Evidence of meeting #20 for International Trade in the 43rd Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was treaties.
A recording is available from Parliament.
12:15 p.m.
Counsel, Herman and Associates, As an Individual
In my view, it does. Those agreements can be drafted accordingly to provide the necessary guarantees and protections for the host country vis-à-vis the investor that we talked about, but would also give the investor a framework for bringing action if that investment was unfairly treated.
12:15 p.m.
Liberal
The Chair Liberal Judy Sgro
Thank you, Mr. Herman.
We move on to Mr. Savard-Tremblay for two and a half minutes, please.
12:15 p.m.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
Thank you, Madam Chair.
I will put a question to Ms. MacEwen.
As we know, investor-state dispute settlement mechanisms provide protection for foreign investors. In the agreements that have been signed, the definition of investment is often limited to the financial aspect. Job creation or wealth creation is not really covered. Often, a transaction through a corporation is enough. I digress.
The protection provided to foreign investors enables multinationals to sue states. In contrast, those agreements contain no measures to protect citizens from abuse by those same foreign investors.
Would you say there is a flagrant imbalance in those agreements?
12:15 p.m.
Co-Chair, Trade Justice Network
Absolutely. That is the central problem with investor-state dispute mechanisms: the imbalance that it gives large foreign investors against states. The only reason you would need an investor-state dispute settlement mechanism for investment in India would be your not trusting the Government of India to behave consistently and not trusting their court system to treat foreign investors equivalently to domestic investors.
If we're afraid that our investments will be counter to what the Government of India wants for its people, I think the Government of India has the right to say what it wants for its people. That's democracy.
The fundamental thing about an investor-state dispute settlement mechanism, and what advocates say about it, is that it ties the hands of democratic governments to privilege the rights of investors over the public good. It doesn't always work out that way, but that is its entire purpose and goal.
I would argue, then, that if we want democracy globally, we have to trust democracy globally, and we do not need to handcuff other governments and prevent them from acting in the best interests of their citizens.
12:20 p.m.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
Thank you for clarifying.
How much time do I have left, Madam Chair.
12:20 p.m.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
Okay. In that case, I thank Ms. MacEwen.
12:20 p.m.
Liberal
12:20 p.m.
NDP
Gord Johns NDP Courtenay—Alberni, BC
Thank you.
Ms. MacEwen, Brenda Sayers, from the Hupacasath First Nation in my riding, went to court regarding the Canada-China FIPA, concerned about indigenous rights and the sovereignty of the people there; concerned that foreign companies could come in and buy part of the watershed for a tree farm licence and impact wild salmon and clean drinking water. We've heard many times that the Canadian government is committed to reconciliation, to the United Nations Declaration on the Rights of Indigenous Peoples. In fact, we have legislation before the House right now.
My NDP colleague tried to include a non-derogation clause in the ratifying legislation of the Canada-UK Trade Continuity Agreement to ensure that Canada's trading partners are fully aware of Canada's obligations to first nations and indigenous peoples. It's disappointing that the amendment was voted down.
Given that the trade continuity agreement includes ISDS provisions as well, as is the case with CETA, can you clarify how the ISDS could impact the government's abilities to fulfill its obligations to Canada's indigenous peoples?
12:20 p.m.
Co-Chair, Trade Justice Network
That question highlights a gap in my presentation when I spoke about our international obligations through the climate accord or through the ILO. The United Nations Declaration on the Rights of Indigenous Peoples is something we have signed on to internationally; that we have committed to, at least rhetorically, at the federal level. We have, however, signed treaties that will not allow us to fully enact the rhetorical responsibility we have agreed to.
I have worked with Pam Palmater on trade agreements, and what she says is that we need to have indigenous representation at the bargaining table to fully realize UNDRIP and trading rights. We are so far from that in trade deals that what we have right now absolutely contravenes UNDRIP.
12:20 p.m.
NDP
Gord Johns NDP Courtenay—Alberni, BC
We hear at this committee regularly that the climate crisis is one of the defining things about our generation. I'm wondering if you could explain how ISDS has negatively impacted...or cost Canadian taxpayers money when making changes to our regulatory framework. Maybe you have a couple of quick examples.
12:20 p.m.
Co-Chair, Trade Justice Network
I think the first example that everybody knows about is that Ontario tried to do a climate response where they bought locally. That was struck down internationally. They didn't do it the right way. I maintain that they could have done it in a way that would have been consistent, but they were unwilling to actually make the effort to break through and do it in a way that would have been consistent with international law. They tried it one way; it didn't work and they gave up.
When I worked for the Department of Agriculture in Nova Scotia, I proposed a whole bunch of ways that we could compensate farmers for actions they had taken to be sustainable. It was killed actually, probably at the deputy minister level, because he thought we would get sued under ISDS for that.
They had given examples of European countries that had similar policies in place. I think those are the examples of where silencing really matters. You never hear about it.
12:20 p.m.
Conservative
Ziad Aboultaif Conservative Edmonton Manning, AB
Thank you, Madam Chair, and thank you to our witnesses this morning.
These questions are for Mr. Van Harten, who has called for cancelling or withdrawing from ISDS.
The first question is whether that can hurt our investment trade balances, especially with the major agreements we have in place. Second, how does the industry react or can the industry react to such things?
12:20 p.m.
Professor of Law, Osgoode Hall Law School, York University, As an Individual
Just as a prelude, let me say, withdrawal is not going to happen quickly. Withdrawal will take a generation.
To withdraw fully from the obligations we have assumed under existing treaties, my view is that our general stance should be to prioritize withdrawal, where possible, depending on the treaty and depending on the context, and certainly not to agree to ISDS anymore.
How will this affect our investment relations, and how will it affect Canadian investors abroad? I think it's so hard to predict how investment relations and the economic benefits of investment, which are clearly tremendous, are affected by current ISDS treaties, let alone future ISDS treaties and the prospect of withdrawal.
I would say the risk of negative impact simply from withdrawing from ISDS treaties would be low, and we can keep it even lower if we do it in a quiet, unprovocative way, which was essentially South Africa's approach when it withdrew from its bilateral investment treaties that allowed for ISDS in the last 10 years or so. They did it in a way that reassured foreign investors there were other protections available, and new legislation was passed to make those protections more robust in South Africa.
For Canadian investors abroad, yes, you're not going to have access to the treaty ISDS anymore, but for many investors the most important Canadian investors' assets we're concerned about are the really big ones, the multi-billion dollar assets that we do not want to leave completely open to abuse by some government abroad. Here, there is always a very complex set of contracts between the foreign investor and the state entities in the host country. A large multinational is sophisticated in its ability to negotiate contracts that protect its interests, including by providing for ISDS. You could have ISDS under a contract; it leads to essentially the same process. I think that is preferable for a host country because you can be more selective in when you're making these extraordinary concessions of your sovereignty and your regulatory flexibility.
That has to be one component of a gradual plan to withdraw, which is to make sure the contract-based ISDS is well-known to major Canadian investors abroad, and that they have capacity to pursue that means of protection.
Secondly, political risk insurance is available. Mr. Warner has referred to it. It could be state-backed, it could be in the marketplace. It's far from perfect. I would stress that the insurers are much smarter than the drafters of the treaties because they limit the obligations. You don't get an obligation to insure for breach of fair and equitable treatment in a political risk insurance contract. You get safeguards against the more obvious and more controllable risks, like nationalization and expropriation, which we absolutely should be protecting investors against.
I think Canadian investors will have some setback. They will not be as well off, but if you look at it in terms of the benefit to Canada, overall, what we pay monetarily, what we pay in our loss of capacity to respond in a future crisis.... I am telling you, when the future crisis comes, government officials will be thanking the heavens if they don't have to worry about ISDS risks in the billions of dollars. That will be well worth it to ensure Canadians can be protected even when one multinational, for whatever reason, fights really hard behind the scenes to stop our doing what's right for Canadians. We just need to get that obstacle out of the way.
I think a Canadian investor who sits down and looks at the quid pro quo will say, we can manage to protect ourselves with governmental support, and we're Canadian too and we can see the value of protecting our country against these broader risks.
All that sounds a little provocative, I'm sure. I don't mean it to be provocative. I've been banging on about reform of ISDS for a long time. I have just come to the view: keep it simple, withdraw and then reform ISDS. Don't stay stuck in it.
12:25 p.m.
Liberal
The Chair Liberal Judy Sgro
Thank you very much, sir.
We will go on to Ms. Bendayan for five minutes.
12:25 p.m.
Liberal
Rachel Bendayan Liberal Outremont, QC
Thank you, Madam Chair.
Thank you to all of our witnesses for this very thoughtful discussion this morning.
As a point of disclosure, I should mention that previous to my political career, I was a lawyer in international commercial arbitration and did represent several companies, including some that we are very proud of here in Quebec, such as Bombardier, against foreign states under arbitration provisions, similar to what Mr. Van Harten was just describing as ISDS provided through contracts. I also did some ISDS through our trade agreements. Nevertheless, without putting any of my personal opinions on the table, I think it is important to discuss how Canada should move forward, particularly as we negotiate new trade agreements.
Before I ask a question, as a point of clarification or correction, Mr. Van Harten did say on the record that it was the United States that asked that ISDS be removed from the new NAFTA. I don't think that any of us who were not in the room should presume how those negotiations went down or what Canada's position had been at the outset.
Also, with respect to the previous conversation regarding the United Kingdom-Canada transitional agreement, I note that the ISDS provision is suspended in that agreement and would only come into force much later if the ISDS provision in CETA were ratified, which, as we heard earlier today and as we all know, is possibly not going to ever happen.
Let me get to a substantive question, perhaps for Mr. Warner and Mr. Herman.
I wonder if you could comment generally on your feeling about taking a case-by-case approach. Perhaps in some situations dealing with certain trading partners, ISDS could be used, whereas in other circumstances, for example, when dealing with partners whose judicial system we have great confidence in, it could be unnecessary in those cases.
Perhaps we could start with Mr. Herman.
12:30 p.m.
Counsel, Herman and Associates, As an Individual
First of all, Ms. Bendayan, your reputation before you took the political turn is well known, and your involvement in these cases by those of us in the field is well appreciated.
I would make just one comment about withdrawal from current ISDS provisions. Our first investor-state treaty was with Russia. I would ask, at some point, Mr. Van Harten to answer this question: Is it in Canadian interests to withdraw from that treaty with Russia?
Your point, Ms. Bendayan, is whether we should approach it on a case-by-case basis. I think that is a viable approach. We are eliminating investor-state disputes with the U.S. They are eliminated, for all practical purposes, with the Europeans. Where are the Canadian interests affected? If we're not going to be subject to investor-state arbitration from American investors, and the same for European investors, where are the Canadian interests that are somehow in jeopardy?
My point is that the withdrawal from existing foreign investment protection treaties is fraught with difficulties. It is possible in future cases, to come to your point, to be selective and to decide where we need some ISDS provisions, with the guarantees that have been built into the CETA provisions where you have an appellate process and a standing arbitration court. That, to me, improves the system remarkably, and that could be part of a policy going forward for any new treaties that Canada is seeking to negotiate.
12:30 p.m.
Liberal
12:30 p.m.
Principal counsel, MAAW Law, As an Individual
Very briefly, I agree with much of what Mr. Herman has said on that subject.
I would say that I think, in reality, the way it will play out for Canada is now that we have taken it out of our agreement with the United States, going forward other countries will ask for equivalent treatment. I think that's how it will play out for Canada.