Free trade and the climate

How can a pipeline company sue Obama for rejecting Keystone XL? It's called Chapter 11

Complaints under NAFTA’s Chapter 11 follow a pattern: corporations almost always win, and governments trying to protect their citizens almost always lose
Photo: Joe Brusky

TransCanada, the Calgary-based company behind two of the largest proposed mega-pipeline projects, is taking aggressive action against the U.S. government after President Barack Obama vetoed construction of Keystone XL.

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The corporation spent years trying to push through the Keystone XL pipeline, which would run from Alberta through the United States.

TransCanada is filing a claim under Chapter 11 of the North American Free Trade Agreement, which requires governments to treat domestic and foreign companies in the same way. It's asking for compensation of $15 billion US as well as the right to build Keystone XL.

"There is surprisingly little political debate about the corrosive influence of NAFTA chapter 11."

In a nutshell, Chapter 11 prioritizes the right of foreign companies to make profits over the right of democratically elected governments to pass laws (such as environmental or anti-pollution measures) that protect their citizens. The clause is the embodiment of putting profits over people.

"Unfortunately, in stark contrast to opinion in much of the world, there is surprisingly little political debate about the corrosive influence of NAFTA chapter 11 and ISDS (investor-state dispute settlement system) on public policy and democracy in Canada," notes a 2015 report by the Canadian Centre for Policy Alternatives.

The report shows that between 2005 and 2015, Canada was the target of over 70 per cent of all Chapter 11 claims, and paid out over $172 million in damages and tens of millions more in legal fees. But the cost to taxpayers is only the tip of the iceberg.

Over 60 per cent of the claims made against Canada since the inception of NAFTA have sought to invalidate environmental regulations or resource management schemes that were claimed to have interfered with the profits of foreign investors.

And NAFTA tribunals, composed of unelected and unaccountable lawyers, don’t seem to like environmental protection — or any government action for that matter.

In 1997 Canada banned the gasoline additive MMT, a suspected neurotoxin that interferes with cars’ diagnostic systems to boot. The ban was overturned, and Canada paid $15 million in damages.

In 1998 Canada banned the import of toxic PCB waste, but the ban was likewise overturned. Evidently the business interests of the company importing toxic waste trump the desire of Canadians to not be exposed to such waste.

"As they stand, these trade agreements are the single biggest threat to meeting our climate change goals."

As of January 2015, there were eight cases pending against the Canadian government seeking a combined $6 billion in damages. Among these cases is one that seeks to overturn the Quebec government’s moratorium on natural gas fracking, which applies equally to foreign and domestic companies.

It’s hard to see how such a blanket ban could be understood as an uncompetitive trade practice that favours Canadian over U.S. corporations.

Eleven Canadian companies have launched Chapter 11 challenges against the United States, but none have been successful. For Canada and Mexico, the pattern of decisions rendered over the years makes clear that when cases are heard by the tribunal, corporations almost always win, and governments almost always lose.

The Council of Canadians issued a release following the announcement of TransCanada’s complaint, pointing out that the Trans-Pacific Partnership and Canada-European Union Comprehensive Economic and Trade Agreement will lead to more challenges from corporations by massively expanding the pool of countries whose companies can legally challenge, and overturn, any government regulation that threatens their profits.

"As they stand, these trade agreements are the single biggest threat to meeting our climate change goals, which the Canadian government proudly announced only a month ago," said Maude Barlow, the Council of Canadians’ national chairperson, in the release. "Why are we letting corporations have the final word on our democratic decisions and environmental progress?"

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