Remarks before the SINT, February 16, 2005
-Rusa Jeremic, KAIROS, Common Frontiers, APG-CCIC
As mentioned by my colleague, we are concerned that the government has not paid adequate attention to the problems inherent to Chapter 11.
In reality the only response to ten years of concerns surrounding Chapter 11 has been an Interpretative Note that superficially addresses concerns regarding the tribunal process without actually engaging in structural changes. The note claims to bring greater transparency to the arbitration process. Not only does it not address the real issues at hand, it actually doesn’t amend the treaty, which means that international arbitration rules would prevail.
I would like to address three main areas of concern regarding Chapter 11: 1) Regulatory Chill, 2) Exporting of Chapter 11, and 3) Regulatory Policy
Regulatory Chill
One of the major and surely unforeseen consequences of Chapter 11 has been a regulatory chill effect.
The expert paper “Untangling the Expropriation and Regulation Relationship” from 2002, had both authors agreeing that if Article 1110 can be used to require governments to pay compensation to investors for adopting bona fide measures, this could have a chilling impact on the ability of governments to regulate, therefore compromising a whole range of social, environmental and other protections and rights.
The recent example of the chill effect at work comes from New Brunswick.
- Public Auto Insurance in New Brunswick
After months of public consultation, expert testimony and deliberations, a Legislative Committee submitted their final report recommending a “made-in New Brunswick model of public automobile insurance.”
Despite popular support and a strong rationale for public automobile insurance, Premier Lord bowed to threats from the insurance industry who were threatening trade treaty litigation if the proposal went ahead. In the end the Premier announced that the government would not adopt public insurance scheme.
Part of the Committee’s work was a detailed analysis of how the provincial government could go ahead with public insurance while ensuring consistency with Canada’s international trade obligations. Moreover, there was no legal or constitutional impediment to implementing the scheme. Even the right to establish new Crown corporations is explicitly preserved in NAFTA.
Despite these assurances the fear of litigation (a litigation that the federal not government would be responsible for not the provincial government) resulted in a total rejection of a public auto insurance program for New Brunswick.
Two more examples of where the government has not yet acted in response to Canadians needs are healthcare and a national childcare program.
- Expanding Healthcare
In 2003 the Romanow Commission handed down some clear and explicit recommendations regarding the need for expanding the public healthcare system to include homecare and pharmacare. Yet since that time, the government has only injected cash infusions into the healthcare system. Clearly this is something that is desperately needed but the government has made no move to expand the healthcare system.
- National Childcare
In a similar vein, right now Minister Dryden is engaging in talks on the long awaited and much needed issue of a national childcare program.
According to legal opinions, if the new program allows for commercial, for-profit child care, NAFTA’s Chapter 11 may be used to pry open the Canadian child care market by big box private institutions. Again, if the government clearly stipulates public, not-for-profit delivery then there should be no risk of provoking a NAFTA investment claim.
The best way to ensure social policy flexibility is to minimize or eliminate private delivery. This means that we can maintain trade obligations without threatening what Canadians want – a public, national, and accessible child-care system.
Once it is in private hands it can’t be reversed. Need to limit foreign investment in the child care sector, which requires that the board of directors be comprised of parents or members of communities that are served, expand the sphere of public not-for-profit commercial providers, limited number of companies providing child care services.
Right now there are not enough details to know the scope of the program but the fear is that the potential threat of litigation will shape the program in a lax manner allowing for foreign-service providers. There is still time to avert this danger.
Exporting Chapter 11
The 2002 Report did not address Canada’s interest in exporting the problematic and flawed Chapter 11 model.
There is a real disconnect between Canada’s stated foreign policy goals, our global role as a Human Rights Champion and the image that Canada is presenting when engaging in trade negotiations.
Currently Canada is negotiating a free trade agreement with four Central American countries (Nicaragua, El Salvador, Honduras, and Guatemala). The Canada-CA4 agreement, as confirmed by negotiators is replicating the NAFTA’s Chapter 11 model.
We are extremely concerned that exporting Chapter 11 is the wrong path for a government committed to upholding human rights and poverty alleviation. Given the problematic nature of Chapter 11 at home, what sort of possibility for development will there be for the post conflict, small, and weaker economies of Central America.
To give you an idea of what sort of problematic emerges that directly contradicts with our values and commitment to supporting human rights and peaceful solutions, I present the Glamis Gold case.
Glamis Gold already has one mining operation in Honduras where negative impacts on the community have been documented. In Guatemala, Glamis Gold was granted a mining concession by the Guatemalan government without an adequate consultative process, which clearly violated ILO169. When the community protested and attempted to deter the operation, the Canadian Ambassador James Lambert supported the mining company disregarding the community’s wishes. Sadly, violence erupted and Guatemalan security forces killed an indigenous campesino Raul Castro Bocel. An unnecessary and tragic loss of life that illustrates the problematic of militarized commerce.
Chapter 11 rules replicated in the Canada-CA4 agreement will only cement the rights of companies like Glamis to operate with no accountability and leave communities with no recompense. Chapter 11 rules would have trumped community rights. And also stated international obligations like ILO169 and adherence to respect for human rights.
Canada should promote trade and investment rules that permit rather than restrict governments’ abilities to uphold the economic, social and cultural rights of its citizens, and to do so without fear of reprisal.
Increasing Corporate Power with No Accountability
What the Glamis Gold case brings to light is how big transnational corporations are using Chapter 11 to their advantage in more ways that one could actually believe. A chess game ensues in which subsidiaries can place challenges in essence to bypass stricter domestic laws.
Glamis Gold is a joint US-Canadian gold mining company, but is generally understood to be a Reno-based corporation with a small subsidiary in Canada.
Glamis Gold has used its Canadian subsidiary to file a Chapter 11 suit under NAFTA for $50 million dollars due to California’s intent to protect its indigenous communities and the environment from the notorious harmful open pit mining process.
This illustrates another way in which Chapter 11 works to advance corporate gains with little or no accountability. As the power of non-state actors increases, there clearly needs to be some binding mechanisms and general recognition of their obligations to promote, secure, and respect international human rights.
Regulatory Policy
Finally I would like to mention that NAFTA continues to take precedence by policy makers over and above our stated obligations in many international environmental agreements, national environmental and health protections, and international human rights obligations.
The 1999 Regulatory Policy covers all international commitments but is preoccupied with trade obligations as evidence by the fact that only authorities with trade relevance are mentioned.
Moreover, written clearly in the NAFTA agreement is a clause that states that NAFTA will take precedence over any other agreement in the event of any inconsistency. This highlights possible logjams from Canada’s commitment to Kyoto and others.
To Conclude I make the following three recommendations:
- As witnessed through our presentations, Chapter 11 is fundamentally flawed. Previous attempts to fix Chapter 11 have only resulted in minor and cosmetic changes. The unforeseen consequences have been great and the conclusion is straightforward: Chapter 11 does not work.
- In direct contradiction to our stated foreign policy and poverty alleviation goals, Canada is now exporting the flawed Chapter 11 model to weaker disadvantaged countries. Rather than reproducing Chapter 11, Canada should be promoting mechanisms that clearly prioritize economic, social, and cultural rights and that allow governments to legislate in favour of public health; education and environmental protection without fear of reprisal. This can include important development tools like allowing for performance requirements on foreign investment such as local-content regulations, and prohibiting national treatment obligations.
- As we have demonstrated, the problematic nature of Chapter 11 spills out into other areas of NAFTA. There is much more to examine so in that regard, we are calling for a review of NAFTA ---with special emphasis on Chapter 11--- be placed on the SCFAIT agenda for a full and comprehensive review.