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Canada-China investment treaty invites multi-million dollar lawsuits against energy project delays, environmental measures: Council of Canadians

FIPA gives Harper government even more reason to reject Nexen sale to CNOOC

Ottawa A bilateral investment treaty between Canada and China, which was signed earlier this month and made public by the Harper government yesterday, will put unacceptable constraints on Canadian energy and environmental policy, says the Council of Canadians. The organization is once again calling on MPs to reject the Canada-China Foreign Investment Promotion and Protection Agreement (FIPA), and to stop signing what are essentially corporate rights pacts inside standalone treaties and Canada’s broader free trade agreements.

“Canadians need to know that as Harper considers selling off Canadian energy firms to foreign investors in China and elsewhere, he’s also signing investment pacts that let these firms sue the federal government when delays or environmental protection measures interfere with profits,” says Maude Barlow, national chairperson of the Council of Canadians. “The terrible flip side of this latest FIPA is that it will let Canadian firms do the same in China where democratic, and not corporate, rights need to be enhanced.”

For example, Swedish energy firm Vattenfall has taken the German government twice to investor-state arbitration under the dispute settlement process in the Energy Charter Treaty. The first time it was to challenge a local preference for a cooling tower for a coal-fired plant where the firm preferred to dump its heated water into the nearby river. Germany settled with the firm by weakening its environmental measures related to the plant. The second dispute from Vattenfall challenges Germany’s decision to phase-out nuclear power. The firm is said to be asking for over $1 billion (CDN) in compensation for Germany’s democratic change of heart.

“There is very little evidence that these corporate rights pacts actually encourage investment into or out of Canada, or any other country for that matter,” says Stuart Trew, trade campaigner with the Council of Canadians. “They are very useful, on the other hand, for extorting governments when things don’t go their way. That could be delays or cancellations to energy and mining projects, environmental policies that eat into profits, even financial rules designed to create stability or avoid crises can be challenged.”

Chinese financial services firm Ping An, formerly the largest shareholder in Belgian-Dutch financial giant Fortis, has just taken Belgium to investor-state arbitration for the government’s post-financial crisis measures. Cigarette maker Philip Morris is using a Hong Kong-Australia investment treaty to challenge Australian plain packaging rules on cigarette boxes. Canada is the sixth most sued country under the investor-state dispute settlement regime, according to a recent UN Conference on Trade and Development report. Over the years, the federal government has paid out or is on the hook for more than $200 million in awards or settlements to corporations because of NAFTA investment lawsuits.

“Canadians need a chance to review the risks in this treaty before it’s ratified by Parliament,” says Barlow. “This should not be a rush job, especially as Canada considers opening up its energy sector to Chinese investment.”

During hearings into the Canada-EU Comprehensive Economic and Trade Agreement, which is also set to include these kinds of corporate protections against public policy, the Council of Canadians urged Parliament to adopt the position of the Australian government on investor‐state arbitration. In April 2011, Australia discontinued its former practice of negotiating investor‐state dispute procedures in trade agreements because they granted foreign firms greater rights than local ones. The Australian policy says firms should be responsible for taking on their own risks when investing in foreign markets. Under treaties like this FIPA with China, NAFTA and Canada’s other free trade deals, the public absorbs this risk by having to pay hundreds of millions in compensation to firms.