TransCanada Goes Legal On US Government Over The Rejection Of Keystone; Will It Wake Obama To The Problems Of Corporate Sovereignty?

from the wake-up dept

Thu, Jan 7th 2016 3:52pm — Mike Masnick

Over the last few years, there's been a big controversy over the Keystone XL pipeline project, a massive planned project to build an oil pipeline from Canada to the US that many folks had been protesting, and which (after years and years of debate), President Obama finally rejected a few months back. That's not a topic that we've really covered here, other than a single mention when we questioned why the FBI had spied on activists protesting the potential pipeline.

However, things got... interesting yesterday, as TransCanada initiated a corporate sovereignty claim against the US government over the rejection of the project. As we've been explaining, corporate sovereignty provisions in trade agreements (usually officially called "investor state dispute settlement" or "ISDS" -- in part because it's so boring many people ignore what it's really about) provide a way for foreign companies to effectively "sue" foreign governments over regulations they dislike -- including regulations that negatively impact "expected profits."

Even worse, it's not a real "court" that deals with these things, but a tribunal of folks, some of whom may have other dealings with the companies.

One of the most egregious examples of this is the ongoing corporate sovereignty claim made by drug maker Eli Lilly against the government of Canada, demanding $500 million, because Canadian patent laws rejected two Eli Lilly patents for not really doing anything new. Eli Lilly claimed that this "expropriated" its expected profit, and thus initiated a claim.

President Obama has been waving off concerns about corporate sovereignty/ISDS for a while now, noting that it's rarely been used against the US government, and that the US government had so far won all such claims. That's true. But, this is a big one -- and it might not end the same way. TransCanada is demanding $15 billion, claiming this is the "lost value" due to the rejection of the plan. And including these provisions in giant new agreements like the TPP (with Pacific rim countries) and TTIP (with Europe) will mean opening the floodgates.

Think about how crazy this is: Any time a company "invests" in plans to do something, that are later made impossible (or difficult) due to a regulatory decision, the (foreign) companies can basically demand payment. That puts a massive burden on any attempt to regulate anything in regards to how corporations act, even if new information has come to light, or people have recognized how existing regulations are problematic. These provisions will make it nearly impossible to even contemplate fixing copyright or patent laws, because companies will just make claims arguing that such changes destroy "expected" profits.

And now, big time champion of corporate sovereignty/ISDS, President Obama, is facing an ISDS claim that could cost American taxpayers $15 billion. Just for deciding that a giant oil pipeline isn't a good idea. Why would any country ever willingly submit itself to such conditions?

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Filed Under: corporate sovereignty, isds, keystone, keystone xl, nafta, tpp, ttip
Companies: transcanada

58 Comments

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Anonymous Coward, 7 Jan 2016 @ 4:02pm

No
Why would Obama care? The U.S. will just ignore the tribunal if it produces an unfavorable result, like with Antigua and Canada. (After years of stalling and appeals, of course.)
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Anonymous Coward, 7 Jan 2016 @ 4:20pm

Why ???
Because we are lead by a bunch of
F#$%^ING MORONS
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Whoever, 7 Jan 2016 @ 4:24pm

Re:
Because we are lead by a bunch of
F#$%^ING SELLOUTS

FTFY. They are not stupid. Just corrupt.
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Anonymous Anonymous Coward, 7 Jan 2016 @ 4:38pm

This isn't good but what does it matter?
Obama (or whoever is in office at the time the case closes) will just turn on the printing presses and make the payment, but will still charge the taxpayers for it cause it's their responsibility doncha know. Worse, he knew this would happen when he killed the project to begin with, even though I absolutely agree that he should have killed that pipeline.
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Anonymous Anonymous Coward, 7 Jan 2016 @ 4:40pm

Re: This isn't good but what does it matter?
Oh, I forgot to mention, watch the value of currency fail as these shenanigans progress, and unless ISDS is killed dead in all its forms these shenanigans will progress and currencies of all types will fail.
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Anonymous Coward, 7 Jan 2016 @ 4:53pm

Obama won't face this. He'll be out of office by the time it gets going. He'll sign his little pet trade bill and march off into the distance without a care of what it does.

You are looking at the next big thing for what were once known as patent trolls because this is where the big money is. They will no longer consider a few million as anything but nickle and dime. What's a couple of million against billions?
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Mark Wing, 7 Jan 2016 @ 5:21pm

"Wait a sec, we meant for this whole corporate sovereignty other to apply to the other countries, not ours."
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Anonymous Coward, 7 Jan 2016 @ 5:24pm

Typical government
"President Obama has been waving off concerns about corporate sovereignty/ISDS for a while now, noting that it's rarely been used against the US government..."
Because we don't care about other governments / countries, as long as we benefit.
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Spike (profile), 7 Jan 2016 @ 5:28pm

The US doesn't win them all... however Canada still got screwed as the US is absolutely under no obligation to abide by any judgements made against them.

https://en.wikipedia.org/wiki/Canada%E2%80%93United_States_softwood_lumber_dispute
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Roger Strong (profile), 7 Jan 2016 @ 5:41pm

There was another ISDS lawsuit launched on Wednesday, going in the other direction:

- The Port Hawkesbury mill in Nova Scotia goes under thanks to the downturn in the industry. (Less glossy flyers and magazines, thanks to the internet.)

- The Nova Scotia government steps in because jobs, and pays to keep the mill in ready condition for a buyer.

- The new buyer is found a year later. The government agrees to subsidize the operation to the tune of $124 million over 10 years.

- Meanwhile over in Quebec, Resolute Forest Products shuts down the 126-year-old Laurentide mill. Naturally, they blame the continued existence of the Nova Scotia plant.

- Never mind the downturn in the market in general. Which had recently sank AbitibiBowater, which then became Resolute Forest Products with the assistance of lots of Canadian government money.

- Never mind that the Canadian mills are having trouble competing thanks to Americans mills getting $8 Billion in tax credits.

- And never mind that Resolute Forest Products is a Canadian company based in Montreal. Show foreign investment, and you can sue your own government under ISDS rules.
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Roger Strong (profile), 7 Jan 2016 @ 5:55pm

Re:
> Obama won't face this. He'll be out of office by the time it gets going. He'll sign his little pet trade bill and march off into the distance without a care of what it does.

Earlier: "Bush won't face this. He'll be out of office by the time it gets going. He'll sign his little pet trade bill and march off into the distance without a care of what it does."

(The fight over Keystone predates Obama's presidency. So does NAFTA. So do TPP negotiations, if that's what you refer to him signing.)
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Anonymous Coward, 7 Jan 2016 @ 6:15pm

Re: Re:
(The fight over Keystone predates Obama's presidency. So does NAFTA. So do TPP negotiations, if that's what you refer to him signing.)

So... no hope of any change?

Bush = Obama
Obama = Bush

Its funny how much each side likes to bitch about the other side while their side does the same fucking thing!
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Anonymous Coward, 7 Jan 2016 @ 7:02pm

Re: Re:
Because we are lead by a short-sighted
bunch of F#$%^ING SELLOUTS

FTFY. They are not stupid. They're not necessarily corrupt. But corrupt or not, they aren't giving (enough) thought to the consequences of their actions.

I'll remind you that even when legislators do give thought to the consequences, there are plenty of people out there willing to twist the wording of the law to fit their own agenda.

And they aren't all spooks. Claims can be made about deregulation (IE getting rid of laws) and consequences thereof. Even a well thought out law can have unintended consequences and perverse incentives. So in a way, we're damned if we do, and damned if we don't.

Corruption is easy to point out, though: money is speech, and legislators tend to hear the loudest voices.
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KillerIdea, 7 Jan 2016 @ 8:56pm

My killer idea for cashing in on the ISDS
I plan to market a range of child-friendly cigarettes. Of course no one in their right mind would allow this to come to market. I estimate my losses will be in the trillions. I love the ISDS :)
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Anonymous Coward, 7 Jan 2016 @ 9:20pm

Now you know the real reason gun sales are skyrocketing.
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morganwick (profile), 7 Jan 2016 @ 10:23pm

Government of, by, and for the corporations.
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Roger Strong (profile), 8 Jan 2016 @ 12:12am

Re:
The US was a capitalist democracy, while China had a totalitarian communist system.

China has embraced capitalism. The US has embraced mass domestic spying, become a torture state, armed its police with military weapons and made them unaccountable, and made those who control the money exempt from legal penalties. ISDS gives investors final word over public safety, environmental issues and more. Corporations are allowed unlimited election spending.

Rather than the Cold War's Mutual Assured Destruction, China and the US have found middle ground with authoritarian capitalism.
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That Anonymous Coward (profile), 8 Jan 2016 @ 1:01am

Anyone else notice how many of our problems seem to be rooted in the "expected" profits of corporations?

We expected our porn was going to make millions, copyright trolling.
We expected our tobacco imports would make millions, they forced us to show the real dangers.
We expected that this tiny change to our pharmaceutical would let us lock the price in at 1000x the cost.

We expected, so you owe it to us.

When are we going to stop allowing the teenager mentality to rule over everyone?
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Sveinbjorn Thormar, 8 Jan 2016 @ 2:52am

Zero sum
They sue for expected profit. US government should sue for expected fines for expected shoddy maintenance and leakage and subsequent environmental damage.
This should round out to 0$
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William H. Taft, 8 Jan 2016 @ 3:12am

Hey Canada,
You can take that pipeline, turn it sideways, dust it off and shove straight up your "other" pipeline.
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Johnson Nails, 8 Jan 2016 @ 3:15am

This pipeline and corporate soverignty
has been Obama's presidential raison d'être. Why are we still shocked by this?
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Anonymous Coward, 8 Jan 2016 @ 4:36am

Just quit it!
And now, big time champion of corporate sovereignty/ISDS, President Obama

I keep reading here how Obama and the Dems are corporate puppets and that isn't true. The Dems are for the little guy and everyone knows that, especially the media. So for anyone to say otherwise is ludicrous. So please, just quit it.
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Anonymous Coward, 8 Jan 2016 @ 4:38am

The most amazing part of this story
The most amazing part of this story is that a foreign company can sue use because we won't bury their pipeline on our soil. Just think about that for a minute. It is our country, our soil and we are free to do with it what we will. To think that anyone, even an American company could sue because we won't allow their pipeline is ridiculous at every level.
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Anonymous Coward, 8 Jan 2016 @ 4:40am

Re: Re:
Wait, where did the hope and change go? Oh, we didn't get any. Bet you thought we would though.
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Anonymous Coward, 8 Jan 2016 @ 4:48am

Re: Re: Re:
Yeah, both parties are the same ...
Imagine if W had not been put in place, would US soldiers be in the middle east? Granted, the market crash would still have happened but I doubt the prolonged Iraq war would have been initiated.
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Anonymous Coward, 8 Jan 2016 @ 4:53am

Re: This pipeline and corporate soverignty
Are you shocked?
If so why?
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Roger Strong (profile), 8 Jan 2016 @ 5:33am

Re: Hey Canada,
Canadians don't want it either. There's simply no support. In fact for national security that oil is better sent to the coast for shipment to China and elsewhere.

However they do have a long list of ISDS issues - American investors suing Canada - which you can turn and shove by yourself.
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Ninja (profile), 8 Jan 2016 @ 5:35am

Here's hoping they succeed. It'll be interesting to see the US reaction. If they pay, many others may jump the bandwagon, if they don't pay then said provisions will basically be rendered useless as other countries will feel empowered to do the same. This will be most interesting to watch.
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Anonymous Coward, 8 Jan 2016 @ 6:33am

Re: Re:
They are stupid and corrupt.

FTFY
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Anonymous Coward, 8 Jan 2016 @ 6:38am

Re: Re: Re:
I still don't have any change but I do have hope that some day I will have a little change in my pocket so I can purchase some luxury like a candy bar.
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Anonymous Coward, 8 Jan 2016 @ 6:41am

It is probably just a tax thing.
They took a billion dollar gamble and lost. But, you can't just tell the IRS "oops" on a billion dollar write off. So they have to sue to make it look like they really did get screwed to justify the tax kickback. It means that for the moment, it is over. Yay!
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Anonymous Coward, 8 Jan 2016 @ 6:59am

The pipeline would NEVER be profitable if it was built today
The most ironic part about this lawsuit, is that with today's oil prices the Keystone pipeline would NEVER be profitable.

Before oil prices fell even more, a number of news analysts pointed out that TransCanada would be losing $10 for each barrel of oil they sold at market value from the tar sands. Given how oil prices have fallen even more since then, they'd no doubt be losing even more money per barrel at today's prices.

The fact is, we've known about oil in tar sands for many decades. No one's actually drilled for it until the last decade because it wasn't economically viable to extract it.

Yes oil prices will go up enough eventually to allow keystone to be profitable. But that will likely take years if you look at oil analysts current projections on oil prices. So TransCanada can hardly say they were guaranteed $15 billion in profits from the pipeline.
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Anonymous Coward, 8 Jan 2016 @ 7:11am

Re: Re: Re: Re:
You just need to work harder.
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Anonymous Coward, 8 Jan 2016 @ 7:14am

Re: Re: Hey Canada,
Or, it is better left in the ground where it belongs.
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Anonymous Coward, 8 Jan 2016 @ 7:21am

Re: The pipeline would NEVER be profitable if it was built today
If one were to consider the costs of the resultant pollution in both health issues and the cleanup issues then the profitability predictions would have a much different outcome. But they do not consider the consequences as their responsibility, that is for the poor tax payers to shoulder. Privatized profits and socialized loses are mainstream corporate policy, always has been and there is no reason to think it will ever change.
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Anonymous Coward, 8 Jan 2016 @ 7:29am

Re: Hey Canada,
That kinda like us saying
"Coke makes kids fat" F%ck off America.

Transcanada is a corporation. Ownership is most likely multinational....
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Anonymous Coward, 8 Jan 2016 @ 7:34am

ISDS made some kind of sense back when it was said to be a measure against corrupt governments misappropriating foreign companies' property. At some point, however, it became about protecting companies against the rule of law.
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Anonymous Coward, 8 Jan 2016 @ 7:51am

Re: Re: The pipeline would NEVER be profitable if it was built today
If those things were considered we probably wouldn't have batteries, solar panels and many other important things.
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Martin, 8 Jan 2016 @ 7:54am

Re: Hey Canada,
How very American of you to say that.
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Anonymous Coward, 8 Jan 2016 @ 7:55am

Re: Re:
Actually - they are stupid and corrupt.
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jupiterkansas (profile), 8 Jan 2016 @ 8:20am

Re: The most amazing part of this story
Welcome to the 21st century, where Corporation > Country.
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jupiterkansas (profile), 8 Jan 2016 @ 8:22am

Re:
It was probably about that time when companies took advantage of those corrupt governments to change things in their favor.
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Anonymous Coward, 8 Jan 2016 @ 8:42am

new plan...
1. Create new country in international waters (anchor boat to something somewhere).
2. Make plans to build the US Canal, a waterway directly through the US to ship goods from California to New York at much lower cost than other freight methods.
3. Sue US in ISDS when they won't allow me to build a canal through the middle of the country.

4. PROFIT... cha ching.

Nobody said the plans had to be viable or even possible. Other options would be to plan to build a space elevator from the top of the empire state building, building a matter teleportation device in the middle of DC, I mean there are just so many plans that would generate me billions and billions of dollars if the US would just let me do them, but since they won't I'll just sue and make billions from the ISDS tribunal.
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Paul Clark, 8 Jan 2016 @ 8:49am

We Can Seize the Canadian Holdings of US Corps
IIRC, there is a separate agreement between countries that will allow the Canadian government to seize US corporate holdings in Canada and use their value to compensate TransCanada if the US government does not pay their bill. I hope the government is smart enough to look at the investments of the biggest congressional/ senate supporter of these trade deals and screw him/ her over by selectively seizing assets in his portfolio. If Donald is president, I wonder if he has any assets in Canada :) .
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Anonymous Coward, 8 Jan 2016 @ 9:05am

And if elected, I will cancel and invalidate all ISDS provisions in all treaties the US is currently party to, and will not sign any new treaties containing ISDS.

Do I have your vote?
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indigo, 8 Jan 2016 @ 9:35am

political maneuvering
Maybe Obama knew they would sue, and so what. He looks good for saying no. What a load of shite, with the lawyers making out like bandits too. Shakespeare was right...
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Non Corporate Entity, 8 Jan 2016 @ 11:06am

Exploitation 101
This corporate sovereignty sounds like the exploitation by enemies or refugies and illegal aliens claiming specific rights that are claimed to be violated by premeditated design. It is a tool used by IS group and lawyers even defending those who have been charged or detained as enemy combatants, and thus an extremely slippery slope being tested here. It should be quelched as soon as possible by governments who can legitimately make national security risks refutals.
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Anonymous Coward, 8 Jan 2016 @ 11:21am

Re: new plan...
Add high speed rail to that list.
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Anonymous Coward, 8 Jan 2016 @ 12:58pm

Re: Exploitation 101
You sound smart. Tell me more.
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Anonymous Coward, 8 Jan 2016 @ 11:14pm

You are assuming the American president cares about his citizens instead of constantly selling them out for personal glory and gain.
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Anonymous Coward, 8 Jan 2016 @ 11:17pm

Re: This isn't good but what does it matter?
That solution will only work as long as the dollar stays the world currency. There are rumblings it will be replaced in the next few years by a more stable currency.
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Anonymous Coward, 8 Jan 2016 @ 11:18pm

Re: Re: Re:
1 party 2 faces
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Anonymous Coward, 8 Jan 2016 @ 11:24pm

Re:
They have been skyrocketing ever since the patriot act was implemented.
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Anonymous Coward, 8 Jan 2016 @ 11:26pm

Re: Just quit it!
Is that because they say that or is there some other reason you believe it?

Since past actions would disprove such a notion, if you relied on the past to expect what the future will bring.
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Anonymous Coward, 10 Jan 2016 @ 8:15pm

I'm pretty sure Obama rejected the pipeline deal because he didn't receive campaign contributions from the pipeline companies. Usually pipeline oil companies back Republicans, not Democrats. Hence, Obama didn't get his cut of the pie so he could care less about approving the deal.

I could be wrong, but probably not.
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Wendy Cockcroft, 12 Jan 2016 @ 5:45am

Re:
When we stop assuming corporations are superior to the rest of us because jobs and growth, etc.

At that point, the babies will be put in the corner.
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Wendy Cockcroft, 12 Jan 2016 @ 5:46am

Re: Just quit it!
Voted funny. The truth is, both of the main parties are corporate puppets.
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Hyth (profile), 14 Jan 2016 @ 6:31am

Still Perplexed
I'd like to address a few of the points made:

- Is it "corporate sovereignty" or "government accountability"? I see little difference between enforcing government promises and those made by individuals or corporations.

- That these agreements can make it expensive or difficult to democratically pass legislation or regulations is beside the point. The country, through its leaders, bound the government to a course of action. Why should it not pay for violating those promises?

- We make the U.S. government pay for violating its promises (including most contractual promises) via the Administrative Procedures Act all the time. Or, similarly, what do you consider suing for violations of civil liberties?

- "Expected profits" are the default form of damages in Anglo-American contract law. It is designed to put the party suffering from the breach of contract in the position she would be in absent the breach. This mode of calculations encourages "efficient breach" of contract.

- Per above, if it efficient for the U.S. to "breach" a contract due to policy preferences/new information, it should do so. And can do so. If it pays for breaking its promises.

- If the politicians are corrupt, having legislation or regulations overrode by international arbitration isn't counter-democratic but rather ambivalent to democracy.

- Most attacks on international arbitration methodology apply to all treaties. Compare the power of an international commercial arbitration tribunal with the ICJ. Maybe you like neither.

I've taken part in ICSID disputes. Protecting basic contract rights, and forcing the state (via taxpayers) to pay when breaching those contracts merely inflicts accountability on governments--much as we want in most other areas.

Of course, if you think governments should be able to break contracts (what about the social contract?) with impunity, "corporate sovereignty" is indeed a problem.

I'm not sure why Mike is on the other side of this policy item, although I see why one could hold the position.
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