Chinese Investor Lawsuits Could Cripple Canada

NAFTA Suits a Warning of Canada-China Treaty Potential

OTTAWA – As the Harper Conservatives move steadily toward the probable November 2 ratification of the Canada-China Investment Treaty, an examination of Canada’s experience with similar investor rights under Chapter 11 of the North American Free Trade Agreement (NAFTA) should raise some red flags.

“Under NAFTA, we gave US and Mexican corporations the right to sue us if they felt our laws hurt their ‘expectation of profits’,” said Green Party Leader Elizabeth May, MP Saanich-Gulf Islands. “We’ve lost half of those suits and it has cost us in both arbitration battles and awards. Now Stephen Harper is about to give powerful Chinese State-Owned Enterprises similar rights.”

Since NAFTA came into effect in 1994, taxpayers have had to pay about $157 million to US corporations disagreeing with Canadian laws and regulations – and there are awards pending.

Canada is already the sixth most sued country under the investor-state dispute settlement regime, according to a recent UN Conference on Trade and Development report. At the same time, Canadian investors have sued other countries, usually the US, 16 times and lost every case – involving softwood lumber, cattle, gold mining, and more.

There is every reason to expect Chinese enterprises and investors to make use of their new right, especially in the resource sector. The Canada-China Investment Treaty does contain exemptions that were not in NAFTA. However, it is not clear these exemptions will be effective as China can still make claims for damages if it believes an environmental or health measure is “arbitrary” or a "disguised trade barrier."

Unlike lawsuits under NAFTA and other treaties signed by Canada, the Chinese suits must be kept secret; the arbitration hearings and all documents, except the actual award, can be kept confidential at the discretion of the country being sued. We might not know if Canada has been ordered to change government decisions.

“If Chinese companies like CNOOC - the Chinese National Offshore Oil Corporation - make crucial inroads into Canada with the Nexen deal, for example, we will be even more vulnerable. Even the provinces, which will have no say in the process, might be asked to pay up,” said May.

“It is interesting that the Conservatives are pushing us into a secretive, potentially treacherous deal as countries like Australia, India, and South Africa are pulling away from investor-state provisions.”

The Canada-China Investment Treaty was tabled quietly in the House of Commons on September 26. The Conservatives do not plan any debate or vote. Once it is ratified, it will bind Canada for a minimum of 15 years and could apply for 31 years.

Suits under NAFTA have included:

1997 – Ethyl Corporation sued Canada for $250 million after it banned MMT, a neurotoxin gasoline additive. The Canadian government repealed the ban and settled for $13 million.

1998 – S.D. Meyers Inc., a US waste-disposal firm, challenged a ban on the export of PCB wastes and sued for $20 million. Canada paid $5 million, plus interest

2007 – Mobil Investments Canada Inc. & Murphy Oil Corporation claimed Canadian guidelines supporting local research and development were anti-NAFTA and sued Canada for $65 million The tribunal process continues.

2009 – After AbitibiBowater Inc. closed its last pulp and paper mill, Newfoundland enacted legislation for the return of certain land and assets. The company sued for $467.5 million. Canada paid $130 million to settle claim.

- 30 -

Media Contact:
Stéphane Vigneault
Communications Coordinator, Green Party of Canada
cell: 613.614.4916