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American multinationals based in Canada and Europe, as well as investors in the mining and financial sectors, could sue governments in costly legal battles that would stymie policymaking, the report by T&E and 14 other environmental NGOs, citizens’ groups and workers unions warned.
Trading Away Democracy details how US corporations with substantial business interests in Canada could use the Comprehensive Economic and Trade Agreement (CETA) to take countries to international arbitration tribunals. Such lawsuits could go ahead even if the ISDS provision is dropped from the EU-US Transatlantic Trade and Investment Partnership (TTIP) currently being negotiated.
In 2007 the world’s largest publicly listed oil company, ExxonMobil, used ISDS in the North American Free Trade Agreement (NAFTA) to successfully sue Canada for implementing laws requiring research spending in the depressed province of Newfoundland. The US energy giant’s investment arm, along with another oil firm, claimed about €49 million, though the final award was never made public.
In 2004, another US company, food processors Cargill, sued Mexico under NAFTA’s ISDS provisions and won €71.8 million. The case concerned a Mexican government tax on drinks containing high fructose corn syrup, which is linked to obesity.
Cecile Toubeau, sustainable trade policy officer at T&E and the report’s co-author, said: ‘CETA will be a Trojan horse for US-based multinationals to sue the EU and its member states. If the European Commission, member states and the European Parliament are serious about protecting public policy, they have to scrap investor-state dispute settlement not only from TTIP, but also from CETA.’
The analysis, published by civil society groups on both sides of the Atlantic, details how Canada has been sued 35 times and has paid €121 million (CAD$171.5 million) in damages to foreign investors under NAFTA’s investor protection provisions. While not all cases were successful, the Canadian government was still exposed to exorbitant legal costs of about €223.4 million, all coming out of the pockets of Canadian taxpayers. The figure is based on UN research that assesses the legal fees, which are typically 82% of total costs, and tribunal expenses at more than €6.4 million on average.
For Canada, the risks of being sued by banks, insurers and holding companies over financial regulations will increase significantly with CETA. Meanwhile, the EU and its member states particularly risk being sued by Canadian mining, oil and gas companies, which are already engaged in a number of controversial natural resource projects across Europe.
Pia Eberhardt, co-author and campaigner with Corporate Europe Observatory, added: ‘The alleged reforms that the European Commission and the Canadian government have promised to dispel concerns about investor-state dispute settlement will not stop corporations and private lawyers from abusing the system. On the contrary, CETA will significantly expand the scope of investment arbitration, exposing the EU, its member states and Canada to unpredictable and unprecedented liability risks.’