Skip to content

Big oil wins again, ISDS to remain in NAFTA

Today, Politico Trade said that the U.S. will not advocate to eliminate Chapter 11’s investor state dispute mechanisms. Why? It may be because  the newly elected government of Andrés Manuel Lopez Obrador is reviewing energy contracts. Some of these contracts were given to U.S. companies.

In a case of a broken clock being right twice a day, the Trump Whitehouse initially supported the removal of Chapter 11 in NAFTA. They correctly identified that it hampers American sovereignty.

We, too, have continuously opposed this chapter which allows foreign investors to sue governments over policy changes that affect their profits. It has given companies the ability to challenge public interest and environmental policies. 

In a case of WTF, Mexico and Canada insisted on keeping the provision, despite the fact that Canada is the most sued government under chapter 11 currently facing $2.6 billion in suits and that the U.S. has never lost a case.

But oil companies lobbied the Trump administration, so now, it looks like the U.S. will advocate only limiting ISDS to companies with U.S. headquarters, and not foreign subsidiaries based out of the U.S.

According to an April New York Times article, big U.S. oil was wary about AMLO’s possible election and his energy reforms.

During the years of former Mexican President Vicente Fox, Pemex, the state-owned oil company, the pride of Mexican nationalism, was privatized. Many oil companies worry that a left-wing nationalist would renationalize it.  In their logic, the prospect of an ISDS suit would be a likely deterrent.

As well, during the Mexican election, AMLO championed a review of energy reform contracts. It was designed to deal with Odebrecht, the Brazilian company at the centre of many political scandals in Latin America, and in Mexico. But it would also challenge some U.S. companies. The new government would give priority to Mexican companies, and companies from countries that fought corruption. 

They are currently reviewing 105 Pemex contracts. According to El Universal, out of the 75 companies that hold energy reform contracts, nine are American. After Mexican companies—36 are Mexican—U. S companies have the most contracts. These companies include ExxonMobil, Chevron, Halliburton, and Schlumberger. It also includes Sierra Oil and Gas, a Mexican company financed by American capital.

Of course, any attempt to affect future U.S. oil investments in Mexico by not renewing or terminating contracts could be challenged under ISDS.

In NAFTA, Big Oil in three countries have been arguing for ISDS and for maintaining an energy chapter.  They have an audience at Capitol Hill.

For example, in December, Republican Senator Lindsey Graham shared his dream of pipelines running from Mexico to Canada with Inside U.S. Trade.

He told Inside U.S. Trade, “Include an energy section. That would be the biggest win of all, if you had a North American energy policy where you could build pipelines all over the place, make sure that we could become more energy independent, that North America would be able to punch back against the Mideast, Russia and China.”

At the moment, the U.S. is negotiating with Mexico saying they need to get a deal by August 25, the last day to get a deal passed with the outgoing Pena Nieto government. Canada, left out of these rounds, is expected to return within the next weeks.

When they return, Canada needs to question why ISDS still remains in the agreement. Please sign our petition.

Photo: Thomas Hawk/flickr/cc