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Lawsuits against Canada under NAFTA's Chapter 11, investor-state disputes, are making Canada, according to the United Nations Conference on Trade and Development, the most "sued country in the developed world." — Canadian Centre for Policy Alternatives
Ottawa (15 Jan. 2015) — A new study released by the Canadian Centre for Policy Alternatives (CCPA) reports that Canada has been sued under NAFTA more times than either the United States or Mexico. The study, prepared by Scott Sinclair, is entitled Democracy Under Challenge: Canada and Two Decades of NAFTA’s Investor-State Dispute Settlement Mechanism.
Of the 77 known NAFTA investor-state dispute settlement (ISDS) claims up to January 1 2015 35 have been against Canada while 20 have targeted the U.S., and 22 have been against Mexico.
Hundreds of millions of dollars in penalties and legal fees
Canada has paid out NAFTA damages totaling over C$172 million, while Mexico has paid damages of US$204 million. The U.S. has yet to lose a NAFTA Chapter 11 case.
All three governments have incurred tens of millions of dollars in legal costs to defend themselves against investor claims.
Canada most "sued developed country in the world"
The study notes that "Canada has been sued more times and faces more active claims than any other NAFTA party. Indeed, according to the latest figures on ISDS claims from the United Nations Conference on Trade and Development (UNCTAD) Canada is now the most sued developed country in the world. This dubious distinction is entirely due to lawsuits under NAFTA chapter 11."
Since 2005, Canada has been the target of over 70 per cent of all NAFTA claims. Currently, Canada faces nine active claims challenging a wide range of government measures that allegedly interfere with the expected profitability of foreign investments. Foreign investors are seeking over $6 billion in damages from the Canadian government.
These claims include challenges to a ban on fracking by the Quebec provincial government and a decision by a Canadian federal court to invalidate a pharmaceutical patent on the basis that it was not sufficiently innovative or useful.
Is Canada an easy mark?
Sinclair asks whether Canada is an "easy mark" when it comes to ISDS complaints.
"Canada is a favoured target of foreign investors and their lawyers. But it is reasonable to conclude that the federal government’s ideological commitment to ISDS and its demonstrated willingness to settle and pay compensation encourages investor-state claims against Canada."
Despite track record federal government continues to push ISDS
Despite "a bruising experience under NAFTA chapter 11, Canada is moving in the opposite direction to much of the world and global public opinion on ISDS," Sinclair writes.
The report also points out that
- the current federal government has concluded or negotiated over two dozen Foreign Investment Protection Agreements (FIPAs), including a controversial and highly imbalanced pact with China
- new trade agreements inked with South Korea and the European Union include comprehensive investment protection chapters and ISDS, as does the impending Trans-Pacific Partnership Agreement
- the federal government has pressured the provinces into agreeing to Canadian ratification of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention), which will make tribunal awards even easier to enforce, in part by removing the right of domestic courts to review tribunal decisions on procedural grounds, such as conflict of interest or corruption.
The report also notes that including ISDS in trade agreement pacts with the European Union, China and South Korea will likely increase the number of ISDS claims against Canada.
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