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OTTAWA— Over the last two decades, Canada has been sued more times than either Mexico or the U.S. under NAFTA’s controversial investor-state dispute settlement (ISDS) mechanism, and the problem is getting worse.
A study released today by the Canadian Centre for Policy Alternatives (CCPA) finds over 70% of all NAFTA investor-state claims since 2005 were brought against the Canadian government and the number of challenges against Canada is rising sharply. From 1995-2005, there were 12 claims against Canada, while in the last ten years there have been 23.
“It appears that the federal government’s strong ideological commitment to ISDS and its willingness to settle and pay compensation is encouraging investor-state claims against Canada,” says Sinclair.
As of January 1, 2015, 45% of NAFTA claims were made against Canada. Canada has been the target of 35 investor-state claims, significantly more than either Mexico (22) or the U.S. (20). “Thanks to NAFTA chapter 11, Canada has now been sued more times through investor-state dispute settlement, than any other developed country in the world,” Sinclair added.
The study notes that although NAFTA proponents claimed that ISDS was needed to address concerns about corruption in the Mexican court system, most investor-state challenges involve public policy and regulatory matters. Sixty three per cent of claims against Canada involve challenges to environmental protection or resource management measures.
Currently, Canada faces nine active ISDS 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 (Lone Pine); a decision by a Canadian federal court to invalidate a pharmaceutical patent on the basis that it was not sufficiently innovative or useful (Eli Lilly); provisions to promote the rapid adoption of renewable energies (Mesa); a moratorium on offshore wind projects in Lake Ontario (Windstream); and the decision to block a controversial mega-quarry in Nova Scotia (Clayton/Bilcon).
Canada has already lost or settled six claims, paid out damages totaling over $170 million and incurred tens of millions more in legal costs. Mexico has lost five cases and paid damages of US$204 million. The U.S. has never lost a NAFTA investor-state case.
The pervasive threat of investor-state challenge under NAFTA chapter 11 puts a chill on public interest regulation, the report argues. Current trends will only worsen unless political and legal action is taken.
“Canadians and their elected officials should be deeply concerned. Unfortunately, compared to other parts of the world, there is surprisingly little political debate about the corrosive influence of ISDS on public policy and democracy in Canada,” Sinclair stated.
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