Democracy Gone Astray

Democracy, being a human construct, needs to be thought of as directionality rather than an object. As such, to understand it requires not so much a description of existing structures and/or other related phenomena but a declaration of intentionality.
This blog aims at creating labeled lists of published infringements of such intentionality, of points in time where democracy strays from its intended directionality. In addition to outright infringements, this blog also collects important contemporary information and/or discussions that impact our socio-political landscape.

All the posts here were published in the electronic media – main-stream as well as fringe, and maintain links to the original texts.

[NOTE: Due to changes I haven't caught on time in the blogging software, all of the 'Original Article' links were nullified between September 11, 2012 and December 11, 2012. My apologies.]

Monday, December 17, 2012

FIPA critics warn of chilling effect on environmental law in Canada

Opponents of the Canada-China Foreign Investment Promotion and Protection Agreement (FIPA) warn that the deal could prevent governments from strengthening environmental protection laws in the future, even though the agreement states that environmental protection in the public interest does not constitute state expropriation.

Green Party Leader Elizabeth May (Saanich-Gulf Islands, B.C) warned that if the federal government proceeds with ratifying they investor protection treaty there will be a “chilling effect” on environmental protection laws in Canada.

“My fear is that Canadians will never know in the future that a government was thinking of bringing in better environmental laws, better regulations, because at the point that they’re beginning to talk about bringing in the law, China can [assert] diplomatic pressure,” Ms. May said of the agreement.

Canada and China signed the agreement on Sept. 9, but the two countries have yet to ratify the treaty. Once the agreement is ratified, parties will have to wait 15 years before being eligible to withdraw with one year’s notice, after which the agreement would remain in effect for an additional 15 years.

The treaty sets out a framework for Canadian firms to seek compensation from the Chinese government for undue expropriation. In return, Chinese firms, including state-owned enterprises like Nexen owner CNOOC, will be able seek compensation from the Canadian government for policies resulting in a loss of profits.

Under the agreement, investments are immune from expropriation or nationalization “except for the public purpose, under domestic due procedures of law, in a non-discriminatory manner and against compensation.”

The agreement also grants China the status of most-favoured nation, meaning that compensation must be “no less favourable” than that given to investors from any other country.

Whether or not stronger environmental laws amount to expropriation depends on who you ask.

Osgoode law professor Gus Van Harten, an outspoken critic of the Canada-China FIPA, said that it could limit future environmental protections “to the extent that they affect any major Chinese-owned asset.”

Moreover, Prof. Van Harten warned that the agreement would give Chinese investors “enhanced leverage” over Canadian environmental policy—an effect that would be hidden from the Canadian public due to a lack of transparency in the settlement process.

“Canadians would not necessarily know that this had happened because a government might back away from the decision due to closed-door threats of a FIPA lawsuit and the corresponding risk of a crippling damages award years down the line that tracked back to the original government decision,” he stated in an e-mail.

In 1997, U.S.-based Ethyl Corp. successfully challenged a Canadian ban on the fuel additive MMT under Chapter 11 of NAFTA, which has become the model for investor-state agreements like FIPA.

Ethyl Corp. initially sought $350-million in compensation, and was in the end awarded nearly $20-million in damages by an arbitration panel.

Ms. May said that similar cases could be made by Chinese private and state investors in the future, with settlements being reached privately by “three guys in a hotel room somewhere.”

“There’s even more reason to be concerned now because we have a very large energy company controlled by CNOOC. The more Chinese investors we have within in Canada, the more reasons there are to be very, very cautious about bringing in this Canada-China investment treaty,” she told The Hill Times.

Canada already has 24 ratified FIPAs, but they are all with capital-importing countries. The agreement with China is the first such agreement that Canada has signed where it will be the net importer of capital. According to the Department of Foreign Affairs and International Trade, Canadians invested nearly $4.5-billion in China in 2011, compared to nearly $11-billion coming into Canada from China in the same year. This year’s Nexen takeover alone was valued at $15.1-billion.

International Trade Minister Ed Fast (Abbotsford, B.C.) and Parliamentary secretary Gerald Keddy (South Shore-St. Margaret’s N.S.) declined interviews with The Hill Times, but in a prepared statement Mr. Keddy said that the agreement “expressly includes language on transparency” when it comes to arbitration.

“Under the agreement, any decision emanating from dispute resolution would be made public. What the agreement does not do is impair Canada’s ability to regulate and legislate in areas such as the environment, culture, safety, health and conservation,” Mr. Keddy stated.

The definition of expropriation contained in the Canada-China FIPA states that “a non-discriminatory measure or series of measures of a Contracting Party that is designed and applied to protect the legitimate public objectives for the well-being of citizens, such as health, safety and the environment, does not constitute indirect expropriation.”

 Cam Mowatt, an investment and trade lawyer and partner with Borden Ladner Gervais law firm, said that the FIPA was unlikely to further limit Canadian environmental regulation because Canada has had a similar arrangement with the United States since 1994 under Chapter 11 of NAFTA. The rights being given to Chinese investors are similar to the rights that U.S. investors have been accorded by the Canadian government for nearly 20 years.

“Canada has had the position throughout under the NAFTA and all the cases that have flowed from it, that environmental measures that are non-discriminatory and for a bone fide public purpose, etc., don’t amount to an expropriation,” said Mr. Mowatt, who has provided legal counsel to the government of Mexico in investor-state arbitration.

Mr. Mowatt acknowledged that it was debatable whether or not such agreements have a chilling effect on environmental regulation, but added that the agreement had the benefit of taking Canadian investors out of the Chinese legal system, which he described as “notorious for its lack of judicial independence.”

Mr. Mowatt was also doubtful that Chinese investors would be more aggressive than U.S. investors when it comes to filing expropriation claims against the Canadian government.

“[U.S. investors] are known to be the most litigious investors in the world. Culturally, the Chinese have a reputation of being dispute averse,” Mr. Mowatt observed. “But that remains to be seen—you put them in the hands of counsel and who knows what happens.”

Original Article
Source: hill times
Author: Chris Plecash

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