Corporate Sovereignty Now So Toxic, For Once It Isn't Being Used Against Canada -- Yet

from the off-the-media-radar dept

Corporate sovereignty was devised decades ago as a weapon for Western nations to wield on behalf of their investors against emerging nations who stepped out of line. However, its inclusion in NAFTA, the 1994 trade deal between the US, Canada and Mexico, changed the situation dramatically, and saw numerous investor-state dispute settlement (ISDS) suits being brought against Canada, rather than by it. As a 2015 report on ISDS cases under NAFTA from the Canadian Centre of Policy Alternatives noted:

Canada has been the target of over 70% of all NAFTA claims since 2005. Currently, Canada faces nine active claims challenging a wide range of government measures that allegedly interfere with the expected profitability of foreign investments. Foreign investors are seeking over $6 billion in damages from the Canadian government. These include challenges to a ban on fracking by the Quebec provincial government and a decision by a Canadian federal court to invalidate a pharmaceutical patent on the basis that it was not sufficiently innovative or useful.

Despite that painful track record, in 2014 Canada signed the Foreign Investor Protection Agreement (FIPA) with China, which not only included corporate sovereignty provisions, but guaranteed that they would take precedence over the Canadian constitution for 31 years. However, it seems that something -- maybe the decision by TransCanada to sue the US for $15 billion because of President Obama's rejection of the Keystone XL pipeline -- has started to make people aware of ISDS's dangers. That, at least, is what a blog post on the Canadian Dogwood Initiative suggests. It's a story about a Chinese mining company filing a lawsuit against Canada's provincial government in British Columbia (BC) over a land transfer. You can read the details on the blog, but what's really interesting here is what the Chinese company is not doing:

The Chinese corporation's allegations of expropriation and lack of consultation will be considered under established Canadian law by the Supreme Court of British Columbia. Generally speaking, weak corporate interests in land -- such as mineral tenures -- while entitled to "procedural fairness" are not entitled to "consultation." Nor will the Chinese corporation be entitled to compensation if the court rules the province’s transfer was an "indirect expropriation." Under Canada's law, only direct expropriation is compensable.

In other words, this is not a case involving corporate sovereignty -- well, not yet. As the Dogwood Initiative post points out, if the Chinese company loses its case in the Canadian court, it can simply invoke that FIPA deal and use ISDS to try again:

If China Metals goes this route, the secret trade panel would not be bound by Canadian law. As environmental lawyer David Boyd points out, unfortunately for the province, and taxpayers, "ISDS tribunals have repeatedly held that indirect expropriation […] gives foreign investors the right to compensation."

So, the obvious question is: why didn't the Chinese company invoke FIPA immediately, and enjoy the huge advantages of corporate sovereignty? The blog post has a pretty plausible explanation:

Had China Metals launched a FIPA-based investor-state lawsuit right now, Canadians would have a tangible example of the corporate superpowers entrenched in these trade deals. That might spark a backlash against trade deals and could delay not only a [more extensive trade] deal with China, but the controversial Trans Pacific Partnership (TPP) as well. So for the time being this mining case is proceeding in BC Supreme Court, almost entirely off the media radar.

In other words, as in Europe, corporate sovereignty in Canada is becoming so toxic that companies are trying hard to avoid any association with it. Of course, if China Metals loses in the provincial court, it seems likely that it will then move on to using ISDS anyway. However, at least doing so will expose the vastly different legal standards of domestic courts and corporate sovereignty tribunals.

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Filed Under: canada, corporate sovereignty, isds, nafta
Companies: china metals