Annual meetings of Canada’s provincial and territorial trade ministers, under the purview of the Agreement on Internal Trade, don’t typically attract media attention. A meeting on June 15 in Northwest Territories was noticed only by the Canadian Manufacturers and Exporters, which stated that the recommendations it and other business lobbies had proposed for including fines in person-to-government disputes under the AIT had been “put in place.”
Dozens of other groups, including the Council of Canadians, have consistently argued there should be no fines in any dispute under the AIT, least of all in disputes brought by investors. “Ontario’s restrictions on the sale of dairy blends (oil-based spreads and other products containing less than 50 per cent dairy) were struck down last month by an AIT panel,” we pointed out in a joint press release in December 2010. “The province must now change its laws or face a fine. This is contrary to basic notions of democracy.”
The AIT was already an unnecessary burden on government that tries to make free-market principles the basis of inter-provincial interaction, and makes those principles more important in many ways than the Canadian Constitution. Now, in a June 15 press release, the Committee on Internal Trade explains that new amendments to the agreement “include the introduction of monetary penalties for non-compliance with panel reports, as currently applies for Government-to-Government disputes, as well as changes resulting from a review to ensure procedural fairness and consistency.”
(On May 28, I requested an agenda for the AIT meeting from the Internal Trade Secretariat and was told, “Information regarding the upcoming CIT meeting will be released on our website at www.ait-aci.ca prior to the meeting.” It wasn’t.)
We don’t know exactly what the fines process will look like, where the money will go, or whether there are any additional changes to the person-to-government dispute process that would make it easier for investors to challenge provincial policy. Those details are not made public “until all the governments obtain the necessary approvals,” I was told by an official at Enterprise Saskatchewan.
Currently under the AIT, the investor must first ask a province to take up its dispute against another province and, if that fails, the investor can continue on its own but only after passing a screening test to see if the case has any merit. Fines in province-to-province disputes are new, with awards of up to $5 million to be transferred from the offending province to the province whose rights under the AIT were found to have been upset.
During a briefing with provincial CETA (Canada-EU trade) negotiators in Brussels last year, members of the Trade Justice Network were told that fines in person-to-government disputes would not go to the person but would be collected in some kind of pool. Again, the press release on June 15 doesn’t mention whether that’s what the provinces and territories have just agreed to.
Possibly pointing to where they do want to go in this respect, the release says, “Ministers directed that work continue with regard to the development of options for addressing situation where foreign interests may receive more favourable treatment under an international than domestic interests receive under the AIT.” This is in the context of ongoing discussions on how the AIT interacts with treaties like NAFTA or the proposed Canada-EU Comprehensive Economic and Trade Agreement.
Clearly the investment protections in NAFTA and Canada’s other trade deals give foreign firms more rights to challenge public policy decisions than domestic firms. Look at the St. Marys Cement NAFTA Chapter 11 case against Canada for Ontario’s decision not to approve a quarry outside Hamilton. The once-Canadian firm, which is asking for $275 million in damages, is now Brazilian-owned and incorporated in the U.S. state of Delaware, making it a foreign investor under NAFTA. Had St. Marys still been entirely Canadian it would not have had the same right to sue. (Actually, AbitibiBowater was on paper a Canadian firm but used its incorporation in Delaware to sue under NAFTA in the Newfoundland and Labrador mill expropriation case.)
One of the reasons the current Australian government decided to stop signing bilateral investment treaties that contained investor-to-state dispute settlement procedures was because these deals give foreign firms more rights than domestic firms. Also, Australia felt the process posed too great a risk to public policy.
The new fines in the AIT for government-to-government disputes were hard enough to take. If in fact provincial trade ministers are quietly trying to make it easier for Canadian firms based in one province to sue other provinces where public policy interferes with profits, just to level the playing field with foreign firms under international deals in the eyes of big business lobbyists, it would be a disaster for democracy.
We’ll post more information on what provincial trade ministers decided as soon as we see it. The Committee on Internal Trade meets against next year, probably in Ottawa.