Canada is the most-sued country under the North American Free Trade Agreement and a majority of the disputes involve investors challenging environmental laws, according to a new study from the Canadian Centre for Policy Alternatives. Over 70 per cent of claims since 2005 have been brought against Canada, and the number of challenges under NAFTA’s settlement clause is rising sharply.
A Huffington Post story by Sunny Freeman on the CCPA report says that the investor-state dispute settlement mechanism contained in NAFTA’s chapter 11 grants investors the right to sue foreign governments without first pursuing court action. The provision included in the 1994 treaty on the argument that U.S. and Canadian investors needed protection against corruption in Mexican courts. But the mechanism limits governments from enacting policies on public concerns such as the environment and labour or human rights, and negotiations are often carried out in secret.
The CCPA believes the federal government’s commitment to Chapter 11 and its willingness to settle and compensate claimants is encouraging this trend. There were 12 cases brought against Canada from 1995 to 2005, and another 23 in the last decade. This compares to 22 against Mexico and 20 percent against the U.S. since 1995.
Canada has lost or settled six claims paying a total of $170 million in damages, while Mexico has lost five cases and paid out $204 million. The U.S. has won 11 cases and has never lost a NAFTA investor-state case.
“Thanks to NAFTA chapter 11, Canada has now been sued more times through investor-state dispute settlement than any other developed country in the world,” said Scott Sinclair, who authored the study. He estimates that Canada has spent $65 million defending such claims over the past two decades.
About 63 per cent of the claims against Canada involved challenges to environmental protection or resource management programs that allegedly interfere with the profits of foreign investors. The government has lost some of these challenges and has been forced to overturn legislation protecting the environment.
In 1997, the Ethyl Corporation, a U.S. chemical company, used chapter 11 to challenge a Canadian ban on the import of MMT, a gasoline additive that is a suspected neurotoxin and which automakers have said interferes with cars’ diagnostic systems. The company won damages of $15 million and the government was forced to remove the policy.
A year later, U.S.-based S.D. Myers challenged Canada’s temporary ban on the export of toxic PCP waste, which was applied equally to all companies. Canada argued it was obliged to dispose of the waste within its own borders under another international treaty. However, the tribunal ruled the ban was discriminatory and violated NAFTA’s standards for fair treatment.
There are currently eight cases brought by U.S. companies against the Canadian government asking for a total of $6 billion in damages. Many of the current challenges involve domestic environmental protections such as the promotion of renewable energies, a moratorium on offshore wind projects on Lake Ontario and Nova Scotia’s decision to block a mega-quarry.
In one case, Lone Pine Resources Inc., is suing the Canadian government for $250 million over Quebec’s moratorium on natural gas fracking, which applies equally to foreign and domestic companies. Lone Pine argues it was not consulted before the ban nor compensated for its wasted investment or loss of potential revenue.
Sinclair argues that the threat of challenges under chapter 11 has a chilling effect on public interest regulation, which will only worsen unless political and legal action is taken.
“Buoyed by their past successes, foreign investors and their legal advisors are now turning to NAFTA chapter 11 with increasing frequency and assertiveness,” he wrote. “Unfortunately, compared to other parts of the world, there is surprisingly little political debate about the corrosive influence of ISDS on public policy and democracy in Canada.”
Canada is embarking on a new generation of treaties such as the Comprehensive Economic and Trade Agreement (CETA) with the European Union, and the Trans Pacific Partnership, both of which contain investor-state dispute settlement (ISDS) systems. While governments can be sued under ISDS, there is no similar recourse for states to hold foreign investors accountable for their actions.
Image Source: http://www.commondreams.org/views/2015/10/23/naftas-isds-why-canada-one-most-sued-countries-world