ISDS – 4 reasons Canada must not ratify the TPP

While the Trans-Pacific Partnership (TPP)
is not yet ratified into law, it is looming – and it threatens to do
irreparably harm. In posts to come we’ll be commenting on the many reasons why
the TPP is a catastrophic deal that Canada must reject. But we begin with one
of the most controversial aspects of the TPP – Investor-State Dispute Settlement
(ISDS), an international arbitration procedure that allows investors the right
to sue national governments.  

ISDS provisions pose a threat to national sovereignty
and give many reasons for Canada not toratify the Agreement.  Here are four reasons the ISDS provisions are so

COST TO TAXPAYERS – ISDS in the TPP allows investors to sue national
governments for lost future profits. This means that if legislation can be
implicated in lost profits to the corporate investor, Canada may find itself
defending its own public interest decisions before a TPP arbitration board.
NAFTA has given Canada ample experience in defending itself in ISDS
actions. That’s bad enough, but the real trouble is that its defence is not
always, or even usually, successful.  
of January, 2015, for example, there were
35 actions brought against Canada under NAFTA. There were 20 actions against the U.S. and 22 against Mexico,
under NAFTA. So far, Canada has either lost or
settled six of these claims, paying out damages totalling over $172 million.
The taxpayers are on the hook for these legal costs.  
TPP’s special ISDS arbitration boards will be able to make uncapped damage
awards. This leaves taxpayers vulnerable to the potential need to finance legal
penalties that have no ceiling. Canada might be getting into something without
knowing the costs. That, in addition to increasing the prospect of regulatory
chill discussed, is reason enough to reject the TPP.
REGULATORY CHILL – While the financial costs from lawsuits can be steep,
the regulatory costs may be even greater. A
review of the effects of ISDS provisions has found that ISDS likely leads to regulatory chill, whereby the Government
may choose not to enact public interest regulations if it may result in a
lawsuit against the country. Consider the Bilson debacle – a NAFTA
lawsuit brought by Bilcon against the Canadian government. Bilcon sued the government when it stopped
Bilcon’s planned quarry. The government stopped the quarry plan after an
environmental assessment found the project was likely to cause significant and
harmful environmental effects. Seeking over $100 million (USD) in damages, Bilcon
used NAFTA’s ISDS rules to sue the government. The tribunal ruled in favour of
the company, finding that the “reasonable” economic “expectations” of Bilcon
were thwarted by federal and provincial decisions to deny Bilcon environmental
Bilcon case is but one example of how ISDS provisions can be used to challenge
the ability of the government to legislate in the public interest. With the
TPP, there is no doubt there would be many more such cases.
ILLUSION OF REGULATORY FREEDOM – Proponents of the TPP argue that the TPP
is not a corporate takeover of national sovereignty, saying that the TPP has
language to ensure the government will retain the right to legislate in the
public interest. Such arguments typically cite Chapter 9, Article 9.16 of the
TPP, which reads:
Nothing in this Chapter shall be construed to prevent a
Party from adopting, maintaining or
enforcing any measure otherwise consistent with this Chapter that it considers appropriate to ensure that
investment activity in its territory is undertaken
in a manner sensitive to environmental, health or other regulatory objectives.” [Emphasis mine].
good, right? Well…it might look good at first glance, but when you give it
another look, the warts come out. There’s no real protections to regulate for
the public interest in the Article. Instead of protecting the right to
legislate in the public interest, the Article merely states that the government
can regulate in the public interest if, that is, in doing so, it complies with
the TPP requirements regarding investors. As noted by the
Columbia Center on Sustainable Investment, the language in 9.16 leaves the government vulnerable
to legal challenge, stating:
words, “otherwise consistent with this Chapter,” thus negate any protections otherwise purported to be given under that
article. Consequently, and as under other
investment treaties with ISDS, good faith measures taken in the public    interest can still be successfully challenged
under the agreement as violating the TPP’s
investor protections.
The government has a duty to legislate in the
interests of its citizens. That duty is a cornerstone of our democracy and one
that cannot simply be abdicated via a trade agreement. We urge the Liberal
Government of Prime Minister Trudeau not to cede to corporate interests its
obligations to uphold the public interest.

There are many other negatives, and some positives, to
the TPP (which will be discussed in upcoming posts), but with the ISDS
provisions and the powers they give to corporations, one has to wonder why the
TPP is called a trade deal at all. Best to call it what it is: a corporate
rights’ treaty.

The full text of the TPP can be found here.

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