Thank you very much, Mr. Chairman. Good morning, members of the committee.
I'm a partner in the law firm Sack Goldblatt Mitchell. I'm on the board of the Council of Canadians, and I have represented them in more than one investor-state dispute proceeding under chapter 11 of NAFTA. As you know, the Dow Chemical case you're concerned with today is such a dispute.
My job is not to talk about the case but to talk about the dispute regime so that you have the context for your consideration of the Dow Chemical case. I'm going to mention also some of the other environmental cases that have arisen under this extraordinary dispute resolution mechanism that's built into chapter 11 of NAFTA. I have about 10 minutes, so I'm going to go quickly and try to keep it at a fairly high level.
Under chapter 11 of NAFTA, private parties--investors and companies--from the other NAFTA jurisdictions, namely the United States and Mexico, can make a claim for damages arising from an alleged breach. We're going to take the case of a claim against Canada--a Canadian government, be it a federal government, provincial government, or municipal government--because of something the government has done that the private investor or the U.S. company, for example, argues is in breach of the broadly worded and ill-defined constraints of chapter 11.
My colleagues will deal with the rules. I'm just going to describe the mechanism and how it has been used.
Virtually any U.S. company is entitled to file a complaint if it has an investment interest in Canada. And the threshold is low. You need only have shares in a Canadian company to be entitled to bring a complaint. The only measure of a Canadian government--policies and laws and programs and practices are described as measures--that are off limits under chapter 11 are measures under the Investment Canada Act. Everything else is fair game. There may be exceptions that are relevant to health care measures, but that doesn't stop you from getting in the door and complaining that something a province has done by way of closing the door to private health care delivery offends NAFTA rules. You may argue about whether the measure is exempt, but you have the right to a hearing before a tribunal.
The tribunal is nominated by the parties. So if I'm the disputing investor, I nominate an arbitrator and Canada nominates an arbitrator. The two choose a third, and that is the tribunal that decides whether a government measure is in breach of NAFTA rules. Typically, the disputes are heard outside Canada. For example, we were involved as intervenors in a UPS case. They brought a complaint against Canada because of the activities of Canada Post. That was argued at the World Bank headquarters in Washington, D.C.
So you have the spectre of a quasi-private tribunal making a determination about the validity of something a Canadian government has done that is otherwise lawful and proper under the Constitution. And often that tribunal will be sitting outside the country, and often at World Bank headquarters in Washington, because that just tends to be a convenient place and is often chosen for the adjudication of these disputes.
That's a broad outline of the mechanism. There is very little opportunity for judicial review of an arbiter award, and the review can only be carried out in the jurisdiction that is chosen as the place of arbitration. So in the case of the UPS claim, for example, the place of arbitration was the United States.
I practise labour law and other types of law. We routinely judicially review decisions of arbitral tribunals. Had that tribunal found Canadian postal policy and law at odds with NAFTA--they didn't, fortunately--we would have had to go to a U.S. court to challenge the award. It's an idiosyncratic feature of the regime, but it describes how removed it is not only from parliamentary scrutiny but also from judicial scrutiny once the mechanism is in play.
Now, environmental laws have become a favourite target of this mechanism. There are several cases in which environmental laws, including Canadian environmental laws, have been challenged. One of the first cases was a challenge by Ethyl Corporation. They didn't like federal regulations that restricted the use of a toxic fuel additive. Canada settled that case and wrote the company a cheque for $19 million to cover its legal fees—the case hadn't even been argued yet—and rescinded its regulations.
Another case was by S.D. Myers. Canada banned the export of PCB wastes to the United States, as it's arguably obliged to do under the Basel Convention. The tribunal found against Canada and ordered it to pay $9 million in damages to this U.S. hazardous waste company.
There are a number of other cases. They're available on the websites. A good percentage of them are about environmental matters, but there are two cases proceeding right now that aren't about environmental matters and are terribly important for the future of the country. One is brought by a forest company called Merrill & Ring. It wants to get rid of the ban on raw log exports that exists at both the federal and provincial levels in Canada. But for these raw log export controls, we wouldn't have a pulp and paper industry in Canada. Yet this dispute is proceeding with very little notoriety, and I doubt many members of the committee have heard about it.
There's another case that's been brought by a U.S. health company, which is suing Canada for $160 million. What's its complaint? It argues that it wasn't allowed to establish private health care clinics in Canada, and it says that's a breach of its rights to invest under chapter 11.
These cases just give you a sense of the terribly important issues of public policy that often find their way into a forum that is really created to resolve private disputes, not public disputes, with respect to which there are no broader public or societal interests. Under NAFTA, what's happened is that we've allowed this private dispute mechanism, which used to exist to resolve commercial disputes, to be used now as a forum to resolve disputes about broad issues of public policy and law.
The last thing I'll say is that while a fair bit of attention is focused on chapter 11, much less attention has been paid to efforts to implement a similar dispute regime as a feature of interprovincial trade, investment, and labour mobility agreements. This has actually happened in the trade, investment, and labour mobility agreement entered into between British Columbia and Alberta, which goes formally into effect on April 1, 2009. They have built into TILMA precisely this dispute mechanism, in which a private investor in Alberta or B.C. can challenge a measure by the other government—it could be a municipality, or even a school board. It could be proper and lawful—the board had the authority to do it—but if it offends the broad constraints of this mobility agreement it can be challenged. This is flying so far below the radar screen that I'd be very surprised if any of you have heard of it. So that's in place.
The ministers of trade for Canada and the provinces signed an agreement last December to expand the dispute mechanism of the Agreement on Internal Trade along the same lines. They haven't made it public. I don't know whether you've seen it. We would very much like to see it. When I speak to federal trade officials, they tell me, well, you'll see it when it's finally ratified.
So just to bring home the concerns you might have about this dispute regime, please be aware there are efforts under way now to actually implement precisely the same dispute model as a feature of Canadian interprovincial arrangements. In my view, the mechanism is unconstitutional. I don't have time to speak to you about that today.
I'll leave you with that provocative thought—I hope—which might prompt some questions.
Thank you. I think my 10 minutes are up.