Canada to ratify CETA- even with investor-state provisions

It looked as though we had a chance to rid the world of the consistently perverse non-trade aspect of all new trade deals – the so-called “investor-state agreement.”   And then along came a sneaky European Union proposal dressed up as reform of the investor-state dispute mechanism.  It looks like, once again, Canada will agree to granting foreign corporations superior rights to domestic ones.  This time it will be the corporations (aka “investors”) of the 23 nations of the European Union that can bring arbitration claims.

These provisions – known by an alphabet soup of acronyms (FIPA, ISDS, IS) – allow a foreign corporation to bring a challenge by way of private arbitration against a government if that government’s actions can be interpreted as “tantamount to expropriation.”  Ever since Chapter 11 of NAFTA where this anti-democratic instrument first emerged, arbitrators have been willing to find that perfectly reasonable measures by governments have reduced foreign corporations’ expectations of profits.   “Tantamount to expropriation” ceased to mean anything close to actual expropriation.  It has become a way for foreign corporations to threaten and punish governments for regulating to protect health, safety and the environment around the world.  Trade lawyer Steven Shrybman once correctly described them as “fundamentally corrosive to democracy.”

The most controversial part of the Comprehensive Economic Trade Agreement (CETA) with the European Union is the investor-state provision.  The most controversial part of the Trans-Pacific Partnership Agreement (TPP) is the investor-state agreement.  These concurrent debates create the opportunity to debate for the first time whether such agreements are in the public interest – anywhere.

Essentially the issue has never been debated.  Despite a significant public debate before Canada ratified NAFTA, Chapter 11 was never identified as a source of concern.  Not even Canada’s NAFTA negotiators had contemplated that the language could be interpreted as it has been.  An elite group of lawyers globally have profited – enormously – as arbitrators, as counsel and as expert witnesses in ripping off governments in the interest of corporate power.  Domestic governments and legislatures at all levels – municipal, state/provincial and federal have lost around the world.

The new so-called reform of ISDS in CETA was put forward by EU Trade Commissioner Cecilia Malmström.  It is described as an Investment Court System (ICS).  Despite being over-sold in the media, the actual proposal is simply rebranding the ISDS mechanism.  One of the few independent Canadian experts in investor-state dispute systems is Gus Van Harten of Osgoode Hall Law School.  In a recent article for the Social Science Research Network, he has carefully critiqued Mme Malmströms proposal.  Van Harten rejects it as allowing the continuation of ISDS, despite a degree of whitewashing of its sins.  Particularly worrying is the failure to require that foreign corporations exhaust their access to domestic courts before opting for investor-state arbitration.  As the appalling Bilcon case under Chapter 11 has established, a foreign corporation can choose to ignore its access to courts and go to anti-democratic investor-state arbitrations instead.

The sensible thing to do, as the issue is hotly debated in the CETA and TPP context, is to move for a thorough global review of all these agreements in the context of the WTO.  The Canada China investor-state agreement is arguably the worst Canada has ever entered into.  The Conservative cabinet ratified it in secret by order in council.  The earliest Canada can exit the agreement is 2045.  Our only way out is either through a global review or if Beijing agrees to renegotiate FIPA in the course of our new trade talks.

A global review of all such agreements is long overdue.  They are not a necessary precondition to investment. Australia, for example, has a far larger volume of trade with China than Canada and never entered into an ISDS with China at all – much less the lop-sided deal with which Harper has left us.

The Liberal government’s determination is ratify CETA is our first big test of whether citizen engagement against investor-state provisions and increasing global corporate rule can alter the Liberal course.

Originally published in Island Tides.