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Trudeau’s proposed NAFTA Chapter 11 ‘reform’ is not real change

A study found that the CETA ICS provision would not have stopped the NAFTA Chapter 11 ISDS challenge launched by Lone Pine against a fracking moratorium in Quebec.

The Trudeau government is reportedly pushing to have the Investment Court System (ICS) replace the Chapter 11 Investor-State Dispute Settlement (ISDS) provision in the North American Free Trade Agreement (NAFTA).

While this is being presented as a progressive reform, closer scrutiny suggests it is highly problematic and against the public interest.

The Globe and Mail reports, “Ottawa is seeking a system where Canada, the United States and Mexico would establish set lists of judges who would be available to hear investor claims under Chapter 11. Canada also wants language in NAFTA that reinforces member countries’ inherent right to legislate as they see fit in the public interest, including on the environment, health or safety.”

The newspaper highlights that this “revamp” of Chapter 11 would “more closely mirror” the provision in the investment provision in the Canada-European Union Comprehensive Economic and Trade Agreement (CETA).

In her October 2015 paper Fighting TTIP, CETA and ISDS: Lessons from Canada, Maude Barlow explains, “NAFTA introduced a new provision [ISDS] whereby corporations from the three countries could sue one another’s governments for changes to laws, policies or practices that hurt the corporations’ bottom lines. As a result, Canada has paid American corporations more than $200 million in the seven cases it has lost and foreign investors are now seeking over $2.6 billion from the Canadian government in new cases. Even defending cases that may not be successful is expensive. Canada has spent over $65 million defending itself from NAFTA challenges to date.”

The Council of Canadians has stated that the “reformed” CETA investment provision is still “smoke and mirrors” and mere “tinkering” given it does not correct the fundamental flaw that allows giant multinational corporations to sue governments in special, separate courts rather than the judicial system.

In her paper, Barlow wrote, “The German Association of Judges (Deutscher Richterbund, DRB), which represents 16,000 judges and prosecutors, opposed the establishment of an investment court system [in CETA], stating that ‘neither is there a legal basis nor the necessity’ for it. DRB stated that the assumption that the courts in European Union member states are not sufficient to provide adequate legal protection for foreign investors is fully unfounded. They highlighted, ‘Special courts for only certain groups are the wrong way.'”

Furthermore, the April 2016 paper Investment Court System put to the test stated, “The European Commission says that [the Investment Court System] will protect governments’ abilities to regulate on crucial matters such as public health and environmental protection. But analysis of five of the most controversial arbitration cases in recent years shows they could still be launched under the current proposal.”

That paper examined : 1) Philip Morris vs Uruguay for the introduction of graphic warnings on cigarette packages and other tobacco control measures in order to promote public health; 2) TransCanada vs the US for President Barack Obama’s decision to reject the Keystone XL pipeline as part of US’ commitment to tackling climate change; 3) Lone Pine vs Canada for a precautionary fracking moratorium enacted in Quebec; 4) Vattenfall vs Germany for Hamburg city’s imposition of environmental standards for water use at a coal-fired power plant; and 5) Bilcon vs Canada for an environmental impact assessment that prevented the construction of a large quarry and marine terminal in an ecologically sensitive coastal area.

It then concluded, “Close analysis of each case shows that every one of these controversial disputes could still be launched and likely prosper under ICS. There is nothing in the proposed rules that prevents companies from challenging government decisions to protect health and the environment. And there is nothing to prevent arbitrators from deciding in their favour, ordering states to pay billions in taxpayer compensation for legitimate public policy measures.”

The Globe and Mail notes, “Hard bargaining on Chapter 11, and on labour and environmental standards, as well as on North American auto-content rules is expected to be the key focus of the Ottawa round [this coming September 23-27].”

The Council of Canadians will be mobilizing with these activities at the time of those talks.We continue to call for the removal of Chapter 11 from NAFTA.