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Highlights
- Proposed gas reservation policy may breach global investment treaties
- Legal concerns rise around investor rights and trade obligations
- Energy security debate fuels election spotlight
With the federal election drawing near, Australia's proposed east coast gas reservation policy is attracting increased legal scrutiny. Independent law firm Corrs Chambers Westgarth has raised flags over the policy’s potential to conflict with Australia’s obligations under international investment treaties. The proposal, recently announced by Opposition Leader Peter Dutton, would reserve gas for domestic use, diverting it from liquefied natural gas (LNG) export projects.
This policy move, if implemented, could affect key players in the energy and resources sector, such as Santos Limited (ASX:STO), Woodside Energy Group (ASX:WDS), and Origin Energy (ASX:ORG), all of which are involved in LNG projects critical to both domestic supply and export markets.
Corrs Chambers Westgarth warns that these types of government interventions could be seen as violating treaties that require fair and equitable treatment of foreign investors. Specifically, such measures may be viewed as "indirect expropriation" or failing to meet the legal expectations set at the time of investment. These obligations often form part of the protections outlined in Australia's numerous bilateral investment treaties with countries in the Asia-Pacific and beyond.
With energy costs and energy security now central themes in the political debate, the government may argue that the policy serves a public interest in addressing domestic gas shortages and rising energy prices. However, whether such objectives justify restrictive measures under international law is still up for legal debate.
The Gas Security Incentive, or any similar mechanism that places quantitative restrictions or levies on gas exports, could open the door for legal claims from foreign investors. Corrs underlines that whether these claims succeed will depend on case-specific details, including whether the intervention is proportionate and respects investors' legitimate expectations.
Investors and policymakers must also consider how such interventions might ripple through markets, especially in sectors sensitive to regulatory changes. For instance, the gas sector is tightly interlinked with ASX dividend stocks, and broader market indices like the ASX200, where energy giants hold significant weight.
While it remains uncertain whether any specific claims will arise from the gas policy shift, the debate underscores the importance of balancing domestic needs with international trade obligations. As election day approaches, the outcome could set a precedent with long-term implications for Australia’s investment landscape.
