International Trade Committee on March 24th, 2009

[Claude Guimond, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Mr. Chair.

Good morning to our witnesses. We are having an interesting discussion this morning around health issues and the environment, especially as they relate to chapter 11.

Without wanting to throw the baby away with the bathwater, could we improve on chapter 11? I am thinking in particular about article 1110. Could the clause dealing with public interest be better defined, in order to give it more teeth and increase our say? We know that the corporation is very powerful. If we better define public interest, as set out in article 1110, could we better serve the interests we are talking about this morning?

[William Amos]

Yes, that is a good question. I would like to come back to Mr. Shrybman's argument, which in my view hits the nail on the head.

Before deciding if we should make improvements to chapter 11, we should determine whether it helps promote investments. It is quite unclear whether chapter 11 and the protections therein, especially its arbitration measures, foster investments in Canada and abroad. The first step is to determine whether the arbitration process is useful. If it is found to be a good way to promote investment, then changes could be made.

Clearly, one has to distinguish between a non-compensable regulation and a compensable expropriation, whether it be direct or indirect. Chapter 11 is very clear on that issue: expropriation, whether direct or indirect, is compensable. The chapter refers to “measures tantamount to expropriation”, meaning measures that very closely resemble expropriation. There could be a very clear definition of a non-compensable regulation, so that Canadian jurisdictions are aware, from the outset, of the measures that can be taken in the interest of Canadians, without having to worry about any potential arbitration.

[Hugo Séguin]

I have a slightly different opinion than that of my two colleagues. In the case of Équiterre, the primary objective of chapter 11 should not be to increase investment in Canada. International trade agreements should not place private interests above the responsibility of governments to protect the environment and public health. To the extent that trade agreements fulfil that responsibility, they can take into consideration investor protection. But one responsibility takes precedence over the other, and that is protecting public health and the environment.

[Steven Shrybman]

I would like to give you a more fundamental point about article 1110. You are entitled as the Government of Canada to expropriate property for public purchases, and you're entitled as the Government of Canada to decide how much or whether you're going to pay compensation when you do that, because we have not entrenched private property rights in the Constitution. That was debated in 1982 and rejected.

What article 1110 does is entrench private property rights in NAFTA, so let's say it is the taking of property, as perhaps would be true of Newfoundland not taking back its water licence but taking the company's mill. It's up to Newfoundland, under our Constitution, to decide how much money to pay, but under NAFTA, Canada must compensate Abitibi for the fair market value of its investment. We rejected that notion as a feature of our Constitution and yet it's been imposed on us through the back door of NAFTA. That's a fundamental problem with article 1110, however you read it.

[The Chair, Conservative, Lee Richardson]

Thank you.

Thank you, Mr. Guimond.

Mr. Keddy.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Thank you, Mr. Chairman.

Welcome to our witnesses.

I have a couple of quick questions.

Are you folks involved at all in the Newfoundland case that Mr. Shrybman was just talking about?

[Steven Shrybman]

I think I will be, but there is no case yet.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

If it comes forward.

[Steven Shrybman]

Yes, I've had a couple of clients ask me to represent them if it comes forward.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Is one of them the Province of Newfoundland?

[Steven Shrybman]

No.

[William Amos]

Just so that we're clear, the Province of Newfoundland would always be represented by the Department of Foreign Affairs--

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Absolutely. Yes, I understand that. But they also have a certain vested interest here, as does AbitibiBowater. That's an interesting case, and at this point I think it's pretty hypothetical exactly where it goes.

I'm more interested in picking up on Mr. Brison's line. If we have an imperfect system--if that's the case--and chapter 11 needs to be massaged or amended to work better and to be more equitable straight across the board, then do we throw the baby out with the bathwater or do we simply try to amend and make changes to chapter 11?

I was interested in Mr. Shrybman's comment that when we're in a court outside of Canada and you want to appeal that decision, then you have to appeal through that jurisdiction. For those of us in the room who are not lawyers, and I think that's most of us, that does present a fairly serious problem.

I will just follow up on that statement. If it's in the state of Mississippi, are you back in the state of Mississippi? Are you in the same court jurisdiction as you were in, state versus federal, or how exactly does it work?

[Steven Shrybman]

In the Loewen case?

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Yes.

[Steven Shrybman]

I think one of the things, essentially, about the Loewen case is that it was brought to challenge the determination of a jury in a jury trial that held Loewen liable for this extravagant amount of money.

Under this mechanism you can actually review the decisions of courts, including the Supreme Court of Canada. There's no limit to the level of court that you can seek an arbitral tribunal hearing on. In fact, it happened in another case involving Canada going after a decision of a U.S. district court of appeal--so right up there. And that's problematic, in my view. Why would you entitle a private tribunal to sit in judgment on the determination made by a Canadian court and whether it was properly made? But that's permitted under this regime.

I'm not sure where the place of arbitration was in the Loewen case, but you wouldn't be back before a court in Mississippi; it would be whatever court in the United States has jurisdiction to review arbitral awards, probably a court of appeal at an appellate level. In Canada it's a superior court.

The Metalclad case, for example, was a dispute between a hazardous waste company in the United States and a small community in Mexico. Of course, it sued the Mexican government. When the decision was made against Mexico, Canada had been chosen as the place of arbitration--in fact, British Columbia. And so the only court that Mexico could turn to to set aside the award was the Supreme Court of British Columbia, and that's where it went. And the court upheld the award.

But here you have the spectre of a Mexican measure being challenged before an international tribunal, and then if Mexico wants to judicially review the decision, it has to go to a court in British Columbia. Ask yourself this: if it had been the United States, do you think U.S. lawmakers and Congress would put up with an outcome like that?

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Well, I'm not certain on that hypothetical question, but I think that if an international tribunal is being held, there would be some reason to allow for a third country. So if it was a dispute between Mexico and the United States, Canada would make the third country, being under NAFTA. With a dispute between Canada and the United States, perhaps Mexico should be the seat.

We have to have a process in rules-based trading to settle disputes. There has to be a process. A good portion of what doesn't work in Canada is interprovincial trade barriers. We had that discussion here this morning. For a truck to haul a load of freight from Nova Scotia to British Columbia, there are several different licences required. That's not promoting trade. So how do we break down these barriers and how do you put a dispute mechanism in place that allows it to happen? And maybe chapter 11 is not perfect--that's not the discussion--but you do need a process to settle disputes.

[Steven Shrybman]

I think those processes have to be consistent with--

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Mr. Amos is trying to get a word in here as well.

[Steven Shrybman]

Very quickly, they have to be consistent with Canadian constitutional norms, if Canada is a party; and they have to be reciprocal and fair. By all three measures, chapter 11, you'd have to conclude, would fail.

[The Chair, Conservative, Lee Richardson]

Mr. Amos.

[William Amos]

I would make a very brief point. Ecojustice obviously is a public interest environmental organization and doesn't make a habit of taking positions on matters of international trade, and so I should probably speak in a personal capacity.

I would simply say that I agree with the need for dispute settlement, particularly between trading nations, but I think there's a very open question as to whether or not investors need a specific mechanism to protect their investments vis-à-vis the host state of their investment. They can use domestic court processes. The chapter 11 investor-state dispute resolution process is something specially designed for those investors. It doesn't have to be there; they could go through the Canadian court system. For instance, they could conceivably challenge—

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

I have one last quick question that maybe you could shine some light on.

There are several jurisdictions in Canada that have banned the chlorophenoxy herbicides. There must be, and I'm sure there are, jurisdictions in the United States, whether at a state, city, or municipal level, that.... I'd be shocked if there are not. When a ruling is brought down, does that affect Canada and the United States, because we've signed on to this trade agreement? If so, why aren't we seeking allies? Anyone can be an intervenor in a case, I would expect.

[Steven Shrybman]

One of the idiosyncrasies of this regime is that there is no doctrine of precedence. It's not like a court, which is bound by higher authority or which needs to respect the decisions of other tribunals. So it's open season in every case. Even though the cases might be similar, one tribunal is quite free to ignore the decisions of others if it thinks it has a better view.

So I don't think there's any precedential value arising from a dispute like that, if that's your question. I'm not sure I understood it.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

My question, I guess, specifically is, if there are jurisdictions in the U.S., wouldn't they have the same interests as Quebec has, and Ontario in this case, and the Halifax municipality and other areas that have banned the use of certain pesticides, or herbicides in this case?