Thank you very much, Madam Chair.
I'd like to thank you and the committee for the invitation to present today on investor-state dispute settlements.
I've studied and engaged in this area for more than 25 years, and I hope to provide some useful and practical views to the committee, so that will take it a little bit outside of some of the other things.
I had the opportunity to hear some of my esteemed colleagues. We had a slight technical problem, and I heard most, but not all. I'll try not to repeat what they've said, and I'll try to focus on what could be the most practical here.
Let me just tell you a little bit about myself. I'm a Canadian and an American lawyer. I'm the co-director of the New York Law School Center for International Law. I serve as the co-chair of the American Bar Association international arbitration committee of its section on international law. I'm the author of many works on international economic law, including two books on NAFTA, the North American Free Trade Agreement. I serve as the editor of Westlaw's investor-state reports and the Westlaw investment treaty series. I served as an adviser to governments in Canada on NAFTA and the WTO, including on the defence of investor-state cases. I have also acted repeatedly for investors with claims against the Government of Canada under NAFTA as the managing partner of Appleton & Associates International Lawyers LP, based in Toronto.
My remarks today, of course, are only in my personal capacity. They do not reflect any of my associations with those institutions, organizations or clients. They're my comments alone. I take full responsibility for them.
Now that we have that out of the way, I want to point out that investor-state arbitration provides a depoliticized and independent mechanism that allows for the application of the rule of law to disputes between states and investors. That's what Professor Côté was just talking about, and he gave a very good overview with respect to that. As this committee is very well aware, Canadians can and do succeed globally in international business and with investment. Canadians can be competitive. We're innovative, we're resilient and we can deal well with diversity of language, culture and legal systems.
Canada does not have oversized economic, military or political weight, and to succeed, we need to understand how to be clever rather than how to be mighty. We succeed by following the rules. We succeed by developing rules. We succeed by having our businesses provide a better value proposition, and we expect that our companies will win—they will succeed abroad—or they will lose entirely based on the application of the rules in a fair manner. Canada wins by the application of trade rights rather than by the application of trade mights. When it comes to trade might, we just don't have it, so we need to be able to find rules.
Because of the need for a rules-based system, Canada has traditionally long underscored the need for multilateral, rules-based institutions. We support the World Trade Organization and the United Nations. This is the Canadian way. An investor-state dispute settlement is another part of a multilateral rules-based system.
As you heard from Professor Côté and you've heard from other witnesses, we're part of the CPTPP, the CETA, the CUSMA, the NAFTA and many other bilateral investment treaties. As Professor Côté just pointed out, investor-state arbitration prevents the escalation of low-level disputes, international disputes, and in this way, investor-state arbitration is critical because it keeps these disputes compartmentalized and de-escalated. ISDS ensures that determinations of the application of discriminatory, improper, unfair or even corrupt treatment against Canadians can be addressed without Canada as a country having to engage in a diplomatic skirmish, the principle of diplomatic protection that you've heard before this committee.
The majority of ISDS claimants that I've represented are small and medium-sized businesses. They are not the Fortune 100 mega caps. The treaty protections are really more important to the small companies because they don't have access to influence and wealth, and access to justice needs to be available for the small as well as for the mighty.
This committee has heard a great deal about the potential for regulatory chill about ISDS, and I'd like to devote the rest of my comments to ISDS in Canada. I want to focus on some practical things that I think this committee can do with respect to its supervision and review of the issues.
ISDS is integrated into our network of investment and free trade treaties. Basically the deal is a quid pro quo. We ask foreign countries to treat Canadian investors at a high level, and then in return we guarantee that same protection to the foreign investments in Canada. It's really that simple. We obtain benefits from others, but we're required to provide those same benefits ourselves.
We think we're a wonderful country. We have wonderful institutions. We have a robust legal system. It should be easy for us to be able to provide that relief.
Restrictions upon Canadian public policy come from the treaty text, not from the ISDS process. Many ISDS complaints misplace the root of the problem on the tribunal, rather than correctly on what's in the treaty text itself. Our treaties are crafted with broad public policy exceptions. They permit broad public policy regulation. However, our officials need to scrupulously rely on the existing exceptions.
The committee here plays a vital role in the supervision and amendment of the trade treaties, and you may wish to consider in particular the impact of exceptions in the treaties in your future work.
I'd like to turn to some actual examples of things we could do that would be better.
First is that discretion is the better part of valour. What do I mean? Much of Canada's difficulties with ISDS arise from Canada's failure to pick the right fights. Every day a Crown counsel, before the court begins, has to decide which cases to fight and which to settle. Not every case is worth the fight.
In ISDS we fight everything. Perhaps we might want to reconsider how we do that, because states lose when they are defending against poor public policy. They lose the imprimatur of the state, the things that come with being a state. Cases that are based on bad public policy should be settled at an early stage. This would save considerable amounts of taxpayers' money, and there's little public purpose that's served from promoting poor public policy. What we want to do is promote strong public policy.
Canada has actively defended against poor public policy in the past, and it's not surprising that Canada has not been particularly successful when it does that. That's a defect, in my view, in Canada's approach to investor-state disputes. I think it helps to explain why Canada has been the most unsuccessful state with respect to NAFTA in investor-state cases. You need to pick winners. Discretion is the better part of valour.
I'd like to turn to the regulatory chill issue. As a government adviser myself, I never experienced a situation of a government policy constraint because of the risk of an investor-state case. In general, treaties are worded to give a wide ambit for government policy. Nothing prevents governments from protecting their subjects. That's their duty. That's what they do.
However, in every situation where I've been involved—and I've been involved in the creation of a number of situations that needed this type of consideration—I've found that governments would move forward with a policy and then subsequently address potential issues later. This is commonly what the government does with respect to WTO-related concerns on policies, and increasingly what the government is starting to do with concerns about the regulation of digital platforms.
These are all issues that now come into the purview of this committee on international trade. This supervisory power from this committee has been, in my view, constrained by some of the government's own actions.
I'd like to advise the committee on some areas they might want to look at.
The first is that Canada has taken steps that restrict public access and public knowledge of materials in NAFTA cases. For example, Canada does not give public access to declassified evidence from NAFTA tribunals. It's all declassified and all has a process. In my view, Parliament and the public should have full access. Transparency is a very important value that we express internationally, and we need to do it so Parliament can supervise it properly.
In a current NAFTA case where I'm counsel, Tennant Energy v. Canada, there are admissions of internationally wrongful behaviour from public officials that come from a previous NAFTA case. Those admissions, astonishingly, talk about how Canadian public procedures were circumvented to assist governmental friends and supporters by a secret high-level group of officials. This is the evidence. Canada posted a link on the Internet to a video with all of this material. It was quite scandalous.
It was public for five years, but then Canada took steps in the Tennant NAFTA arbitration case to prevent the public and Parliament from actually seeing this material after it was posted for five years on the Internet. Parliament and Canadians have no access because of the government's decision to suppress this information.
Perhaps it may be embarrassing, but this may explain why Canada hasn't done so well. It's not because of the ISDS system. It's because of the decisions that we take along the way. It would seem to me that Canadians have a right to know. I would suggest that the standing committee really should have a right to know what's going on, especially with something that's been posted for five and a half years on the Internet. I simply don't know how it could be confidential.
Another very practical matter that would enhance Canada's success in ISDS would be to engage in meaningful consultations at an early stage. The CUSMA and the NAFTA both have provisions that mandate this, but our consultation process has moved from meaningful consultations to active listening. It would seem to me that we could resolve matters much earlier and much more easily if we could deal with that.
Let me give you an example. I was counsel in an early NAFTA case where Canada was unsuccessful. It was a case called S.D. Myers. In that case, a small business brought a case against Canada. It sought meaningful consultations with Canada. Had Canada engaged in the meaningful consultations, I'm of the view that the case would have settled. The government lost the case and had to pay millions of taxpayers' dollars, but all the company really wanted was to be heard at an early stage and to have an apology for something that they thought was wrong.
It would seem to me that these are all specific things that we could do to be better and to enhance our handling of ISDS. These are specific powers and approaches that I think this committee can do.
These opening remarks provide some practical and specific suggestions as to how Canada could enhance its success with ISDS. I've engaged in a considerable amount of study on the ISDS system, its operation and the new reforms that are under way. While I thank the committee for the opportunity to present today and I'd be delighted to take questions on any of the new ramifications or the new approaches as well as the other ones, I didn't want to miss the opportunity to provide some very specific things that I think this committee could consider to make our process better.
That's something that we can do, but you cannot do that if you don't have the information. You need this information from the government; you need that reporting. All Canadians will be better and you'll have a much better and meaningful process if you're able to obtain that information.
I thank you very much for the opportunity today. I look forward to questions.