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.
12:30 p.m.
Liberal
The Chair Liberal Judy Sgro
Thank you, Mr. Warner.
We'll go on to Mr. Hoback for five minutes, please.
12:35 p.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
Actually, Mr. Warner, you bring up a good point. When you go to countries where you feel you really do need appropriate ISDS protections because of their court systems or because of their political systems, how do you negotiate that in that scenario?
12:35 p.m.
Principal counsel, MAAW Law, As an Individual
It's tough. Those are exactly the countries that are going to stand across from us in a negotiation and say, “Well, if you didn't need it with the United States, why would we put it in an agreement with you?”
I don't know how we're going to answer that. It could just be that the interest in having an agreement is so substantial that they will accede to it. I think that's going to be one of those unintended consequences of the last go-around with the CUSMA that has yet to play out, but it will be very tough to get this. Certainly, with bigger players.... I think Indonesia, for instance, could very well look at us and say, “You have to be kidding,” because it is very nationalistic as well.
12:35 p.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
One of the problems I have is that we hear from other parties that this is a huge issue for Canada. When I go back and look at the record, we've lost eight and won nine cases against Canada. We paid out $219 million in damages and about $95 million in legal fees, yet we received some $410 billion worth of foreign direct investment.
How big of an issue is it in Canada? How restrictive is it? Are we concerned about investment in Canada, as we're seeing now with this government that they've put in policies that make sure nobody wants to invest in Canada? Is it now more the concern that we protect Canadians who invest outside of Canada? How do we take that small company that has maybe $10 million worth of sales and wants to break into a new market—let's say Europe or the U.S.—but wants to make sure that it has protection? It can't buy that protection; it's not a big multinational that's actually going to go to the courts and sue a state or the federal government in the U.S. What other than ISDS do we put in place to protect those small businesses?
12:35 p.m.
Principal counsel, MAAW Law, As an Individual
I suppose that once ISDS is out of the U.S. agreement, we're going to be asking, basically, to politicize every trade and investment dispute all over again. There's no shortage of things on the list of disputes with the United States, from softwood lumber to Keystone or whatever else.
There's only so much time and attention you can have with the United States when you're Canada. I don't know if you really want to convert all of these. We're going to be asked to spend a lot more money in supporting individual Canadian companies in bringing these disputes forward in the United States in the absence of ISDS, it seems to me.
12:35 p.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
Then, Mr. Warner, can you just talk about buying insurance?
You can buy insurance for political risk from EDC. Let's say that you actually go to collect on that political risk. Who ends up paying the bill if it's EDC paying out that insurance premium or that policy? Is it actually not the Canadian taxpayer? Are there other companies that are buying risk insurance from EDC? If we were to see a massive payout, who, in the end, is on the hook? Is it the Canadian government, or is it the foreign government that actually went and nationalized the Canadian company or made decisions arbitrarily against the Canadian company?
12:35 p.m.
Principal counsel, MAAW Law, As an Individual
It seems to me that if it's EDC paying for it, then we are the ones that ultimately will be underwriting that risk as Canadian taxpayers. That's just part of, again, the unintended consequences of some of these proposals.
12:35 p.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
Mr. Van Harten, I asked Mr. Warner a question before about these small businesses. They only do $10 million worth of sales, and they decide to get into the export market because we've been promoting them to be SMEs that are exporters. Let's say that they do invest in, say, a warehouse distribution or something in another country. How do we protect their investments? What do we do for them?
12:35 p.m.
Professor of Law, Osgoode Hall Law School, York University, As an Individual
Mr. Hoback, that's a totally fair question, an important question.
I want to support entrepreneurial Canadians doing business abroad. I take my hat off to them. I'm an academic. In the private sector, “they expect results,” as they say in Ghostbusters. I have the utmost respect for them.
I just want to tell you that, honestly, ISDS isn't going to help because they can't afford the litigation. You're dealing with a country like, let's say, Russia or China. Even if you win an ISDS millions or tens of millions in litigation fees later, do you think the country is going to pay?
Russians, you know, they might not pay. Then what do you do? Then you have to chase Russian assets in countries all over the world, waving around an arbitration award and an investment treaty. It's great for the lawyers. It's great for the arbitrators. I'm just telling you straight up that unless you're talking about hundreds of millions in assets, the benefits to Canadian investors' being protected abroad.... You're just going to have to look elsewhere for your protection.
12:35 p.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
In other words, then, in our trade agreements for these small and medium-sized enterprises, we actually have to look for a different mechanism to protect them. Is that fair to say?
12:40 p.m.
Professor of Law, Osgoode Hall Law School, York University, As an Individual
Yes, we need a state-to-state mechanism. That would help more. They have to look at their contracts, but at a certain point, it's an ugly marketplace out there, so make your decisions accordingly.
12:40 p.m.
Liberal
March 22nd, 2021 / 12:40 p.m.
Liberal
Randeep Sarai Liberal Surrey Centre, BC
Thank you, Madam Chair.
My question is for Mr. Van Harten.
Similar to what others have said, I still have mixed thoughts about ISDS. We've heard, as Mr. Hoback has just stated as well, that we've won a bit more than we've lost.
What are the potential risks of not having an ISDS, particularly for SMEs that go out and venture, and especially for new technologies that might be disruptive or might be state-of-the-art, which other states might not like or use protective measures to shut down?
12:40 p.m.
Professor of Law, Osgoode Hall Law School, York University, As an Individual
In most contexts, treaty-based ISDS is not going to do anything for companies that have assets below hundreds of millions of dollars at stake in the country abroad. There should be a sequenced approach to managing the Canadian interest in withdrawal and the Canadian investor interest in still having sufficient protections that are tailored to that investor's needs.
For example, the highest priority was always NAFTA. We're out of ISDS under NAFTA, box ticked, great, thank you very much, Minister Freeland. I emailed her at the time to thank her for basically asking for Canada what the Americans were demanding for themselves. The Americans wanted to keep ISDS for Canada and Mexico but not have the obligations themselves. Well, that was a non-starter for our government, and I thank you for that.
Beyond that, I say keep CETA provisionally applied and keep ISDS out. Do it quietly, but make sure ISDS is not coming in. Also, don't leave it just to European member states to not ratify. Make it clear that ISDS is never going to be applied under CETA. I will be so happy for Canada on that day.
Next, on the CPTPP, oh, dear, that was a turn in the wrong direction. At the time, we were changing ISDS on CETA and actually getting ready to get out of it in NAFTA. Look at the example of New Zealand and Australia: They have side deals under the CPTPP that remove ISDS as between them. I don't see how we can't conclude similar side deals with those same countries in the CPTPP.
As for the bilateral investment treaties, it's a bit of a different story, but if you want to protect Canadian SMEs, there are far more important measures that can be pursued at a lower level than the grand claims of treaty-based ISDS.
12:40 p.m.
Liberal
Randeep Sarai Liberal Surrey Centre, BC
Thank you.
I'm going to pose the same question to Mr. Herman.
How do you think we can perhaps modify ISDS for future provisions, or in current or side agreements, as Mr. Van Harten has said, to still protect our interests where they're unfairly hindered by different states, while at the same time also allowing us to protect our sovereignty and our own environmental labour laws?
12:40 p.m.
Counsel, Herman and Associates, As an Individual
As I've said, we don't have ISDS with the Americans anymore, so that removes a huge swath of risk. I don't think we need to get overly exercised about ISDS going forward with the Europeans. It's probably not going to happen.
Where do Canadian interests lie? I don't quite understand the notion that we should abrogate existing treaties, get out of existing foreign investment protection agreements. I don't understand how Canadian interests are advanced by doing that. I might be missing something. It might be desirable from an academic perspective, but why would we withdraw from those treaties where there is benefit arguably and no disadvantage to Canadians in terms of Canadian interests?
We could negotiate under the CPTPP bilaterals to eliminate ISDS. I don't think there's a huge risk of foreign investors from the Asia-Pacific region attacking Canada. It might happen, but I think there are a lot of atmospherics about ISDS. Frankly, I think we have to sit back and determine where Canadian interests lie. I'm not talking about broad academic interests. I'm talking about hard Canadian interests.
12:45 p.m.
Liberal
12:45 p.m.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
Thank you.
A number of stakeholders have talked about the need to keep this mechanism. Some have said it must be maintained at all costs, and that all agreements use it. But that is not quite true. The new NAFTA—CUSMA—does not use that mechanism.
I would like to put the following question to Mr. Warner, who said he is in favour of the mechanism.
Since CUSMA came into force, eight months ago, has the fact that the mechanism was not being used had a significant impact?
12:45 p.m.
Principal counsel, MAAW Law, As an Individual
Well, I think the answer to your question is that we have not really exited NAFTA yet from the point of view of investor-state dispute settlement. That will happen next year, because now there's this transitional period. We haven't really seen that effect.
Someone mentioned Keystone. What's interesting so far is that when NAFTA was in effect, the TransCanada, as it was then, did launch an investor-state dispute settlement case that they withdrew when Donald Trump passed an executive order to let the project go through. What's interesting is that in this transitional period, TC Energy has not reinitiated a similar measure, which it's entirely entitled to do. I don't have a complete answer to that, and I keep asking.
12:45 p.m.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
That's okay. Thank you for your effort.
The United States and Canada have developed justice systems. They are two countries governed by the rule of law, capable of making decisions on disputes themselves.
Why is that insufficient?
12:45 p.m.
Principal counsel, MAAW Law, As an Individual
I think the reality is that it doesn't work. One famous case in NAFTA was a case involving Loewen, a funeral home. It's one of the golden oldies you can read about. Many people published it. It's a case in which the Canadian investor—well, we thought—was treated very poorly in an American courts system. What's the remedy for that? In the end, he didn't get what he wanted from ISDS, but I wonder where else that person could have gone.
On the reverse side, in Canada when you have some of these decisions in which municipalities or provinces act arbitrarily, I have to say, as I cited before the work of Professor Armand de Mestral, it's not clear to me that under Canadian law any such investor has a remedy in those kinds of cases. That's, to me, why. Those are the paradigmatic cases in which ISDS can be useful.
12:45 p.m.
Liberal
The Chair Liberal Judy Sgro
Thank you very much, Mr. Warner.
Thank you to our witnesses. We will allow you to leave. Thank you for the excellent information that you've given us. We have some committee business.
We go now to Mr. Savard-Tremblay.
You have two motions. Do you want to speak to the first one?
12:45 p.m.
Bloc
Simon-Pierre Savard-Tremblay Bloc Saint-Hyacinthe—Bagot, QC
These are routine motions. The first reads as follows:
That all documents submitted for committee business that do not come from a federal department or that have not been translated by the Translation Bureau be sent for prior linguistic review by the Translation Bureau before being distributed to members.
I believe the French version was also sent to you.