Canada remains vulnerable to costly NAFTA investor–state lawsuits even after removing the controversial dispute settlement process from the renegotiated NAFTA deal, according to a new report from the Canadian Centre for Policy Alternatives (CCPA) that urges the Trudeau government to help phase out the investor–state dispute settlement regime (ISDS) from all its international agreements.
“The agreement to remove ISDS from the renegotiated NAFTA deal was a critical victory for democratic public interests over investor power, but it was only a partial victory,” says study author Scott Sinclair. “Canada’s experience under NAFTA’s investment dispute process in Chapter 11 has clearly been negative. CUSMA’s investment chapter needlessly gave ISDS a three-year lease on life, during which much harm can still be done.”
For example, an impending NAFTA “legacy” claim by the Alberta government, challenging the Biden administration's cancellation of the Keystone XL pipeline, has the potential to be one of the largest ISDS disputes in NAFTA history and could see the company (TC Energy) seeking multiple billions of dollars in compensation. Although the U.S. has never lost a NAFTA ISDS case, the report notes it is easily possible they could this time around.
The new CCPA report includes data on ISDS claims through March 31, 2021, and new information on Canada’s legal costs (to March 2020) acquired through an access-to-information request. The report also provides a step-by-step approach for removing ISDS from all Canadian trade agreements. It finds that, over NAFTA’s quarter-century lifespan, Canada has spent more than $113 million (and counting) in legal costs to defend against several dozen ISDS claims, mostly from U.S. investors. These cases, which frequently challenge non-discriminatory environmental and resource-management policies, have resulted in Canada paying damages and settlements totaling more than $263 million.
The new Canada–U.S.–Mexico Agreement (CUSMA) will eliminate ISDS between Canada and the U.S. within three years and curtail its use between the U.S. and Mexico. But a recent spike in ISDS claims against Mexico underscores the significant risk of cases piling up toward the end of that period. Canada is still the most sued country under NAFTA, but since 2015, there have been more investor claims against Mexico, the report finds.
Canadian companies also continue to take advantage of ISDS provisions in Canada’s other free trade deals and bilateral investment treaties to try to block governments abroad from acting in the public interest, for example, on local environmental regulation. For instance, three Canadian mining companies are currently suing Colombia for protecting the country’s supply of fresh water.
“As foreign affairs minister, Chrystia Freeland called the removal of ISDS from the new NAFTA one of her proudest achievements. So why does the Canadian government continue to pursue ISDS in other trade deals? Not only are we still vulnerable to investor–state lawsuits cases piling up, but we could easily repeat the mistakes of the past if ISDS isn’t removed from other agreements,” adds Scott Sinclair.
The report, The Rise and Demise of NAFTA Chapter 11 by Scott Sinclair, is available for download on the CCPA website.
For more information, please contact Alyssa O’Dell, CCPA Media and Public Relations Officer, at [email protected] or cell 343-998-7575.
The CCPA is an independent, non-profit charitable research institute founded in 1980.