NAFTA’s Chapter 11 investor-state dispute process
New challenges to Canadian environmental and health policy call NAFTA into question
When the North American Free Trade Agreement (NAFTA) was implemented in 1994, it introduced new
corporate investment
rights and protections unprecedented in scope and power. While there are many
aspects of NAFTA that threaten social and environmental priorities, the investor-state dispute process
found in Chapter 11 puts public policies aimed at protecting people and the environment at the most
risk. Chapter 11 gives corporations the right to sue the Canadian government, often for tens of millions
of dollars, if any public policy or government action denies them investment or profit opportunities.
There have been many Chapter 11 cases filed over the years. Most recently, in April 2009, American
chemical company DowAgrosciences decided to sue the federal government for $2 million in damages
that the company claims it will suffer from Quebec’s cosmetic pesticide law. Ecojustice Canada,
Equiterre, the David Suzuki Foundation, the Environmental Law Clinic and the Canadian Environmental
Law Association (CELA) have called upon the federal government to vigorously defend Quebec’s ban on
the herbicide 2,4-D, as a reasonable and lawful measure to protect human health.
According to the Canadian Centre for Policy Alternatives, about 40 per cent of legal challenges to
government policy under NAFTA’s Chapter 11 have been against environmental policies. And many of
the cases have cost us millions of dollars.2 Here are some more examples:
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The Canadian government paid Ethyl Corporation $13 million in an out-of-court settlement based
on a challenge, filed on April 14, 1997, to Canada’s ban on the import and interprovincial trade of
the gasoline additive MMT, a suspected neurotoxin.
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On July 22, 1998, U.S. waste disposal firm S.D. Myers Inc. challenged a temporary ban on exports
of PCBs, which the federal government was arguably obliged to implement under the Basel
Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal,
according to trade lawyer Steven Shrybman in a recent presentation to Parliament’s Standing Committee
on International Trade. A NAFTA tribunal later ruled the ban violated Articles 1102 (National
Treatment) and 1105 (Minimum Standards of Treatment) and awarded the company $5 million plus
interest in damages.
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On December 2, 1998, U.S. water firm Sun Belt Water Inc. challenged British Columbia’s water protection
legislation and voluntary ban on exports on the basis that they violated the same Articles
above (1102 and 1105), as well as Article 1110 on Expropriation. The Canadian government says
the claim is invalid, but the company, which asked for $10.5 million, insists it is still active.
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On October 12, 2006, U.S. investor V.G. Gallo, challenged the Ontario government’s decision to
kill a joint project to put a major new dump for Toronto’s garbage on top of an abandoned, flooded
mine in northern Ontario. The environmental risks were enormous and the public opposition was
overwhelming. Yet the company wants more than $355 million in expropriation costs. The case is
ongoing.
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U.S. company Bilcon, proponent of the White Point Quarry project in Digby Neck, Nova Scotia,
wants $188 million because an environmental assessment put an end to the project.
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U.S. investor Centurion Health would like $160 million because of the difficulties it has faced in
trying to establish for-profit health services in British Colombia. “Canada is an unfair competitor
in ways detrimental to U.S. private sector companies in the monopolized health care system in
Canada,” states Centurion’s revised NAFTA Chapter 11 claim. “The competitive activities of Canada’s
private sector health care providers, based as they are on the foundation of a public monopoly
and the network it has built with public funds, are incompatible with basic principles of fairness in
regards to NAFTA and GATT (the General Agreement on Tariffs and Trade),” the company adds.
- U.S. pulp and paper company AbitibiBowater has filed a Chapter 11 case demanding $300 million
for Newfoundland’s expropriation of water rights granted more than 100 years ago to help run their
mill, which the company will be closing anyway.
In the health care challenge, Centurion is correct that current free trade agreements, and those now
being negotiated, make it very difficult to strengthen public services after they have become partially
privatized. The Chapter 11 dispute process also puts a chill on legitimate public policy. Just the threat of
an expensive NAFTA Chapter 11 challenge is enough to discourage federal and provincial governments
from pursuing environmental or health policies that might run counter to business interests. Think how
much time and money is spent defending these legitimate policies.
The federal government is bound by law to defend Quebec’s pesticide law, public health care, Nova
Scotia’s environmental assessment process, and Newfoundland’s appropriation of AbitibiBowater’s
water and energy rights. But, wouldn’t a more appropriate response be for Canada to signal its desire
to renegotiate NAFTA to remove or amend the Chapter 11 clause that allows companies to dismantle
environmental and public health protections on the grounds they interfere with profits?
What you can do
Ontarians, and all Canadians, need to demand from their elected representatives at all levels the courage
to forge strong environmental and public health standards and policies regardless of the potential for
Chapter 11 challenges under NAFTA. Where NAFTA unreasonably gets in the way of protecting the
environment, it is the Canadian government’s responsibility to scrap Chapter 11 and refuse to pander to
business interests that run counter to the public interest. Write to your MP, call their constituency office,
and tell them that you want them to support local communities and not international corporations, and
scrap Chapter 11 from NAFTA and any future agreements.
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2 Examples taken from the Canadian Centre for Policy Alternatives with the exception of the Bilcon and private health clinic
challenges, which came after the CCPA publication in 2008.
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