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.]

Thursday, January 22, 2015

NAFTA’s Pioneering Investor-State Rules Force Democratically-Elected Governments to Pay to Govern

The year was 1994. Corporate Capital was King. Canada’s Prime Minister Brian Mulroney, America’s Ronald Reagan and Mexico’s Carlos Salinas sat down together to draft what was dubbed a North American New World Order. Henceforth, at least in North America, the rights and interests of multinational business took precedence over the rights of citizens.

More than two decades later, the situation has worsened, according to Scott Sinclair, research fellow with the Canadian Centre for Policy Alternatives, where he directs its Trade and Investment Research Project. While there is a growing global backlash against Investor State Dispute Settlement (ISDS), it is still eagerly embraced by Canada’s Prime Minister Stephen Harper and his Conservatives.

Sinclair notes that the current federal government boasts that is has concluded or negotiated over 24 Foreign Investment Protection Agreements (FIPAs) and signed new trade agreements with South Korea and the European Union that include the controversial investment protection chapters and ISDS, as does the impending Trans-Pacific Partnership agreement.

Even more unsettling is 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). It will make tribunal awards even easier to enforce by removing the right of domestic courts to review tribunal decisions on procedural grounds, such as conflict of interest or corruption.

Also, arbitration can be invoked unilaterally by the three NAFTA countries’ foreign investors. Not only do investors not need to seek consent from their home governments and are not obliged to try to resolve a complaint through domestic courts before launching a NAFTA claim, under Chapter 11, all three parties have given “their unconditional prior consent” to submit investor claims to binding arbitration. This allows investors to skip domestic courts. Cases are decided by three-member tribunals: one chosen by the investor, one by the challenged government and a third selected by mutual agreement. Lastly, all tribunal decisions are final and beyond the reach or review of domestic courts.

Sinclair reports that Canada has been the target of 35 investor-state claims, significantly more than Mexico (22) or the U.S (20). This despite the fact the latter’s economy is 10 times larger than Canada’s.

There have been 77 NAFTA investor-state dispute settlement claims up to January 1, 2015.

Canada has paid damages totalling over $CAD $172 million and Mexico, $US204. The U.S. has yet to lose a NAFTA Chapter 11 case.

Investor-state is a coercive tool with which multinational corporations can assail and frustrate government regulation in both developing and developed countries. ISDS has truly evolved into a parallel system of justice for foreign investors. In effect, democratically-elected governments are being forced to pay to govern.

Currently, there are nine active investor-state claims outstanding and one damages award in a case Canada has already lost which is still outstanding. “This financial toll will certainly increase,” Sinclair warns.

All three countries have incurred tens of millions of dollars in legal costs defending against NAFTA claims. Sinclair notes that the cost of administering a NAFTA arbitration typically runs over $1 million and more. Serving on an arbitration panel is lucrative, he points out, with arbitrators charging fees of up to $3,000 per day plus expenses.

Nor is that the end.

“The costs of legal advice and representation are usually much higher than the costs of the panel itself,” Sinclair says. “Governments routinely incur costs of several million dollars or more.” Governments end up having to pay up even over frivolous or nuisance claims. Tribunals have complete discretion in apportioning costs between the parties, but governments usually fail to get their full costs.

“A conservative estimate of legal costs incurred by Canada alone over the last two decades is more than $65 million.”

There is a decided skew in the whole NAFTA saga. And that skew continues. Canada and Mexico have both been sued routinely, while the U.S. has never paid a dime throughout NAFTA’s entire existence.

Sinclair notes that NAFTA’s investor rights system is repeatedly used to attack regulations in all three countries. He further notes that all Canada’s losses (six to date) involve important public policy or regulatory matters.

In 1997, Ethyl, a U.S. chemical company, successfully challenged a Canadian ban on the import and interprovincial trade of the gasoline additive MMT, a suspected neurotoxin which automakers also claim interferes with automobile on-board diagnostic systems. The company won damages of $13 million U.S. and Canada was not only required to overturn the regulatory ban, it had to issue a formal apology.

In 1998, S.D. Myers, a U.S. company, successfully challenged a temporary Canadian ban on the export of toxic PCB wastes. The ban had been applied to all PCB wastes, but the tribunal still concluded that the ban was discriminatory and violated minimum standards of treatment requirements. The NAFTA tribunal rejected Canada’s arguments that an international treaty on the control of transboundary movements of hazardous wastes and their disposal obliged it to dispose of its toxic wastes within its borders. The NAFTA tribunal awarded S.D. Myers $6 million in damages plus $1.1 million in costs.

Also in 1998, Canada lost a case related to its long-running softwood lumber dispute with the U.S. and was obliged to pay damages totalling $870,000.

In 2009, Abitibi Bowater closed its last timber mill in Newfoundland and Labrador, leaving behind unpaid bills, unemployed workers, unhonoured pension obligations and highly contaminated industrial sites. Provincial legislation provided a process for determining compensation, but the company sued under NAFTA’s Chapter 11 investor rights and managed to wrest a $130 million payout from Ottawa. Prime Minister Stephen Harper – a devotee of investor rights – paid the bill but then turned around and threatened all provincial governments that it intends to hold provincial and territorial governments liable for any future NAFTA-related damages required to be paid by Ottawa over provincial measures.

Currently, Canada is facing a bill of $250 million over Lone Pine Resources of Calgary’s plans to employ the oil industry’s highly controversial hydraulic fracturing or fracking process to extract shale oil deposits under the St. Lawrence River, a plan fiercely opposed by the Quebec government and its citizens. Lone Pine asserts that Quebec’s actions violate the company’s “legitimate expectation of a stable business and legal environment.”

Sinclair notes there has been a “large global jump” in investment treaty arbitrations over the last five years.

ISDS, he continues, “has truly evolved into a private, parallel system of justice for foreign investors – to which they are resorting with increasing alacrity. Democratically-elected governments are being forced to pay to govern.”

Manuel Perez Rocha at the Institute for Policy Studies likens ISDS to “playing soccer on half the field. Corporations are free to sue and nations must defend themselves at enormous cost. And the best a government can hope for is a scoreless game.”

ISDS is not just another acronym for business and finance. It is, in reality, a New World Order, a dystopian, anti-democratic topsy-turvy world where democracy is repealed, corporations are the real governments and governments take their marching orders, not from their citizens, but from the privileged boardrooms of international capital.

Original Article
Source: nationalnewswatch.com/
Author: Frances Russell 

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