By Alan M. Field
This spring, Canadian anti-trade activists collected thousands of signatures demanding that Calgary-based energy company Lone Pine Resources drop its $250 million NAFTA lawsuit against Quebec’s moratorium on fracking. The dispute called attention to a key provision of the TPP that was long ago incorporated into the 1994 NAFTA, as well as numerous subsequent pacts. Known as investor-state dispute resolution chapters, they enable companies from countries that are parties to international trade pact to sue governments that engage in anti-competitive or unfair practices.
When the current Quebec government was elected in 2012, it imposed a moratorium on all exploration and development of shale gas in the province. Rather than go to court in Quebec to sue the government, Calgary-based Lone Pine Resources took advantage of the fact that Lone Pine was incorporated in the U.S. state of Delaware to access the investor rights chapter of NAFTA. That chapter gave Lone Pine – and other companies incorporated in the U.S. – the right to challenge the Quebec moratorium in front of a NAFTA investment tribunal. However, the recent petition against Lone Pine’s suit in Quebec now urges the company “to respect Quebec’s right and obligation under international trade law, including NAFTA, to protect its people and its sovereign right to set its own environmental and resource laws by dropping your NAFTA challenge to the fracking moratorium.”
In defense of its suit, Lone Pine has argued that the Quebec moratorium is “arbitrary” and “capricious” and that it deprives Lone Pine of its right to profit from fracking for natural gas in Quebec’s Saint Lawrence Valley.
According to Stuart Trew, the trade campaigner of the Council of Canadians, Lone Pine has become emblematic of the unreasonable scope of NAFTA and other “twenty-first generation” trade agreements such as the Central American Free Trade Agreement (CAFTA) and the upcoming Trans-Pacific Partnership (TPP). Mr. Trew said that Lone Pine was just “poking around and drilling in the Utica Shale deposits in that region of Quebec.” They want $250 million in compensation for any future profits” despite the fact that they haven’t invested nearly as much money in Quebec, nor recorded earnings as a result of their investments. Their case is one of nearly 20 such suits against the Canadian federal government, brought to the NAFTA tribunal. In perhaps the most notable cases, Detroit International Bridge Co. filed a lawsuit under NAFTA in 2010, claiming Canada was trying to undermine it by coercing Michigan into building a new bridge that would compete against it. Detroit International already had another NAFTA suit under way, claiming that construction of a Windsor approach road steered traffic away from its Ambassador Bridge, which carries a quarter of the merchandise trade between Canada and the U.S.
Several Canadian mining companies have also used the investor dispute resolution chapters in recent free trade agreements to sue foreign governments. Most notably, Pacific Rim, a Vancouver-based mining company, moved its headquarters to the state of Nevada where it could take advantage of the investor-state dispute resolution chapter in CAFTA, which binds the U.S. with the five Caribbean nations (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua) and the Dominican Republic. (Canada has no parallel agreement with those countries, but it does have a pact with Costa Rica and it is negotiating one with the other Central American nations.) Pacific Rim owned permits to explore for gold in El Salvador, but when it requested a permit to mine, the government of El Salvador refused to do so, arguing that the company had failed to provide a suitable environmental impact statement. On April 1, 2013, Pacific Rim sued the government of El Salvador for $315 million in a Washington-based World Bank tribunal called the International Centre for Settlement of Investment Disputes [ICSID]. That tribunal recently ruled that although Pacific Rim is not a U.S. company, the firm is entitled to sue in that court nevertheless.
Pacific Rim has become a lightning rod for environmentalist critics of the investor-state dispute resolution process in place or proposed in such pacts as NAFTA and the TPP. “A tribunal in Washington, D.C. [ICSID] that nobody elected recently issued a verdict that potentially hinders the democratic rights of millions of people,” said Robin Broad, a professor at the American University, and John Cavanagh, Director of the Washington-based Institute for Policy Studies, in a joint statement. “Its three members ruled that a foreign company may continue to sue El Salvador for not letting the company mine gold there. The impoverished Central American country could potentially be forced to pay Canadian mining company Pacific Rim $77 million or more in damages. This anti-democratic ruling has ominous implications for all of us.” In 2009, Salvadorans elected a President who promised he would not issue any new mining permits during his five-year term.
In response to such arguments, Tom Shrake, President and CEO of Pacific Rim, said, “Had El Salvador followed its own laws, the El Dorado [gold] mine would be in operation today, employing thousands of Salvadorans in one of the poorest regions of the country. The El Dorado operation would be the single largest taxpayer in El Salvador.” Although both sides in the dispute charge the other with corruption, the ICSID tribunal will formally decide whether El Salvador “has breached the Salvadoran Investment Law by refusing to issue the necessary mining licenses for the El Dorado gold project.”
In a very different case involving a suit against the Canadian government, U.S. pharmaceutical giant Eli Lilly is challenging Canada’s pharmaceutical approval process before a NAFTA investment tribunal, claiming $100 million in damages from a court decision to invalidate a patent for the attention deficit hyperactivity disorder (ADHD) drug Straterra. A U.S. trade policy decision sided with the company without taking issue with the use of NAFTA’s investment protections to enforce World Trade Organization rules on pharmaceutical patent terms and drug regulation.
In another area of contention, the Office of the U.S. Trade Representative is urging Canada to comply with its Anti-Counterfeit Trade Agreement (ACTA), a multinational treaty designed to standardize intellectual property laws around the world; one of the ultimate goals of the TPP itself. Although several countries have signed ACTA, including Canada, only Japan has ratified it. In March, the Canadian government introduced a bill that would make major changes to Canadian copyright and trademark law, including giving more power to customs and border protection agents without any judicial oversight. “The move is intended to prevent counterfeit goods from entering the country, but it has been criticized for being less about protecting Canadians and more about caving in to American demands,” wrote Dana Gabriel, a Canadian trade activist. Those demands include the harmonization of anti-counterfeit practices around the world in accordance with U.S. standards. Mr. Gabriel added, “Over the years, the U.S. has been critical of Canada’s efforts in addressing trade in counterfeit goods and has been pressing for intellectual property reform.”
The timing of the Canadian anti-counterfeiting legislation is suspect, argued Mr. Trew. “Was this new [anti-counterfeiting] law [known as ACTA] one of the conditions that the Obama administration put on Canada’s entry to the TPP talks last year? What other legislative surprises should we look forward to as these increasingly controversial TPP talks move forward?” The Council of Canadians has been demanding a thorough parliamentary and public review of the Harper government’s new anti-counterfeiting legislation to make sure it is “necessary and proportionate to the government’s stated objectives of protecting Canadians from counterfeit products.” The organization has also joined forces with activists for “international trade justice” and health advocates “in demanding that intellectual property rights be taken off the CETA and TPP negotiating tables,” said Mr. Trew.
For Mr. Trew and other critics of free-trade, it is especially troubling that a range of public policy issues are being settled in private, rather than on a pubic stage. He said, “They are talking about areas of public policy. Only two of the chapters of the TPP are about tariffs and market access. The other chapters are about intellectual property protection, the creation of a parallel court for corporations, and regulatory cooperation, and so forth. This secrecy shackles the hands of governments that might go the extra mile to protect health or reduce emissions.” However, Mr. Laver at the CCCE said there is nothing unusual or worthy of suspicion about the way the TPP will continue to be negotiated behind closed doors.