Back in the old days, 50 years ago, free trade agreements were about trade and tariffs. Today, trade Agreements have morphed into foreign investment promotion and protection agreements (FIPAS). At the heart of these agreements is the investor-state dispute settlement (ISDS) provision that allows foreign corporations to sue national governments in offshore tribunals where national law counts for nothing.
We thought it fitting to focus on ISDS lawsuits for our quiz this month, given that the North American Free Trade Agreement (NAFTA) between Mexico, the US and Canada is currently being renegotiated.
Our Quiz of the Month
Below are eight countries and eight questions. Can you match them?
Argentina, Canada, Ecuador, Egypt, Germany, Libya,
Russia, the United States,
What country
Here are the answers to the above quiz: 1. Germany, 2. Egypt, The United States, 4. Ecuador,
5. Russia, 6. Libya, 7. Argentina , 8. Canada
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The original justification for including ISDS provisions in trade and investment agreements was to protect investors from expropriation or nationalization of their assets in countries with weak rule of law.
The reality, unfortunately, has been quite different.
Between 1993 and 2015 only 17% of ISDS claims were actually filed because of direct expropriation. Instead, the ISDS system is primarily being used to challenge government regulations, particularly with respect to the environment. Around 63% of claims against Canada so far have involved challenges to environmental protection or resource management programmes that allegedly interfered with the rights of foreign investors.
Corporations are demanding ever larger damage awards. According to UNCTAD since the year 2000 there have been 88 ISDS disputes in which the claimants demanded more than a billion dollars in compensation.
Canada's ISDS record
According to UNCTAD, out of the 137 countries for which it has data, only five countries (Argentina, the Czech Republic, Egypt, Venezuela and Spain) have been sued more often than Canada.
That is startling, but just as startling is the other side of the coin. Canadian corporations rank fourth, after those in the US, Germany, and the Netherlands, in launching lawsuits under the umbrella of their home country’s FIPA agreements.
Corporations within Canada have used Canada’s FIPA treaties to initiate 45 lawsuits. Twenty-two have been directed towards third world countries, almost all of them by mining companies. Ten lawsuits have targeted the United States. No lawsuit against the US has to date been successful.
The NAFTA renegotiation: What is the future of ISDS?
NAFTA renegotiations are taking place in Ottawa this weekend and ISDS will be part of the discussions. Although the US has no official policy yet, the US trade representative has, somewhat surprisingly, drafted a proposal that would give individual countries to opt out of ISDS.
A decision by Canada to opt out of ISDS would be very much in the interests of Newfoundland and Labrador. We’ve already experienced two NAFTA lawsuits that have set potential precedents over water and judicial sovereignty. As for Muskrat Falls, any scaling back or retreat from the project would in all probability provoke NAFTA lawsuits from participating corporations like Emera that have affiliates in the United States.
Unfortunately, our federal government does not appear to be interested in seizing the opportunity presented by NAFTA renegotiations to return judicial control over corporate lawsuits to our national court system. Trade Minister Freeland prefers, instead, to talk about strengthening “the right to regulate” within NAFTA. The model for this will be the Investor Court System (ICS) that is about to be implemented in the Canada-EU CETA trade and investment agreement.
But the Investor Court System also has many strong critics. Last month Belgium asked the European Court of Justice to rule on whether the ICS was compatible with European law. Both the largest German federation of judges and prosecutors and the the European Association of Judges have stated their opposition not only to ISDS but to the ICS.
Why is the federal government so keen on ISDS?
The constant threat of lSDS lawsuits puts a potentially huge price tag on any law or regulation that government might want to introduce in the future. In this sense, ISDS in any form is a back door, long term assault on Canadian sovereignty. Yet, in spite of Canada being the most sued developed country in the world, our government is determined to keep ISDS in NAFTA? Why is that?
It seems pretty clear that the big ISDS winner is the corporate sector. Could it be that we have a federal government that places the interests of international corporations above that of protecting the public good and the environment, both at home and abroad?
……….
Submitted by Marilyn Reid
We thought it fitting to focus on ISDS lawsuits for our quiz this month, given that the North American Free Trade Agreement (NAFTA) between Mexico, the US and Canada is currently being renegotiated.
Our Quiz of the Month
Below are eight countries and eight questions. Can you match them?
Argentina, Canada, Ecuador, Egypt, Germany, Libya,
Russia, the United States,
What country
- is facing a $5.6 billion ISDS claim for deciding to phase out nuclear energy after the Fukushima nuclear disaster?
- is facing a lawsuit by a waste-water management company for increasing the country’s minimum wage?
- has never lost an ISDS challenge?
- was originally ordered to pay over $2 billion (including interest) for terminating an oil concession after the company sold 40 percent of its production rights without the required government approval.
- has been ordered to pay the highest compensation ever ($50 billion)?
- was ordered to pay $900 million to an investor after backing out of a tourism project even though the investor had only invested US $5 million in the project?
- has been the recipient of the most ISDS lawsuits?
- is facing a $1.3 billion lawsuit for allegedly failing to create a fair regulatory environment for new investors in the telecommunications sector?
Here are the answers to the above quiz: 1. Germany, 2. Egypt, The United States, 4. Ecuador,
5. Russia, 6. Libya, 7. Argentina , 8. Canada
.................................................................................................................................................................................
The original justification for including ISDS provisions in trade and investment agreements was to protect investors from expropriation or nationalization of their assets in countries with weak rule of law.
The reality, unfortunately, has been quite different.
Between 1993 and 2015 only 17% of ISDS claims were actually filed because of direct expropriation. Instead, the ISDS system is primarily being used to challenge government regulations, particularly with respect to the environment. Around 63% of claims against Canada so far have involved challenges to environmental protection or resource management programmes that allegedly interfered with the rights of foreign investors.
Corporations are demanding ever larger damage awards. According to UNCTAD since the year 2000 there have been 88 ISDS disputes in which the claimants demanded more than a billion dollars in compensation.
Canada's ISDS record
According to UNCTAD, out of the 137 countries for which it has data, only five countries (Argentina, the Czech Republic, Egypt, Venezuela and Spain) have been sued more often than Canada.
That is startling, but just as startling is the other side of the coin. Canadian corporations rank fourth, after those in the US, Germany, and the Netherlands, in launching lawsuits under the umbrella of their home country’s FIPA agreements.
Corporations within Canada have used Canada’s FIPA treaties to initiate 45 lawsuits. Twenty-two have been directed towards third world countries, almost all of them by mining companies. Ten lawsuits have targeted the United States. No lawsuit against the US has to date been successful.
The NAFTA renegotiation: What is the future of ISDS?
NAFTA renegotiations are taking place in Ottawa this weekend and ISDS will be part of the discussions. Although the US has no official policy yet, the US trade representative has, somewhat surprisingly, drafted a proposal that would give individual countries to opt out of ISDS.
A decision by Canada to opt out of ISDS would be very much in the interests of Newfoundland and Labrador. We’ve already experienced two NAFTA lawsuits that have set potential precedents over water and judicial sovereignty. As for Muskrat Falls, any scaling back or retreat from the project would in all probability provoke NAFTA lawsuits from participating corporations like Emera that have affiliates in the United States.
Unfortunately, our federal government does not appear to be interested in seizing the opportunity presented by NAFTA renegotiations to return judicial control over corporate lawsuits to our national court system. Trade Minister Freeland prefers, instead, to talk about strengthening “the right to regulate” within NAFTA. The model for this will be the Investor Court System (ICS) that is about to be implemented in the Canada-EU CETA trade and investment agreement.
But the Investor Court System also has many strong critics. Last month Belgium asked the European Court of Justice to rule on whether the ICS was compatible with European law. Both the largest German federation of judges and prosecutors and the the European Association of Judges have stated their opposition not only to ISDS but to the ICS.
Why is the federal government so keen on ISDS?
The constant threat of lSDS lawsuits puts a potentially huge price tag on any law or regulation that government might want to introduce in the future. In this sense, ISDS in any form is a back door, long term assault on Canadian sovereignty. Yet, in spite of Canada being the most sued developed country in the world, our government is determined to keep ISDS in NAFTA? Why is that?
It seems pretty clear that the big ISDS winner is the corporate sector. Could it be that we have a federal government that places the interests of international corporations above that of protecting the public good and the environment, both at home and abroad?
……….
Submitted by Marilyn Reid
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