CETA – No Lawyers Left Behind

Joyce Nelson

Photo: Ester Strijbos

The Canada-EU trade deal called CETA (Comprehensive Economic and Trade Agreement) is being rammed down our throats on both sides of the Atlantic. Portions of it could come into effect as soon as November 1, according to the Council of Canadians. PM Justin Trudeau is scheduled to sign CETA in Brussels on October 27.

This draconian treaty would give multinational corporations immense power to overrule elected local governments on numerous fronts. But one of its most controversial provisions is that it will allow for dozens more corporate lawsuits to be filed each year against the Canadian government under its investor-state dispute settlement (ISDS) mechanism.

The ISDS, first introduced in NAFTA, allows foreign corporations to sue governments over policy decisions or regulations that harm their future profits. For example, TransCanada Corporation is suing the US government (under NAFTA) for over $15 billion for failing to approve the Keystone XL tar sands pipeline, even though the company invested just $2.4 billion in the controversial project. With ISDS, there is no upper limit to how much a company can claim in “lost future profits.”

The year 2015 saw a record high of 70 new ISDS corporate lawsuits filed against countries under NAFTA and various bilateral treaties, raising concerns worldwide about ISDS and the ways corporations use it to bleed governments financially while putting a “chill” on any new regulations.

Current deals like CETA and TPP (Trans Pacific Partnership) would open up huge new vistas for ISDS lawsuits, which is one reason why the corporate sector is pushing the deals so relentlessly.

ISDS “Rewrite”

Canada’s International Trade Minister Chrystia Freeland is enthusiastically touting CETA and hastening its implementation. On July 3 she told the Globe and Mail that concerns about ISDS in CETA have been eased: “Ms. Freeland said those concerns were addressed after the treaty’s investment chapter was rewritten to strengthen the right of governments to regulate in areas of the environment, labour standards, public services, and a fairer arbitration process.”

In an op-ed for the same newspaper (July 8), Freeland and Cecilia Malmstrom (the EU’s Trade Commissioner) asserted, “We also know that governments need to be free to act in the interests of their citizens. That’s why, in February, we created in our trade agreement a deeply reformed approach reinforcing the sovereign right to regulate, making investor arbitration procedures fairer, independent and more transparent.”

Far from any “deeply reformed approach,” the rewritten chapter is little different from its predecessor, according to a March 2016 report from the Corporate Europe Observatory (CEO). The rewrite was basically a PR re-branding exercise, giving ISDS a new name: the Investment Court System (ICS). Otherwise, “the proposed ‘new’ ICS is ISDS back from the dead,” Pia Eberhardt wrote in the report appropriately called The Zombie ISDS.

The Council of Canadians calls the reforms “smoke and mirrors” and says the changes “actually make [the provisions] worse. The reforms enshrine extra rights for foreign investors that everyone else – including domestic investors – don’t have. They allow foreign corporations to circumvent a country’s own courts, giving them special status to challenge laws that apply equally to everyone through a [private] court system exclusively for their use.”

The “Inner Mafia”

In November 2012, CEO’s Pia Eberhardt and Cecilia Olivet of the Transnational Institute exposed this ISDS private court system in a report called Profiting from Injustice. They revealed that a “small club of international law firms, arbitrators and financial speculators are fuelling an investment arbitration boom that is costing taxpayers billions of dollars and preventing legislation in the public interest” across the planet. They found a handful of legal firms “are actively encouraging corporate clients to sue governments” under investment treaties containing the ISDS clause, while “top arbitrators are using their influence to secure investor-friendly rules and sustain the flow of multi-million dollar lawsuits.”

At the heart of this “secretive but burgeoning legal industry,” they found an “inner mafia” of fifteen arbitrators who (as of 2012) had decided on 55% of all known ISDS disputes – earning millions in fees for themselves and billions in ISDS settlements for their corporate clients. That “inner mafia” includes three Canadian lawyers: Marc Lalonde, L. Yves Fortier, and Henri Alvarez.

Profiting from Injustice also revealed that private investment funds are speculating on ISDS court cases: lending money to companies so they can sue governments, and then taking a percentage of the final financial award. Such a gamble can be very lucrative: in a recent ISDS lawsuit, a national government was ordered to pay a whopping $50 billion to the claimant.

As of January 2015, there had been 37 known ISDS claims against Canada under NAFTA, with settled awards to corporations totalling about US$341 million. As well, Canada has spent over $65 million on ISDS court costs and legal fees, which can average $8 million per case or more. Canada still faces more than $2.5 billion in pending claims.

Under CETA’s rebranded ISDS, the three for-profit arbitrators (now to be called “judges”) who decide each case would be drawn from a pool of lawyers and would be paid US$3,000 per day, on top of a monthly retainer fee of 2,000 euros per month. As well, they can moonlight as lawyers with the very same corporations launching the lawsuits.

The deal would allow for thousands more corporations to sue governments on both sides of the Atlantic.

CETA, also for the first time, prevents provinces and municipalities from favouring local contractors, so European companies will be vying for federal, provincial, and municipal procurement contracts worth more than $100 billion per year. Dozens of Canadian municipalities (including the Union of BC Municipalities) are officially opposed to CETA. Legal experts predict that lawsuits over lost contracts will mushroom in Canada.

Think of CETA as a “no lawyers left behind” treaty.

“Illegal and Unconstitutional”

In 2012, the Canadian Union of Public Employees (CUPE) released a legal analysis of leaked negotiating texts showing CETA would “trump provincial powers over natural resources and public services” and “override areas of provincial jurisdiction set in the Constitution.”

After CETA was approved in principle in October 2013 by the Harper government, renowned constitutional lawyer Rocco Galati stated publicly: “Your government has told you that we have a CETA with Europe but we don’t know the details of it. We don’t know what’s in it. Have we gone back to the Middle Ages?”

Galati argues, “In the States, they cannot implement a treaty without passing it through Congress. In Canada we pretend and fantasize and continue to invoke the ‘Crown prerogative’ of the executive [i.e., the Prime Minister] to sign treaties.” But, Galati says, “There is no Crown prerogative left after the 1982 patriation of the Constitution.” Therefore, any treaty “should have Parliamentary approval before the treaty has any effect, to ensure that it’s reviewed for Constitutional conformity.”

In late September 2014, then PM Stephen Harper, European Commission President Jose Manuel Barrosso, and European Council President Herman Van Rompoy signed a joint declaration marking the end of negotiations on CETA. That was the first time people in Canada and Europe were allowed to see the official text, although no changes would be allowed.

Just days after the signing, the Globe and Mail reported (September 30, 2014) that “The CETA must still be approved by the Canadian parliament and provinces and European parliaments,” although it is “unclear whether all [Canadian] provinces and territories will hold votes in their legislature, or whether some will approve the deal through regulation or other means.”

But Gus Van Harten, international investment law expert at Osgoode Hall Law School in Toronto, recently told me by email that CETA never was voted on by the Canadian parliament or any provincial/ territorial legislature. Van Harten stated, “Personally I think trade agreements of this magnitude should be voted on federally and in each province or territory, prior to Canada’s ratification of the agreement, due to their broad-ranging implications for governments and legislatures.”

Rocco Galati goes further, calling CETA “illegal and unconstitutional.”

CETA over sovereignty

Galati has explained: “The federal government cannot sign a treaty in which they sign and bind exclusive provincial and First Nation rights vis-à-vis other countries that they can’t implement in Canada, but then have to compensate foreign countries and companies when they can’t do business under the treaty.”

An example is the pending C$250 million ISDS lawsuit filed by Lone Pine Resources (under NAFTA) after Quebec instituted a temporary moratorium against fracking.

CETA (like NAFTA) “puts the treaty above Canadian sovereignty,” Galati says. “It puts the treaty above the Constitution, private interest over the Constitution. That’s what’s wrong with it.”

As well, this situation sets up a framework in which “they’re giving away the family store to their friends, in essence,” Galati says, through the ISDS lawsuits that then happen. “My personal theory is this is just money going between friends in different countries,” Galati has stated publicly.

That “theory” was largely confirmed by the Profiting from Injustice report which showed the “inner mafia” of lawyers and law firms reaping vast sums from ISDS. The new report, The Zombie ISDS, states that the CETA investment rewrite raises “concerns that tribunals will be staffed with the same private lawyers who have until now driven the boom in investment arbitration.”

While CETA would allow thousands of European companies to sue Canada under ISDS for “lost future profits,” some 42,000 US multinationals that have branch plants in Canada could sue European governments through CETA – a kind of “back door” in case the equally controversial Transatlantic Trade and Investment Partnership (TTIP) between the US and the EU collapses.

Assault on Democracy

On June 28, a German news agency reported that European Commission (EC) President Jean-Claude Juncker told EU leaders the Commission is planning to push CETA through without giving national parliaments any say in it. After pushback from Germany and France, Juncker appeared to be backtracking, recommending as of July 5 that CETA is a “mixed” treaty that would require “both the approval of the European Parliament and national legislatures” in the 28-member EU bloc.

But the EC believes that 95% of CETA falls within EU jurisdiction and could be implemented immediately after the October 27 signing, leaving the other 5% of the deal to be voted on.

Apparently, that process has been planned for some time. In March, Canada’s chief negotiator, Steve Verheul told iPolitics, “After the agreement is approved by the European Parliament, the EU will pursue something called provisional application, which will allow them to put in place probably 95% of the agreement. And then member [European] states could subsequently ratify, if that’s required, over a period of time that would be of less concern to us.”

The 95% of CETA that the EU considers part of its “jurisdiction” includes the investment chapter with its ISDS “reforms.” Even worse, according to trade analyst Felix Heilmann, Article 30.8 of CETA states that countries “would be subject to corporate lawsuits even if they decide against CETA – for three whole years!” Le Monde and Council of Canadians have also reported that even if CETA is rejected in Europe, “claims under the ISDS chapter would still be possible up to three years afterwards for investments made during the provisional period.”

Spinning CETA

On July 5, the Globe and Mail published an op-ed by business advisor Omar Allam, urging the private sector to “rally behind Ottawa” on CETA. “Our companies (especially our small- and mid-market firms) stand to benefit from CETA, which would open significant export and investment opportunities for Canadian companies to do business in and with Europe in a wide range of sectors,” he wrote.

But according to federal figures cited by the Toronto Star in 2014, “Of the more than one million small-to-medium sized businesses in Canada, just one in 30 does any exports,” and those are to the US. So one million Canadian companies aren’t likely to benefit from CETA at all, and in fact, they could lose local procurement contracts to the Europeans.

Some Canadian companies that will benefit from CETA include Canadian multinational (banking, mining, defense, oil and gas, aerospace) and the big law firms like Bennett Jones LLP, which advised the Harper government on CETA, and which advertises “Investment Treaties and Disputes” as one of its legal services for corporate clients.

Of course, words like “investments” are always slippery in the legal world. In one infamous recent ISDS case, a company invested $5 million in a “tourism” project in Libya, but claimed (and got) $900 million in “lost future profits,” even though construction had never started.


Joyce Nelson is an award-winning free- lance writer/researcher working on her sixth book, Beyond Banksters.

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