When corporations sue countries, no one wins
TransCanada is demonstrating beautifully why there is so much opposition against trade agreements such as CETA (Canada-European Union Comprehensive Economic and Trade Agreement) and the TPP (Trans-Pacific Partnership). The Calgary-based company recently filed a US$15 billion NAFTA challenge after U.S. President Barack Obama’s rejected the pipeline. This is under the NAFTA’s Chapter 11 investor-state dispute settlement (ISDS) provisions which allows corporations to sue government over policy decisions that may affect their profits. Keystone XL would have produced 110 million tons of greenhouse gasses per year.
Last week, Globe and Mail columnist Barrie McKenna slammed the Council of Canadian’s opposition to ISDS:
“It took barely a nanosecond for anti-trade activists to decry what they say is the real meaning of TransCanada Corp.’s multibillion-dollar Keystone XL pipeline lawsuit. …The Council of Canadians quickly [complained] that trade agreements enable companies such as TransCanada to thwart the democratic will of Americans to manage their environment and economy. Wrong. If there is a lesson in the Keystone saga, it is that Canadians should be thankful that NAFTA, the Canada-EU free-trade deal [CETA] and the TPP [Trans-Pacific Partnership] give companies a tool to fight mistreatment at the hands of other governments.”
In a letter to the editor published today, I respond. Here is the full letter that the Globe and Mail did not publish:
In his Jan. 9 column, Barrie McKenna characterizes TransCanada’s NAFTA lawsuit about the failed Keystone XL pipeline as a “righteous fight” against injustices toward foreign investors.
He questions the “instantaneous” opposition from the Council of Canadians and other groups to investor-state dispute settlement (ISDS), the provisions in some trade agreements that let foreign corporations challenge everything from environmental legislation to health regulations.
He portrays TransCanada’s fight as a David-versus-Goliath battle against an unjust U.S. government. In his analysis, the real victims are foreign investors, stymied by arbitrary foreign governments. ISDS enables Canadian companies to get “fair” treatment, he suggests.
But the actual track record of ISDS shows otherwise. For starters, it’s usually American corporate behemoths suing the Canadian government for local or provincial policies.
Newfoundland and Labrador used to have an economic development plan requiring oil companies to contribute to petroleum research. Investment arbiters ruled that requirement hindered profit-making, and Canada paid $17.3 million.
Quebec put a moratorium on oil and gas exploration on the St. Lawrence River to prevent hydraulic fracturing (fracking), a controversial extraction technique banned in France and other jurisdictions. As a result, the Canadian government was sued for $250 million by a company headquartered in Calgary but registered in Delaware.
In Digby, Nova Scotia, a picturesque fishing town near the Bay of Fundy, a joint federal-provincial panel rejected a quarry after an exhaustive environmental review. The Canadian government paid the price: Bilcon, the U.S. company behind the project, won an ISDS lawsuit.
True, ISDS mechanisms cannot rewrite legislation, but they pose severe threats. Governments will hesitate to enact legislation that creates a risk of millions or billions of dollars in ISDS lawsuits. This creates a serious chill effect.
It does not even take an actual ISDS challenge to change policy, according to a study by Osgoode Hall legal scholar Gus Van Harten. In interviews he held with Ontario policymakers, he was told that policy decisions are delayed or shelved because of potential lawsuits. One lawyer reported that legislation is reviewed to see if it is compatible with trade agreements. He says Chapter 11 of NAFTA, outlining ISDS, “is the one that really bites.” Another policy official said, “You don’t have to be even threatened before it [ISDS] is a factor in your decision-making process.”
In the end, policymaking in the public interest is curtailed by ISDS. Canada has been subject to 35 NAFTA claims, with 63 per cent of them challenging environmental protection or resource management measures. As the most-sued developed country in the world under ISDS, Canada faces $2.6 billion in ISDS claims.
And while trade agreements give foreign companies binding protection against environmental and social legislation, human rights and our environment enjoy no such protections. There is no independent international arbitration tribunal that can award billions in the event of massive environmental destruction, human rights abuses or labour violations. Trade agreements such as the Trans-Pacific Partnership and the Canada-EU Comprehensive Economic and Trade Agreement largely amount to relinquishing more and more of our national policy space to international rules that favour corporations.
If Keystone XL were built, it would produce 110 million tons of carbon dioxide emissions every year, which is incompatible with effective U.S. action to cut climate pollution.
With Canada bearing the brunt of Chapter 11 challenges under NAFTA, we might feel righteous about trying to get our own back through TransCanada. But if our home-grown champion wins, the loser isn’t the big bad Americans; it’s our environment, and the right of governments to protect it for their citizens.
Posted on Huffington Post, January 19, 2016