’s and Indonesia’s legal systems are not and cannot.

Final Note

But the EU has already entered into an FTA that contains an investment chapter with Canada (Chapter Eight of the CETA). So, the EU and Canada do not have mutual trust in their respective legal systems, one may ask. While many things can be said as to why the EU-Canada CETA contains investment chapter, absence of trust cannot be one of them. Some have already advocated for an EU-Australia-like FTA with Canada, as Canada also has a ‘well-functioning” legal system. However, the question and the recommendation to revisit the EU’s agreement with Canada operate under the same assumption, i.e., the investment agreement is for legal systems that are deficient, a term that does not describe the North.

(This is a Guest Post by Gidey Belay Assefa who is a PhD Candidate at the Australian National University, Canberra.)