Thank you for inviting me to appear on behalf of the Trade Justice Network. We're a coalition of environmental, civil society, student, indigenous, cultural, farming, labour and social justice organizations that came together in 2010 to call for a new global trade regime founded on social justice, human rights and environmental sustainability.
Our members include the Canadian Labour Congress, Unifor, CUPE, the United Steelworkers, Climate Action Network Canada, The Council of Canadians, the Communications Workers of America, the National Farmers Union and many other groups that represent people in Canada from all walks of life.
The new standard that has been set in the Canada-U.S.-Mexico trade agreement is that ISDS or other investor-state dispute settlement courts are unnecessary and in fact harmful. Outside this deal, as you've heard from the other panellists, Canada is still part of dozens of agreements that include an ISDS mechanism. We want to reiterate the reasons we think Canada should permanently shift from including these mechanisms in our trade and investment deals.
An ISDS mechanism is the clearest embodiment of the ways in which trade deals prioritize corporate rights and not just corporate rights, but foreign corporate rights, because if we legislate something, an ISDS claim would only apply to foreign corporations, not Canadian corporations. If there is no remedy in Canadian law, that's because Canadian legislators have determined it would be inappropriate to have a remedy, that it's okay. Why would we put a remedy in an international trade agreement that is not available under our Canadian law? Why would we allow foreign corporations to have different rights from domestic corporations? I think that is the crux of where we disagree with ISDS mechanisms.
It also constrains citizens and governments in their ability to voice and protect the public interest. As you've heard, ISDS reinforces and protects corporate rights by allowing foreign corporations to sue government for alleged appropriation, discriminatory treatment or loss of potential profit. It often goes beyond protecting investors, so the obligation to compensate investors for their losses of expected profits has been applied even where the rules are non-discriminatory, and where the company's profits are made from causing public harm.
In a 2016 report from Gus Van Harten, “Foreign Investor Protections in the Trans-Pacific Partnership”, he outlined how these types of protections have historically only benefited very large companies and very wealthy individuals. The suits often target and suppress government action towards the public good, both in Canada and internationally. Under NAFTA chapter 11, Canada has been brought to investor-state arbitration more times than the U.S. or Mexico.
This is a problem, whether we win or lose the suit, because it takes significant energy on behalf of provincial and municipal governments to determine whether or not they will be in violation of an ISDS suit, and they don't have the expertise that the New York lawyers have, who often deal with these suits. It can be very difficult for local legislators to determine if their action will be acceptable. Often they determine it is too risky to even try, so that problem of “chill” is a problem, having to deal with a suit once it comes up is a problem, and then losing is the third problem, obviously.
Some of the laws or regulations that have been challenged in Canada include a proposed ban on fracking, domestic court decisions around drug patents, a ban on the gasoline additive MMT, and provincial water and timber protection policies.
The problem is that the letter of the law matters in an ISDS success; Van Harten said who makes decisions is fairly arbitrary. They don't generally have precedent, so you can't predict the outcome of a decision. They themselves don't have a clear process that's easy for people to be able to tell, so there is a great deal of difficulty on the government side to establish a process that will protect them from an ISDS claim—and again, they don't have the capacity.
As we've said, Canada is now the most sued developed country under ISDS. These cases clearly illustrate the danger of this mechanism in preventing the Canadian government from implementing policy, law or regulations in the public interest. As two of the panellists have also mentioned, Canadian investors are bad actors on the international stage on this front. They have used ISDS to disproportionately target environmental policy in developing nations when they file investor-state lawsuits outside North America.
A 2019 report by Hadrian Mertins-Kirkwood and Ben Smith, “Digging for Dividends”, finds that Canadian investors have initiated 43 ISDS claims against countries outside North America since 1999, and that these are often mining companies and they are against environmental protections in these countries.
In the report, Mertins-Kirkwood also raises concerns about third party profiteering from the ISDS system, whereby financial speculators engage in for-profit financing of cases. This speculative funding is used to encourage and sustain ISDS cases that would not otherwise be able to go forward. This acts as a huge barrier to climate action for developing nations, which are most affected by the severe climate impacts of global warming and climate change.
As Gus Van Harten mentioned in his opening statement, ISDS threats have also hindered effective public action during the pandemic and could possibly cost nations millions of dollars in ISDS claims in the years to come and prevent governments from taking action that would protect the public health of their people.
Several of the actions that governments have taken in the past year that could make them a target for ISDS include restricting and closing business activities; securing resources for their health system; preventing foreign takeovers of strategic businesses that have been affected by the crisis; ensuring access to clean water for handwashing and sanitation when they freeze utility bills and suspend disconnections; and ensuring that medicines, tests and vaccines are affordable.
For example, in Italy, after a private manufacturer failed to deliver critical parts for ventilators and refused to share the design specifications, government researchers reverse-engineered the part and 3-D printed the parts for a fraction of the cost that the private supplier had been charging. The manufacturer threatened to sue, and the government had to back down from producing this life-saving piece.
The Columbia Center on Sustainable Investment has made a call for a complete moratorium on ISDS cases during the pandemic. In June, the National Union of Public and General Employees, a member of the Trade Justice Network, wrote an open letter to Prime Minister Trudeau criticizing the threat of ISDS cases and highlighting six calls to action, including restricting ISDS cases and prohibiting ISDS in any future agreements. These calls are very important, as is the need to continue to educate the public and politicians about the risks of ISDS.
Finally, as the committee knows, Canada failed to support a motion at the World Trade Organization that would waive restrictions on making sure that vaccines and other medical supplies for the pandemic would be affordable for developing nations. Should these nations go ahead with generic vaccine production anyway in order to protect their people from COVID-19, they would be subject to expensive ISDS lawsuits from pharmaceutical manufacturers, whose vaccine development and trials were largely funded by the public sector in the first place.
We argue that trade and investment should be viewed as a means to enhance material and social well-being, not as an end in their own right, and that if investors—even if they’re Canadian investors investing abroad—are violating our environmental or human rights codes, we should not be allowing them to be protected by ISDS suits. Any protection of investor rights, whether within Canada or globally, should be accompanied by an enforcement of their responsibilities to the public good.
Thank you very much.