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Trudeau government, C.D.Howe Institute step up their defence of ‘investment protection’ provisions

The Council of Canadians and allies have taken aim at the investor-state dispute settlement (ISDS) provisions in deals like the North American Free Trade Agreement (NAFTA), the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), and the Trans-Pacific Partnership (TPP).

These ‘investment protection’ provisions grant investors (transnational corporations) the right to sue democratically-elected governments in special tribunals, without first pursuing legal action through established legal system, for investments and future profits affected by public interest legislation. With respect to NAFTA, almost two-thirds of these investor challenges are against environmental protections.

It would now appear that a new counter-offensive is being launched against our arguments.

In today’s Globe and Mail, Lawrence L. Herman, a senior fellow at the C.D. Howe Institute, writes that while “Canada is close to the top of the list of countries targeted in these international investment disputes [fifth place internationally]”, “many of these investor claims have been either dismissed or haven’t been pursued by the claimants”, so the good news is that Canada only “comes out at the top as a respondent under the NAFTA”.

Herman then argues that while “billions of dollars have been claimed by American investors”, Canada has only paid out “about $37-million”, excluding the $130 million paid to AbitibiBowater because “it was accepted by the province from day one that compensation would be paid.” He tries to assure us that “the NAFTA totals, while not negligible, aren’t particularly dramatic”, though admits “there are some pending cases that could change the balance, including hundreds of millions claimed by Eli Lily in a patent case and by Lone Pine Resources regarding Quebec’s moratorium on fracking operations under the St. Lawrence River”.

And to explain why Canada is sued so often through NAFTA, Herman offers: 1) “we have the same legal traditions – common law – and speak the same language [as American investors]”, 2) “our access laws make [Canadian government documents] available to American claimants without too much fuss”, 3) American companies are litigious in nature and pursuing “a NAFTA claim is generally less costly than hiring an American law firm”, and 4) “the availability of third-party financing of these investor claims through different mechanisms”.

He then offers, “Given the existing ISDS provisions in both the NAFTA and the TPP, the exposure of Canada to binding arbitration claims by US investors will not be changed in any substantive way going forward. …While it may not give perfect comfort, there is a clear tendency in these decisions to dismiss investor claims and uphold non-discriminatory government regulation where there is a demonstrable public interest at stake.”

The Government of Canada seems to want to make the same arguments.

In defending the ISDS provision in the Trans-Pacific Partnership, Global Affairs Canada has written, “Our experience under the NAFTA demonstrates that neither our investment protection rules nor the ISDS mechanism constrain any level of government from regulating in the public interest.”

Another argument now being made by Global Affairs Canada is that, “NAFTA Chapter 11 establishes a framework that provides investors with a predictable, rules-based investment climate. While disputes are a normal part of every trade relationship, they represent a very small portion of the billions of dollars in investment that Canada attracts and the billions that Canadian companies invest abroad.”

And David Lametti, the parliamentary secretary to the minister of international trade, has commented that investor-state challenges are “part of the democratic process … and frankly it’s a healthy part of the process, if it forces governments to reflect on what they do and what they think they should do. And if they really think they’re right in doing what they’re doing, then they will enact that policy and take whatever…outcomes are produced by that decision.” He contends that, “If there’s government will to be leaders on environmental concerns, for example, nothing prevents us from doing it.”

The views being expressed by Herman, Global Affairs Canada and Lametti run contrary to the concerns being raised by Council of Canadians chairperson Maude Barlow, the largest association of judges in Germany (the Deutscher Richterbund), Nobel Prize-winning economist Joseph Stiglitz, and numerous others.

Barlow has stated these so-called investment protections “give a special status to foreign corporations by allowing them to challenge the laws that apply to everyone else through a special system outside established court systems.” The German judges say, “Special courts for only certain groups are the wrong way” and “neither is there a legal basis nor the necessity” for it. And Stiglitz notes, “It used to be the basic principle was polluter pay. If you damaged the environment, then you have to pay. Now if you pass a regulation that restricts ability to pollute or does something about climate change, you could be sued and could pay billions of dollars.”

In short, investor-state rules are profoundly undemocratic in that they give special rights to corporations, but not basic protections to states, their populations or the land and water. The Council of Canadians will continue to challenge the undemocratic and unfair nature of ‘investment protection’ provisions in ‘free trade’ agreements.