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Government response to Hupacasath FIPA challenge lacking

Last week I said I’d summarize the Crown’s case for why there is no government responsibility to consult with the Hupacasath First Nation (or any other First Nation) on the Canada-China Foreign Investment Protection Agreement (FIPA). West Coast Environmental Law has already done an excellent job here, so I won’t pull out much more in this post.

As the WCEL points out, Canada basically argued the FIPA “has no application to the way in which land and resources are managed within Canada,” nor does it “change, or set the stage for future changes, to these domestic regulatory regimes.”

Hupacasath counsel Mark Underhill replied, in part, that, “Granting one group of resource investors new enforceable rights with respect to their investments, backed up by a right to compensation funded by Canadian tax payers, changes the equation. To suggest that this will have no impact on what happens on the ground is simply not sustainable.”

In more detail:

While the existing domestic law nas not been modified, Canada has taken on an obligation to only develop the domestic law, or exercise its own authority under that law, in a manner consistent with an entirely separate body of rules. That other body of rules, applied by a new decision making body consisting of ad hoc arbitrators appointed by the parties, will determine whether measures taken by all levels of government in Canada amount to a breach of the obligations under the CCFIPPA, for which compensation is payable. Governments at all levels will have to take that into account when they are deciding what measures to enact or steps to take, including steps to protect or accommodate asserted Aboriginal Rights and Treaty claims.

At several points in the Crown’s arguments and Hupacasath rebuttal, a previous constitutional challenge related to the FIPA-like investment rules in NAFTA, brought by the Council of Canadians and Canadian Union of Postal Workers, is mentioned. The Crown uses that case to try and argue that you would have to show an actual violation of Charter rights stemming from a government action taken under NAFTA to demonstrate that the treaty was unconstitutional. Underhill argues the case is different here, where, as argued in past Supreme Court cases, the possibility that an action taken as a result of the FIPA could disturb the Hupacasath’s rights should be enough to trigger the responsibility to consult.

Canada also makes some demonstrably false statements about the impact of NAFTA’s investor-state dispute process. For example, that “the number of claims that have been brought under NAFTA is relatively modest and none have involved Aboriginal rights or measures,” and that, “there is no evidence that these claims have impaired the government’s ability to regulate with respect to Aboriginal interests or the public interest generally.”

Underhill’s rebuttal points out that, “A recent UNCTAD report notes that out of 50 countries, Canada ranks 6th in having the most investment claims filed against it.” That’s more relatively embarrassing than “relatively modest.” Canada also leaves out the recent ExxonMobil and Murphy Oil case in a list of NAFTA losses, and its still-to-be-determined fine from a total sum of payments resulting from NAFTA investor-state cases.


And the Crown completely misleads when it says good faith measures adopted to protect legitimate public objectives (e.g. protecting the environment, conserving resources) do not violate expropriation rules in FIPA as long as they do not discriminate between Canadian and Chinese firms. “[T]his is not the case,” says the Hupacasath rebuttal:

In fact, Canada’s expert Mr. [Chris] Thomas [Q.C.], agreed on cross-examination that bona fide regulation with a public purpose may constitute expropriation under FIPPA, and that the form of a measure and the intent of a state are not determinative. Further, he agreed that the question of when regulation crosses the line and constitutes a measures “tantamount to expropriation” is a contentious issue, and that there is no bright line which sets out when compensation will be required, as each case will be very fact dependent.

Similarly, another of Canada’s expert witnesses for the case, Vernon MacKay, a negotiator on the FIPA, confirmed on cross-examination by Underhill that an ad hoc tribunal need not be limited by Canada’s language restricting “minimum standards of treatment” guaranteed to Chinese investors in the treaty. These tribunals “may very well interpret the minimum standard of treatment and fair and equitable treatment in the same ‘expansive’ manner as NAFTA panels before the Note of Interpretation was adopted,” writes the Hupacasath counsel.

Underhill also attacks the Crown’s claim that there “has been no case in which a claim has been made, much less a decision issued, where it was alleged that measures relating to aboriginal rights and title constituted an indirect expropriation.” In fact, explains Underhill:

the [NAFTA] case relied on by Canada’s own expert, Glamis Gold [vs. United States], involved a claim for indirect expropriation as well as for breach of the minimum standard of treatment, respecting regulation to protect Native sacred sites in California. The tribunal found that in that case there was no expropriation, because there was not a sufficient impact on the investment. The tribunal did not determine that there could be no expropriation because the legislation was aimed at protecting aboriginal concerns. If the mining had not just become more expensive, but had instead been made impossible because the permit had been revoked, it may very well have constituted expropriation.


As a bit of a side-show, the Government of Canada lawyers go out of their way to attack Osgoode Hall law professor Gus Van Harten in their defense of the FIPA, suggesting that as a critic of the investor-state dispute process in NAFTA and other trade agreements, his testimony for the Hupacasath is not as impartial as that of their own witness, Mr. Thomas, who “had never publicly expressed his views about the CCFIPA before being retained by Canada to examine the agreement and provide his assistance to the court.”

Underhill replies that Van Harten’s academic work “should properly have no bearing on the weight to be given to his opinion in this case, particularly when his decision to maintain academic objectivity by refusing paid work in the arbitration field is contrasted with the background and work of Canada’s expert.” According to the government expert’s CV:

Mr Thomas has appeared as counsel in fourteen investor-State disputes, four judicial review applications involving attempts to set aside awards, and has acted as an arbitrator or is currently acting as an arbitrator in nineteen investment claims. He has also acted as an arbitrator, including as presiding arbitrator, in various other arbitral fora, ranging from LCIA commercial arbitration to dispute settlement proceedings under Canada’s Agreement on Internal Trade (AIT).

In other words, one of these experts is standing back, watching NAFTA and other bilateral investment treaties do their thing, the other is right in there making a living off investor-state claims. A recent report by Corporate Europe Observatory and Transnational Institute goes into the conflicts of interest that investment arbitration can create.

WCEL lawyers explain the “FIPA is not only a threat to First Nations’ rights, but also a threat to all Canadians concerned about a healthy environment.” They write that, “Hupacasath First Nation has demonstrated immense courage by undertaking this legal battle against the Federal Government. This action stands as the last major impediment to approving the Canada-China FIPPA and should command the attention and support of all.”

Underhill says he expects the judge to announce his decision by September.