Published in The Ecologist, October 30, 2015
There’s been a big fuss about the ‘ISDS’ clauses in the TTIP trade deal that would allow US corporations to sue the EU and its member states for ‘lost profits’, writes Maude Barlow. But ISDS is already in CETA, the already negotiated EU-Canada trade deal – and nothing would be easier than for US companies to use it as their ‘back door’. We must make sure CETA is rejected at its final hurdle.
Several weeks ago, hundreds of thousands of people across Europe and the UK marched to protest the Trans-Atlantic Trade and Investment Partnership (TTIP), a massive planned new trade deal between Europe and the US.
They were rightly sounding the alarm as TTIP will greatly reduce the ability of local governments to spend public money for local development, impose new limits on the right of governments of all levels to regulate on behalf of their citizens and environment, endanger public services and jeopardize Europe’s higher standards on labour, food safety and social security.
TTIP also includes Investor State Dispute Settlement (ISDS), a provision that will allow American corporations to sue European governments for laws and practices that threaten their bottom line. There are now over 3,200 bilateral ISDS agreements in the world, and foreign corporations have used them to sue governments over health, safety and environmental laws.
For example, cigarette maker Phillip Morris used ISDS to challenge Australian rules around cigarette packaging intended to promote public health. A Swedish company, Vattenfall, is suing Germany for a reported €4.7 billion relating to Germany’s decision to phase out nuclear power. ISDS is profoundly anti-democratic and threatens the human rights of people everywhere.
A warning from Canada – 35 ISDS actions from the US
But people in the UK and Europe should be paying attention to another deal that has had way less attention. CETA – the Comprehensive Economic and Trade Agreement between the EU and Canada – is equally disturbing and way further along in the process.
I’m coming on a speaking tour of the UK to share a powerful story of Canada’s experience that is relevant for two reasons.
The first is that we Canadians have lived with ISDS for 20 years. It was first included in NAFTA, the 1994 North American Free Trade Agreement between Canada, the US and Mexico, and has been used extensively by the corporations of North America to get their way.
As a result of NAFTA, Canada is now the most sued developed country in the world. Canada has been sued more times than either the US or Mexico. Of the 77 known NAFTA investor-state claims, 35 have been against Canada, 22 have targeted Mexico and 20 have targeted the US.
We have already paid out over over $200 million (~€135m) to American corporations. Foreign investors are seeking another $2.6 billion (~€1.75 bn) from the Canadian government in new cases. Even defending cases that may not be successful is expensive. Canada has already spent over $65 million (€45m) defending itself from NAFTA challenges.
The US government has won 11 of its cases and never lost a NAFTA investor-state case or paid any compensation to Canadian or Mexican companies.
Two-thirds of the claims involve challenges to environmental protection or management of our own resources, issues that should reflect the democratic will of the people of Canada. No surprise, the US has never lost a NAFTA case. In this game, the big guys generally win.
Canada – the back door for US corporations to sue the EU
The other reason people of the UK and Europe should care about Canada is that the CETA is a ‘done deal’, meaning that, even though it has not been ratified politically, the negotiations are finished and they contain ISDS provisions. CETA could act as a ‘back room’ for American corporations whether TTIP is adopted or not.
There is a great deal of opposition to ISDS in TTIP, so much so, that many think either ISDS will have to come out of the deal or be radically modified, or it will be defeated in Europe. Already, the European Commission has proposed ISDS ‘reforms’ to TTIP that would set up a new European Investment Court that would be more transparent and accountable, although still unacceptable to most of us.
But all an American agriculture, energy, mining or drug giant would have to do to take full advantage of ISDS is use its existing subsidiary in Canada, or set one up, and sue European governments through CETA. American corporations would have as much access to challenge Europe’s higher standards under CETA as if TTIP with a full ISDS had been signed.
In fact, one Canadian gold mining company has already done something similar – setting up a UK subsidiary in order to sue Romania for $2.56 billion under a UK-Romania trade and investment deal after a mining permit was refused at Rosia Montana.
Canada’s losing ISDS cases
Ethyl, a US chemical corporation, successfully challenged a Canadian ban on imports of its gasoline that contained MMT, an additive that is a suspected neurotoxin. The Canadian government repealed the ban and paid the company $13 million (approximately €8.8 million) for its loss of revenue.
S.D. Myers, a US waste disposal firm, challenged a similar ban on the export of toxic PCB waste. Canada paid the company over $6 million (approximately €4 million).
A NAFTA panel ordered the Canadian government to pay Exxon-Mobil, the world’s largest oil and gas company, $17.3 million (approximately €11.6 million) when the company challenged government guidelines that investors in offshore exploration in the province of Newfoundland and Labrador – where the company is heavily involved – must invest in local research and development.
New Jersey-based Bilcon Construction is demanding $300,000 (approximately €200,000) in damages from the Canadian government after winning a NAFTA challenge when its plan to build a massive quarry and marine terminal in an environmentally sensitive area of Nova Scotia and ship basalt aggregate through the Bay of Fundy, site of the highest tides in the world, was rejected by an environmental assessment panel.
Chemical giant Dow AgroSciences used NAFTA to force the province of Quebec, after it banned 2,4-D, a pesticide that the Natural Resources Defence Council says has been linked in many studies to cancer and cell damage, to publicly acknowledge that the chemical does not pose an ‘unacceptable risk’ to human health, a position the government had previously held.
The Canadian government paid American pulp and paper giant AbitibiBowater $130 million (approximately €88 million) after the company successfully used NAFTA to claim compensation for the ‘water and timber rights’ it left behind when it abandoned its operations in the province of Newfoundland and Labrador after 100 years, leaving the workers with unpaid pensions. This challenge is particularly disturbing because it gives a foreign investor the right to claim compensation for the actual resources it used while operating in another jurisdiction.
Mesa Power Group, an energy company owned by Texas billionaire T. Boone Pickens, is claiming $775 million (approximately €523 million) in a challenge to the province of Ontario’s Green Energy Act, which gives preferential access to local wind farm operators.
Lone Pine, a Canadian energy company, is suing the Canadian government through its American affiliate for $250 million (approximately €152 million) because the province of Quebec introduced a temporary moratorium on all fracking activities under the St.
Lawrence River until further studies are completed. This challenge is concerning because it involves a domestic company using a foreign subsidiary to sue its own government.
Eli Lilly, a U.S. pharmaceutical giant, is suing Canada for $500 million (approximately €337 million) after three levels of courts in Canada denied it a patent extension on one of its products. This case is particularly disturbing because it challenges Canadian laws as interpreted by Canadian courts and represents a new frontier for ISDS challenges
‘An attack on the very essence of sovereignty’
Truth is, there’s very little in these ‘trade’ deals that is actually about trade. They’re much more about handing over frightening new rights to corporations that fundamentally challenge the way that governments legislate on behalf of ordinary people.
It’s no wonder that a UN expert on human rights recently referred to ISDS as “an attack on the very essence of sovereignty and self-determination, which are founding principles of the United Nations.”
Trade and investment agreements such as NAFTA, CETA and TTIP give transnational corporations incredible new rights to impose their will on governments. But they are probably just the tip of the iceberg because many new laws or changes to laws never come to light because of the ‘chill effect’ of prior restraint.
The Canadian government adopted a new policy soon after NAFTA was adopted whereby all new laws and any changes to existing laws have to be vetted by trade experts to ensure they are not challengeable under ISDS rules.
People in the UK should learn from our experiences in Canada and understand that this new generation of trade deals poses a terrible threat to health of their people, the resilience of their communities, the fate of their public services, and the protection of their natural resources.