Thank you very much, Mr. Chair. It's an honour to present to you today.
My name is Gus Van Harten. I'm an associate professor at Osgoode Hall Law School. I previously taught and studied at the London School of Economics, where I did my doctorate in law on investment treaty arbitration and public law.
I have four main points to make about the AbitibiBowater case and settlement.
First, the case and settlement are examples of how NAFTA chapter 11 and other investment treaties concluded by Canada that provide for compulsory investor state arbitration may, by their operation, conflict with a basic principle of Canada's system of constitutional democracy. This is the principle that Parliament or a provincial legislature is supreme and that it may legislate or regulate on any matter within its constitutional authority without payment of compensation to private parties whose economic interests are affected by the legislation.
This is a longstanding principle of parliamentary democracy and the common law tradition as recognized by A. V. Dicey and others. By ratifying NAFTA, the federal government in effect determined that this principle would be subordinated to decisions of arbitrators who are appointed in cases brought by private parties under the treaty.
To date, there have been 28 cases against Canada under NAFTA chapter 11. A number of these cases never led to the establishment of a formal tribunal; however, a number of these cases have arisen from legislative acts or from decisions adopted pursuant to broad statutory schemes.
For example, there is an ongoing Dow Chemicals claim against Canada involving a challenge by a U.S. chemical company to the Quebec prohibitions on the cosmetic use of pesticides pursuant to Quebec's Pesticides Act. The Gallo claim arises from legislation introduced in Ontario to end, finally, a scheme to dispose of Toronto's garbage at a quarry in northern Ontario. The Centurion Health Corporation claim arose from a challenge to the Canada Health Act by a U.S. private health care provider. The Ethyl claim was one of the first under NAFTA claims that arose from federal legislation that put restrictions on a gasoline additive. That case was settled by the federal government for, amongst other things, payment of compensation. All those cases involve legislative acts.
The second point I would like to make is that this constraint of the authority of Parliament or a provincial legislature could have major implications for the federal-provincial division of powers if it were to lead to affirmative orders issued by arbitrators against a provincial government, or if it were to lead the federal government to seek payment by a province of international awards issued against Canada.
As a matter of international law, it was the federal government on behalf of Canada that ratified NAFTA. So it is the federal government on behalf of Canada that is responsible for Canada's treaty obligations under NAFTA.
As a matter of Canadian constitutional law, which of course is a distinct source of law, since the federal government did not seek the consent of the provinces and passage of provincial legislation in order to implement NAFTA chapter 11 awards where they arise within matters of provincial responsibility, it is the federal government that is very likely responsible for those awards as issued against Canada.
This is so because of the constitutional principle recognized in the Labour Conventions case of 1937, which is that the federal government cannot avoid the federal-provincial division of powers in the Constitution merely by entering into treaties with foreign countries that could encroach on provincial authority.
The third point I would like to make is that sometimes the word “court” is used to describe the dispute settlement process under NAFTA chapter 11, and I would just like to clarify that the decisions are made by arbitrators. We should not confuse the arbitrators with the courts or tribunals, both domestic and international, that enjoy certain institutional safeguards of judicial independence. On the contrary, the arbitrators who decide the NAFTA chapter 11 cases lack such safeguards in important respects, especially the safeguards of judicial security of tenure, prohibitions on outside remunerative activities by the judge, and an objective method of appointment of individual judges to particular cases.
In the absence of such safeguards, reasonable perceptions may well arise that the arbitrators have been influenced inappropriately by the financial incentives that arise to please prospective claimants, to respond to the interests of executive officials in the appointing authorities for the arbitrators as well as the major governments and other actors that have the greatest influence over whether or not to include arbitration clauses in the treaties.
This makes it all the more significant that arbitrators, quite exceptionally in this regime of international adjudication, have been given the authority--in fact, to a greater extent than any other international court or tribunal--to decide public law claims by private parties, without a requirement to resort to the domestic courts or tribunals before an international claim is brought, and without a robust review process by an international or domestic court, and also to award public compensation to private parties for legislative, executive, or judicial acts. This is a quite different dispute-settlement process from anything that you would find in customary international law, or indeed under any other international treaty, including treaties that allow private claims against states.
The fourth point I'd like to make is to simply highlight the experience to date of the Canadian government and Canadian investors seeking protection in arbitrations pursuant to investment treaties. The information is drawn from a database of known investment treaty cases, as maintained by me and others at Osgoode Hall Law School.
Overall, the experience to date of Canada as a respondent has been average. For NAFTA chapter 11 arbitrations against Canada that have led to a final resolution on the merits, either by way of an award against Canada, or in favour of Canada, or by a settlement, the result was four wins for Canada and four losses. That's an average result and it compares to the experiences of other countries, although one might expect a little better, given that Canada is a mature democracy with mature domestic judicial institutions and so on. But it's not a lot of data.
More striking, however, is that in known cases brought by Canadian investors against the United States under NAFTA chapter 11, as well as in some cases brought against other countries under bilateral investment treaties, Canadian investors have zero wins and 16 losses. There are many possible explanations for this poor record. It could be that Canadian investors brought bad cases or had bad lawyers. It could be coincidence. There's not a lot of data.
But more worrying is that the investment arbitration industry, which is based in Paris, London, Washington, New York, and the Hague, may not be a particularly favourably forum for Canadian interests. I suggest only that it's an issue that warrants greater attention and scrutiny by policy-makers and treaty negotiators.
I also have a summary of all the known cases involving claims against Canada or by Canadian investors, which I will happily share with the clerk of the committee.
Thank you for the opportunity to speak to you today.