Report finds U.S. opposition prompted Canada's retreat on NAFTA Investor-State panels

Prospects for change dim
June 11, 2001

OTTAWA--There is almost no chance that NAFTA Trade Ministers, meeting next month, will make any meaningful changes to limit corporations' rights to use NAFTA to challenge laws that protect public health and the environment, says a new report from the Canadian Centre for Policy Alternatives.

"The Bush Administration is clearly opposed to such changes," says Scott Sinclair, the report's author.

Trade Minister Pettigrew, who favoured limiting NAFTA's investor-state dispute system, was publicly overruled by Prime Minister Chretien at the Quebec Summit, undercutting Canada's position on this issue.

"The main pressure came from the U.S. business community, which made it clear in an April 19 letter to the U.S. Trade Representative that it would tolerate no weakening of the investor-state clause," says Sinclair. "As interpreted by NAFTA trade dispute tribunals, the definition of expropriation goes well beyond domestic law in all three countries."

Sinclair is also concerned that the Prime Minister's comments will result in increased litigation under NAFTA's controversial investment rules. "The P.M.'s comments give a green light to more investor-state lawsuits just as these controversial cases are reaching a critical mass," he said.

Sinclair sees the recent judicial reviews of the NAFTA panel decisions as a positive step, but notes that the recent B.C. Supreme Court review of the Metalclad case against Mexico was very restricted. He urged state and provincial governments to give courts more authority to set aside NAFTA panel decisions. "The main priority, though," says Sinclair, "is to remove the investor-state system from NAFTA and other investment agreements."

Sinclair is very concerned about the Canadian retreat. "It could not have come at a worse time...Without strong political action to choke off this litigation, the number of cases will grow, public liabilities will mount, and regulatory chill will deepen."