How Corporate Sovereignty In Trade Agreements Can Force National Laws To Be Changed

from the they-said-it-couldn't-be-done dept

Wed, Mar 11th 2015 1:03am — Glyn Moody

As we noted recently, one of the most worrying aspects of corporate sovereignty chapters in trade agreements is the chilling effect that they can have on future legislation. That's something that the supporters of this investor-state dispute settlement (ISDS) mechanism never talk about. What they do say, though, is that corporate sovereignty cannot force governments to change existing laws. A recent defeat for Canada before an ISDS tribunal proves that's not the case:

An international trade tribunal has ordered Ottawa to pay ExxonMobil and another oil company $17.3 million, following a complaint that the companies were required to spend money in Newfoundland and Labrador on research and development.

The case was brought by ExxonMobil using the corporate sovereignty provisions in the North American Free Trade Agreement (NAFTA), and concerned another agreement, called the Atlantic Accord. As CBC News explains: Under the terms of the Atlantic Accord, a federal-provincial agreement on oil development first negotiated in 1985, oil companies are required to support petroleum-focused research and development in Newfoundland and Labrador, as part of its local benefits package.
In other words, three decades ago, Canadian politicians had passed a research and development package, one of whose measures was designed to boost local employment -- exactly the kind of thing that voters want their politicians to do. But the ISDS tribunal ruled that under NAFTA, this was not permitted, and awarded substantial damages to ExxonMobil for being required to comply with the Atlantic Accord. But it gets worse: Unless the governments of Canada and Newfoundland and Labrador agree to change the R&D legislation, Ottawa could be on the hook for continued damages. The federal government is responsible because NAFTA is an agreement between sovereign nations.
That is, the corporate sovereignty provisions in NAFTA are being used to force the Canadian government to change existing and long-standing legislation -- something that ISDS fans assure us never happens.

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Filed Under: corporate sovereignty, isds, laws, regulations, tafta, tpp, trade agreements, ttip

11 Comments

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Anonymous Coward, 11 Mar 2015 @ 2:06am

Sometimes I wish we Canadians would just say screw the rest of the world and focus on taking care of ourselves.
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Anonymous Coward, 11 Mar 2015 @ 2:38am

And coming from the blog/mouthpiece of the biggest corporation in the US, why boy howdy, you better be scared!
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Brazilian Guy, 11 Mar 2015 @ 2:43am

So, will all the R&D developed in that region transfered to the government of Canada if they pay, and will Exonnmobil pay retroactive licensing fees?
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Anonymous Coward, 11 Mar 2015 @ 2:44am

If these agreements did not cause governments to change laws and regulations they would be rather pointless from the viewpoint of those writing them.
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Daydream, 11 Mar 2015 @ 4:33am

I don't get it:
Wouldn't a requirement for an oil company to support research and development regarding petrochemicals, essentially be an industry-specific tax, fixed or otherwise?
Why would ExxonMobil feel the need to litigate over this?
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- Padpaw (profile), 11 Mar 2015 @ 5:22am
  
  Re: I don't get it:
  It feels like a shakedown to me. They know they can pointlessly sue and make a profit off of it regardless if they have any basis or not.
  
  I would be interested if any of the members of the tribunal profited from this choice or not. be it bribes or other means
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  - Pragmatic, 11 Mar 2015 @ 6:29am
    
    Re: Re: I don't get it:
    They're industry lawyers. If they didn't rule in favor of the litigating industry, their pay might drop or they might find that their services are no longer required where they work as part of an unofficial quid pro quo setup with business partners.
    
    Direct conflicts of interest might be hard to prove but it's the indirect ones I'm interested in.
    
    It's why I hate the idea of corporations ruling the roost.
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- Vincent Clement (profile), 11 Mar 2015 @ 11:14am
  
  Re: I don't get it:
  Free money.
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Paul Clark, 11 Mar 2015 @ 11:54am

Frederal vs provincial Politics
One quirk of the Canadian political structure is that trade deals are the responsibility of the federal goverment and resource development is the responsibility of the provincial government. The provinces can do what they like with foreign multinationals and its the federal government that has to pay the penalties. Soemtimes provincial/ federal relationships are strained ....
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GEMont (profile), 14 Mar 2015 @ 1:48am

What Me Worry?
s

Well, ya, we'd be very upset about this pay-off to EM, if that money was coming out of our own pockets, but hey, the Canadian Taxpayer is footing the bill for all of this, as usual, and a lot of our friends and relatives have stock in ExxonMobil, so its not really as bad as it looks... at least not for us career politicians, anyway.

Karla Toowatt,

Spokesperson, Canadian Career Politicians Club

/s

---
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KevinEHayden (profile), 15 Mar 2015 @ 9:42pm

Boycott Esso
Calling all Canadians to boycott Esso gas retail outlets. I'm sure if we all stopped buying gas from them for a while they'd lose a lot more than $17 million. Why the hell should I do business with a bunch of slimeballs who want to stick their hands in my pocket thru the backdoor? I'll never buy from Esso again.
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