Thanks very much to the chair and to the committee for the invitation to be here. It's my privilege to be here to speak about this important agreement.
I'm going to make only one recommendation today, which is that the committee should advise the government to remove the treaty's investor-state dispute settlement process from chapter 17. The inclusion of ISDS in the treaty, whether or not Ukraine requested it, is inconsistent with the goal of sustainable postwar reconstruction and redevelopment, and unnecessary for the purposes of attracting Canadian investment to the country.
Contrary to what you heard from Global Affairs Canada officials earlier in these hearings, there is nothing stopping the two governments from amending the treaty at this point to take out the ISDS provisions. In fact, this is what Canada did in the CETA negotiations in 2016, if you remember, in order to make sure that passed through the European Parliament.
What is wrong with ISDS and the model investment treaty that has been included in this agreement? It's come up at this committee before. It's one-way protection. This is accessible only to foreign investors. There's no ability in this treaty for states to file counterclaims against businesses like negligent investors, for example.
The contrast between this and the labour chapter is pretty stark. In the labour chapter, workers are dependent on the state to bring claims forward on their own behalf to uphold their rights in the treaty, whereas investors can bring their own disputes directly to arbitral tribunals.
The second point is that there are huge liabilities for states in ISDS. Awards from ISDS claims have grown enormously since the 1990s, when these treaties started to proliferate. Canada is currently facing a $20-billion award, for example, related to the non-approval of an LNG facility in Quebec. This is outrageous in the sense that it accounts for future lost profits. Ukraine will not be able to afford these awards if they are handed down in the future, especially in its current state and in its postwar state.
The third point is that there is too much room for interpreting investment rights. Even though Canada has done some work in this chapter and in its model FIPA to narrow down certain vague descriptions of treatment that are supposed to be granted to investors, there is still vagueness in this treaty. It will depend on how an arbitrator, for example, decides what is meant by manifest arbitrariness in public policies that happen to affect an investor's business interest in the country.
Finally, there is the chilling effect on climate measures and energy transition policies. The threat of huge awards can scare countries away from introducing new climate measures, which is the reason that a lot of European Union member states are pulling out of the Energy Charter Treaty and why the European Parliament itself is considering a withdrawal from that treaty.
Finally, Ukraine has strong domestic legislation in place for foreign investors, which protects against expropriation without compensation and even protects Canadian investors against changes in legislation that might affect the business outlook, including for energy firms. Ukrainian law is supportive of international arbitration as a means of handling disputes between the states in contract-based arbitration, which would be another matter. We don't need ISDS. You can still have contract-based arbitration for Canadian firms.
Instead of putting this treaty in place, which is a substitute for the rule of law and for strengthening anti-corruption measures in Ukraine, I think Canada should put its focus on those measures and continue to work with the Ukrainian government, the European Union and other allies on strengthening those efforts to weed out corruption in the political system. Nothing in this treaty will speed up or ensure that Ukraine's infrastructure needs are met sooner, more efficiently or with more public benefit.
I'll just conclude by saying that the whole agreement needn't be thrown out, but the investment chapter should be reviewed and the ISDS provisions excluded, much as Canada did when CETA was negotiated.
As it's currently written, ISDS is more likely to harm than help Ukraine's sustainable development goals during the war and after the war. This is a missed opportunity to start to dismantle the ISDS regime in general, as countries like Australia and now the European Union are starting to do as well.
Thanks very much. I also look forward to questions.