While the Trans-Pacific Partnership (TPP) is not yet ratified into law, it is looming – and it threatens to do irreparably harm. In posts to come we’ll be commenting on the many reasons why the TPP is a catastrophic deal that Canada must reject. But we begin with one of the most controversial aspects of the TPP - Investor-State Dispute Settlement (ISDS), an international arbitration procedure that allows investors the right to sue national governments.
ISDS provisions pose a threat to national sovereignty and give many reasons for Canada not toratify the Agreement. Here are four reasons the ISDS provisions are so menacing:
1. COST TO TAXPAYERS – ISDS in the TPP allows investors to sue national governments for lost future profits. This means that if legislation can be implicated in lost profits to the corporate investor, Canada may find itself defending its own public interest decisions before a TPP arbitration board. NAFTA has given Canada ample experience in defending itself in ISDS actions. That’s bad enough, but the real trouble is that its defence is not always, or even usually, successful.
As of January, 2015, for example, there were 35 actions brought against Canada under NAFTA. There were 20 actions against the U.S. and 22 against Mexico, making Canada the most-sued country under NAFTA. So far, Canada has either lost or settled six of these claims, paying out damages totalling over $172 million. The taxpayers are on the hook for these legal costs.
2. UNCAPPED DAMAGES - The TPP’s special ISDS arbitration boards will be able to make uncapped damage awards. This leaves taxpayers vulnerable to the potential need to finance legal penalties that have no ceiling. Canada might be getting into something without knowing the costs. That, in addition to increasing the prospect of regulatory chill discussed, is reason enough to reject the TPP.
3. REGULATORY CHILL - While the financial costs from lawsuits can be steep, the regulatory costs may be even greater. A review of the effects of ISDS provisions has found that ISDS likely leads to regulatory chill, whereby the Government may choose not to enact public interest regulations if it may result in a lawsuit against the country. Consider the Bilson debacle - a NAFTA lawsuit brought by Bilcon against the Canadian government. Bilcon sued the government when it stopped Bilcon’s planned quarry. The government stopped the quarry plan after an environmental assessment found the project was likely to cause significant and harmful environmental effects. Seeking over $100 million (USD) in damages, Bilcon used NAFTA’s ISDS rules to sue the government. The tribunal ruled in favour of the company, finding that the “reasonable” economic “expectations” of Bilcon were thwarted by federal and provincial decisions to deny Bilcon environmental permits.
The Bilcon case is but one example of how ISDS provisions can be used to challenge the ability of the government to legislate in the public interest. With the TPP, there is no doubt there would be many more such cases.
4. ILLUSION OF REGULATORY FREEDOM – Proponents of the TPP argue that the TPP is not a corporate takeover of national sovereignty, saying that the TPP has language to ensure the government will retain the right to legislate in the public interest. Such arguments typically cite Chapter 9, Article 9.16 of the TPP, which reads:
"Nothing in this Chapter shall be construed to prevent a Party from adopting, maintaining or enforcing any measure otherwise consistent with this Chapter that it considers appropriate to ensure that investment activity in its territory is undertaken in a manner sensitive to environmental, health or other regulatory objectives." [Emphasis mine].
Sounds good, right? Well…it might look good at first glance, but when you give it another look, the warts come out. There’s no real protections to regulate for the public interest in the Article. Instead of protecting the right to legislate in the public interest, the Article merely states that the government can regulate in the public interest if, that is, in doing so, it complies with the TPP requirements regarding investors. As noted by the Columbia Center on Sustainable Investment, the language in 9.16 leaves the government vulnerable to legal challenge, stating:
The words, “otherwise consistent with this Chapter,” thus negate any protections otherwise purported to be given under that article. Consequently, and as under other investment treaties with ISDS, good faith measures taken in the public interest can still be successfully challenged under the agreement as violating the TPP’s investor protections.
The government has a duty to legislate in the interests of its citizens. That duty is a cornerstone of our democracy and one that cannot simply be abdicated via a trade agreement. We urge the Liberal Government of Prime Minister Trudeau not to cede to corporate interests its obligations to uphold the public interest.
There are many other negatives, and some positives, to the TPP (which will be discussed in upcoming posts), but with the ISDS provisions and the powers they give to corporations, one has to wonder why the TPP is called a trade deal at all. Best to call it what it is: a corporate rights’ treaty.
The full text of the TPP can be found here.