Canada should follow EU lead on investment rules

Stuart Trew, Emma Lui, Published: Monday, 03/03/2014

What has become of the Canada-European Union free trade deal? The Harper government announced an “agreement in principle” with the EU in late October. And yet talks continue in a number of areas, notably on a controversial NAFTA-like investment protection chapter that is giving Europeans second thoughts.

Due to mounting public concern, the European Commission has launched a consultation with EU member states and the public on whether its Transatlantic Trade and Investment Partnership with the United States should include an investor-state dispute process. This process in the North American Free Trade Agreement and similar treaties signed by Canada, the US and EU member states has resulted in dozens of absurd corporate lawsuits against public health, environmental and conservation measures, and other matters that should be the purview of elected governments.  

The three-month consultation, which begins as early as this week and ends in June, will undoubtedly further delay the Canada-EU Comprehensive Economic and Trade Agreement negotiations. The Conservative government should use this pause to also consult the Canadian people on what is probably CETA's most controversial chapter. A review of Canada's existing investor "rights" deals, including NAFTA, is long overdue.  

Using NAFTA's powerful investment protection chapter and dispute process, US investors have targeted a precautionary moratorium on shale gas extraction under the St. Lawrence Seaway, the federal government's decision to build a new bridge between Windsor and Detroit, a research and development profit-sharing program in Newfoundland and Labrador, a ban on trade in toxic chemicals, and more.  

The list goes on. Most recently, the brand name drug company Eli Lilly launched a NAFTA lawsuit claiming $500 million in damages for two superior court decisions that invalidated patents because the company failed to meet Canadian patentability standards. It cannot be said with any authority that investment rules in treaties like NAFTA, CETA or the EU-US TTIP simply level the playing field between national and foreign firms in any given country. By giving investors extra-legal protections, such as the ambiguous right to "fair and equitable treatment," or the right to be safe from regulatory expropriation, the treaties are an effective tool to threaten governments against introducing public interest legislation that might depress corporate profits, and for punishing governments that ignore those threats.  

For example, in its NAFTA lawsuit against Canada, Lone Pine Resources claims that the partial moratorium on fracking in the St. Lawrence was actually an "arbitrary, capricious, and illegal revocation of [its] valuable right to mine for oil and gas." What hope do we have of effectively protecting communities and water from potentially destructive resource projects such as mines, quarries or oil and gas exploration while these treaties make us pay to regulate?  

The Conservative government claims that things will be different in CETA because they are trying to make it more difficult for companies to file so-called frivolous cases against legitimate public policies. But expert opinions of a leaked November 2013 version of the CETA investment chapters contradict this claim. In reality, says Howard Mann of the International Institute for Sustainable Development, CETA will give European and Canadian companies even more opportunities to sue for perceived violations of their fair and equitable treatment rights.  

Water problems  

The Council of Canadians is extremely concerned about how these additional rights will affect public services, in particular municipal water services. From our reading of the text, CETA would lock in water service privatization that the Conservative government is encouraging by forcing municipalities and First Nations to consider the Private-Public Partnership, or P3, option before receiving federal funding for water infrastructure. We don't think this makes sense when globally, there is a trend away from private water.  

If CETA is ratified as is, communities entering into a P3 for water and wastewater services would open themselves up to investor lawsuits should they later decide to cancel a contract-even if it was in the public interest to do so. Regina recently announced three consortia-Epcor Saskatchewan Water Partners, Prairie Water Partners, and Wascana Environmental Partners-are bidding for the city's new P3 wastewater treatment plant. All three consortia have partners that are either based in or have offices in Europe. United Water is a partner in the latter consortium and is owned by Suez Environment, one of the world's largest multinational corporations based in France. Suez has already used investment treaties to win millions in compensation from water service remunicipalization.  

If at some point Regina opted to bring its privatized wastewater services back into public hands, perhaps to contain rising costs, a consortium with ties to Europe would have solid grounds in CETA to claim a violation of their fair and equitable treatment. Fair payment to the firm for interrupting a contract is no guarantee against such a case, which is entirely up to an arbitration panel to decide. The EU agreement would create a disincentive against even considering a move back to the more affordable and accountable public model because of the costs and stress of arbitration. CETA, more than previous Canadian investment treaties, gives too much discretion to the three paid arbitrators deciding these lawsuits to pass final, non-appealable judgment on the appropriateness or not of public policy decisions. It is not what most of us would call a rules-based system, but an arbitrary one where democracy and the rule of law are subverted so that "investors" can go about their business with as few constraints as possible. The European consultation on investment protection rules in the TTIP is a positive step, but there is a risk it will become a propaganda campaign for the EU Commission and corporate lobby groups. Holding parallel consultations in Canada with maximum public input could help avoid that situation.  

Actually, it's the very least we should be asking from the Conservative government. And since the Commission will be publishing the CETA investment chapters anyway as part of the European consultation, there is no good excuse why they cannot be published here as part of a national public discussion. Stuart Trew and Emma Lui are The Council of Canadians' trade and water campaigners respectively. author_email: