Author Archives: Lawrence Herman

About Lawrence Herman

Counsel on International trade and investment, global business transactions & public policy

Canada-China Investment Treaty Wont Open Floodgates

Here is a commentary of mine that was published in the Financial Post on October 2, 2014.
To see the actual FP piece, click here.
October 2, 2014

China investment treaty no sell-out

Special to Financial Post

Lawrence L. Herman: Predictions of doom over the Canada-China deal aren’t borne out by real-life experience

Predictions of doom over the Canada-China deal aren’t borne out by real-life experience

The Canada-China investment treaty – what Canada calls a Foreign Investment Protection Agreement or “FIPA” – officially entered into force yesterday.

The treaty has been opposed by a number of interests groups, mostly on the left of the political spectrum such as the Green Party and the Canadian Centre for Policy Alternatives. One of their main targets is the investor-state dispute settlement (ISDS) provisions of the treaty.

Opponents claim that ISDS amounts to a sell-out by governments, giving a huge advantage to foreign investors by enshrining the right to bring binding arbitration against host governments that allegedly infringe the treaty, thereby thwarting policies or legislation enacted for genuine public policy reasons.

They argue that increased investment by Chinese enterprises means it’s only a matter of time before a Chinese investor initiates a dispute against Canada or one of the Canadian provinces for measures that it doesn’t like because it has some impact on its Canadian assets.

The reality is that the Canada-China FIPA is merely the last in line of almost 3,000 bilateral investment protection agreements around the world. Many hundreds of these contain ISDS provisions of one sort or another.

The implication in the opponents’ arguments is that dozens of governments from countries large and small, rich and poor, don’t know what they’re doing and have unwittingly signed away their rights to regulate by giving arbitration advantages to foreign investors, often being large and deep-pocketed corporations from rich industrialized countries like the United States.

While there are some aspects of the ISDS process that could be improved on, overall the oppositions’ arguments are highly overblown.

For one thing, China already has, believe it or not, bilateral investment agreements with over 70 countries, going back to the mid-1980s, including with a number of European countries, such as Switzerland, Austria, Germany and the United Kingdom. These agreements, particularly the more recent ones, contain ISDS clauses not much different than those in the Canada-China FIPA.

For example, the 2010 China-Switzerland and the updated 2003 China-Germany agreements contain full-scope ISDS provisions, just like the agreement with Canada, allowing Chinese investors the right to invoke binding arbitration for alleged breaches under the treaty, including allegations that the right to non-discrimination and “fair and equitable treatment” have been infringed.

So the Canada-China FIPA simply follows a 20-year-plus history of China’s bilateral investment agreements with other industrialized countries. Although it’s more detailed than some of these, the basic thrust of the Canadian FIPA is in line with China’s investment protection treaties since the mid-1990s.

There is no doom and gloom here. There isn’t anything in our FIPA with China that’s wildly out of line with investment protection treaties that China has with a host of other industrialized countries.

Another argument against the China FIPA is that it will unleash a litany of arbitration claims by aggressive Chinese companies, claiming that this or that regulation harms their Canadian investments and somehow breaches Canada’s treaty obligations.

Again, that argument is highly dubious. With more than 70 Chinese bilateral investment treaties, some over 20 years old, there is only a single registered arbitration claim by a Chinese company, a case involving financial services regulations in Belgium. While this doesn’t necessarily foretell the future, the record suggests that a flood of Chinese investor arbitration claims is just not going to happen.

One of the overlooked gains in the Canada-China FIPA is that China is now legally bound to strict standards of conduct toward Canadian investors, such as non-discrimination, “fair and equitable treatment” and rules against expropriation without full compensation.

Some argue that this is a sham, that Canadian investors won’t be able to successfully challenge unfair Chinese measures because of the opaqueness of the Chinese system. In other words, the investor playing field isn’t level.

To the extent there is merit in these arguments, they miss a vital point. By signing on to the deal, China becomes legally bound to Canada to accord a defined standard of treatment to Canadian investors. Quite apart from the whole ISDS debate, if the Chinese government or any one of its sub-units fails to live up to these obligations, the Canadian government can invoke dispute settlement proceedings against China directly.

The symbolic – let alone the legal – value of China’s investment treaty with Canada is therefore of immense importance. It binds the two countries legally and morally to a system of rules.

While there are aspects of the standard ISDS model that merit closer examination and possibly improvement, the broad sky-is-falling attack on the Canada-China FIPA is wide of the mark.

Lawrence L. Herman, Herman & Associates, practices international trade and investment law and policy and is a Senior Fellow of the C.D. Howe Institute, Toronto.

Canada and Europe – The Road Ahead for CETA

Prime Minister Harper and EU President Barroso have signed the formal text of the Canada-EU Comprehensive Economic and Trade Agreement (CETA).

Don’t be surprised when I tell you that this isn’t the final step. It isn’t.

Under the Law of Treaties (yes, there is such a thing) signature by authorized representatives is a necessary first step that signifies acceptance of the treaty as negotiated. But signature isn’t the same as ratification. Treaties have to be formally ratified to enter into force and become binding under international law.

What is Ratification?

Ratification requires each party to first take all the internal steps needed to implement treaty obligations within their own laws. Only when all of that is done, is each side be in a position to ratify.

As one simple example, in the case of the CETA there are reductions in duties on imports from each side. So Canada will have to amend its Customs Tariff to reduce duties on EU products. The same is true for the EU. And there are host of other legislative changes needed before both sides are in a position formally ratify the agreement.

This requires bills to be tabled and approved by Parliament. All this will take time and won’t likely be completed until sometime in 2015.

Once all the legislation is in place on the Canadian side, an order in council will be passed by the Governor-in-Council (i.e., by the federal cabinet) allowing an instrument of ratification to be issued. There will then be a formal exchange of these instruments with the EU, following which the treaty then enters into force and becomes legally binding on both parties.

Parliamentary Approval

Under Canada’s constitution, the executive branch (i.e., the Federal cabinet) has full authority to negotiate, sign and ratify treaties. There is no written constitutional requirement for the treaty itself – as opposed to specific statutes – to be approved by Parliament.

In recent years, it’s become the practice to seek Parliamentary approval of major international agreements, as was done with the NAFTA. Whether the Harper government will request Parliamentary approval of the CETA is uncertain but it is expected that this will be done.

But Parliamentary approval on its own doesn’t bring the treaty into force in Canadian law. It merely signifies that the legislative branch has approved the treaty in principle. For the treaty to be given legal effect and for Canada to be able to implement treaty obligations, as noted, legislation will be needed.

Situation in Europe

In the case of the EU, the situation is different. Under the Lisbon Treaty, once the EU Commission concludes a major treaty (i.e., one with significant financial consequences), it requires approval of the European Parliament. Once approved, that treaty then binds all EU member states and the Commission can enact the necessary regulations to implement it.

The Commission is taking the position that there is no need for CETA to be approved by each of the EU’s 28 member States. However, some members of the European Parliament (MEPs) and some interest groups have been claiming that the CETA is a so-called “mixed agreement” under Lisbon and legally requires the approval of each EU member state.

If this becomes necessary – and it’s far from certain it will be – it will enormously complicate matters on the other side of the Atlantic. Apart from its impact on the Canadian deal, it will signal to the Americans that successfully doing a deal with the EU is highly uncertain.

The Role of the Provinces

What about the Provinces? What do they have to do for Canada to be able to ratify CETA?

The short answer is nothing. No provincial approvals or legislation will be needed ahead of Canadian ratification. This was true in the case of the NAFTA and it’s true for CETA as well.

All the provinces have been privy to the CETA negotiations and have given their political approval to the deal. None of the recent electoral changes in the provinces, such as in Quebec or New Brunswick or even in Alberta, have changed the landscape as far as CETA acceptance is concerned.

Leverage

Once ratified, the CETA becomes binding on Canada as a whole vis-à-vis the European Union. If any provincial law is inconsistent with the treaty, the EU – or an EU investor – can bring binding arbitration against Canada. Should the EU succeed and the provincial measure not be changed or repealed, the EU can retaliate, targeting goods exported from that particular province.

So even if the CETA doesn’t require provincial measures before ratification, there is leverage to ensure provincial compliance. It’s safe to expect that all the provinces will take the necessary steps to comply with treaty obligations one way or another.

Time Factors

As is abundantly clear, implementation of the CETA won’t happen tomorrow. The interesting question is whether it will be in force before the next Federal election in 2015. What if it isn’t and there is a change of government?

If history is any guide, political changes in Canada shouldn’t change things. It would be a dramatic step for a country that signed an international treaty to refuse to implement it after a change of government. However, it has happened before.

The danger isn’t on this side of the Atlantic. The situation to watch is on the European side.

 

Investor Arbitration and Public Regulation

On August 27, 2014, a NAFTA panel dismissed a claim by the Canadian pharmaceutical company, Apotex Inc., that had argued that the US government had breached the non-discrimination clauses in the Agreement by issuing an Import Alert over the company’s Canadian drug manufacturing processes.

In 2008 -2009. the US Food and Drug Administration had inspected Apotex Inc.’s manufacturing facilities in Ontario in response to complaints about the safey of certain Apotex products sold in the US. The inspections revealed alleged deviations from what FDA regarded as good manufacturing practices. The FDA placed the company on “Import Alert”, meaning that its drugs could be detained at the border by US customs officials. The Apotex facilities were removed from the Import Alert in 2011.

In February 2012, Apotex initiated NAFTA arbitration against the US government, claiming that the Import Alert violated US obligations under NAFTA Chapter Eleven to accord Apotex and its investments national and most-favored-nation treatment. Apotex also claimed that the FDA adopted the Import Alert without due process, in violation of the customary international law minimum standard of treatment.

The story was picked up by Barrie McKenna of the Globe and Mail, who sought out my views on the significance of the panel decision. Below is an extract from his article.

Tribunals have generally been very reluctant to undercut the right of countries to take actions for legitimate public policy purposes, pointed out Lawrence Herman, a Toronto trade lawyer.

A 2011 NAFTA panel similarly upheld Quebec’s right to restrict the use of certain pesticides.

“These decisions show that governments have a legitimate right to protect the health and safety of their citizens,” he said. “And if it isn’t a biased measure and has sound scientific underpinnings, they won’t interfere. The sky-is-falling rhetoric that we’ve heard is highly exaggerated.”

A win by Apotex in the case would not have affected the right of the FDA to act, but could have forced it to pay compensation.

Those cases are now part of the jurisprudence that panels would look to in the future, including any stemming from the Canada-Europe free-trade agreement, Mr. Herman argued.

“There is no doubt that panels established under [the Canada-Europe free trade agreement] would look to the jurisprudence worldwide,” he said.

Mr. Herman also pointed out that more restrictive rules will make it much more difficult for companies to sue under the Canada-Europe deal than under NAFTA.

 

 

CETA Drama – Ho-Hum

There was flurry of media excitement last week over the leak in Germany (on August 14th) of an unofficial and incomplete version of the Canada-EU economic and trade agreement (CETA). But not much real drama. In fact, public and business reactions in Canada have been quite tame.

Leak Was Expected

As the final drafting by officials came to an end, it was expected that the text would be leaked sooner rather than later– and more likely in Europe, where there are many more officials involved in EU headquarters in Brussels than in Canada. The PMO exercises much stricter controls over these sorts of things. At EU headquarters, there are many possible outlets for leaking these kinds of documents.

No Surprises – So Far

From the moment negotiations began, it was clear that the Canada-EU deal would be a massive treaty, much farther-reaching than the NAFTA. It’s really an epic document, a modern treaty with a lot of beyond the border stuff.

While the value of two-way trade and investment is far less than with the US, the breadth and depth of the CETA makes the NAFTA look like a bit of a novella in comparison.

Last week’s leaked version seems pretty close to what is likely to be the final treaty text. It seems basically consistent with the Agreement in Principle summary issued by the Harper government last October.

The devil is always in the details and those details obviously will warrant careful examination. But on a cursory review, there are few if any surprises in the leaked text. There are provisions for enhanced patent protection for pharmaceuticals as disclosed in the October 2013 summary, as well as more protection for geographic indications, more coverage for procurement at the national and sub-national levels, more detailed rules on investor-State dispute settlement (ISDS) and so on. This is only an unofficial document, however, and more is to come.

Road to Ratification

It will be important to examine all of this carefully when the official text is finally released. That is still a long way off. Some media reports had suggested that the final text would be signed at the Canada-EU summit on September 25th in Ottawa. But the PMO press release certainly didn’t go that far, stating clearly that even though officials have finished their final negotiations,  the CETA still requires a full legal review and translation into many EU languages.

When it will be officially signed remains to be seen. Signature and ratification are distinct steps in treaty-making. Ratification and entry into force could take another year even after formal signature. The treaty will have to be tabled in Parliament and referred to a Commons committee for examination before formal ratification.

During that process, there will be ample opportunity for debate and public discussion, even if this will not result in any parts of the text being amended or re-negotiated. A majority government in Ottawa ensures that, at the end of the day, Parliamentary approval for Canadian ratification is a foregone conclusion.

Not so in Europe. While the Lisbon Treaty gives the EU Commission authority to negotiate trade agreements, when it comes to implementation, it’s not clear whether the CETA comes under the exclusive jurisdiction of the Commission and the European Parliament. If it’s determined that CETA implementation involves shared jurisdiction with the twenty-eight EU member countries – what’s called a “mixed agreement” – it will require legislative approval by each of those countries.

I expect that this issue will be a hotly contested one in the EU. The German opposition to ISDS disclosed last month is a shot across the bow. There is the possibility of litigation before the European Court of Justice on this issue.

My prediction is that even after the fanfare surrounding the Canada-EU summit this September, the road to ratification will be long and bumpy, particularly on the other side of the Atlantic.

Russian Trade Roulette

The current cavalcade of sanctions and counter-sanctions in the Russian-Ukraine crisis ultimately involves issues of trade rules under the WTO Agreement. I commented on this in an op-ed piece in the Globe and Mail today (August 8, 2014), my view being that, contrary to the Russian threat, it’s Russian trade retaliation against the West, including Canada, that’s illegal under WTO rules.

To read my op-ed piece, click here.

Russia had the temerity to suggest in late June that Western sanctions were in contravention of the WTO Agreement. It threatened to litigate the matter in Geneva if the sanctions weren’t lifted.

Contrary to the Russian bluster, it’s Russia that is in breach of WTO obligations, by imposing retaliatory trade actions in a crisis that Russia itself is responsible for.

Under WTO rules, governments can take extraordinary trade measures considered “necessary” to protect their essential security interests in cases of “emergency in international relations”. While this is a very broad escape clause and allows governments to self-define what they consider necessary, it doesn’t allow trade actions where it’s the country itself that has caused the emergency in the first place.

So if the Russians persist in taken the case to the WTO, the Western countries, including Canada, should respond by challenging the Russian retaliation action itself as a gross breach of WTO rules — and demand compensation for the economic impact. Those Russian counter-measures represent political gamesmanship and are indefensible under international trade law.

August 8, 2014

 

Germany, Canada and Investment Protection – Another Look

The reported German rejection of Investor-State Dispute Settlement (ISDS) in the Canada-EU trade and investment agreement, while inexcusably late in the day, shouldn’t come as a total surprise.

The July 26 Sueddeutsche Zeitung report simply articulates Germany’s growing distrust over these binding investment arbitration provisions, of particular German concern in the context of the EU-US trade and investment negotiations.

Maybe the German government looked at the many investor claims under the NAFTA launched against Canada by US companies – many more than against Mexico – and saw the potential exposure of German laws and policies to these kinds of claims by American corporations.

If the Germans don’t agree with investor-State arbitration in the agreement with Canada, never mind what the EU Commission’s technical mandate might be, it just won’t happen. The German position can’t be ignored.

Politically, this means a setback for the Harper government. I said so in my comments in the Globe and Mail today. But that’s only the immediate, short-term response.

We need to take a closer look at this.

While investor arbitration has been touted as a major gain for Canada in the EU deal, its value may be overstated. It’s not clear that investment arbitration is a critical tool for Canadian companies doing business in Europe. None of the 200 pending arbitrations under the International Centre for the Settlement of Investment Disputes, for example, involve Canadian companies suing European governments.

We don’t really expect serious problems for Canadian companies investing in the UK, France, Germany, Spain, Italy, do we? Canada has never pursued bilateral investment protection agreements (FIPAs) with these countries for that reason.

Regarding the others, Canada already has standalone FIPAs with binding arbitration provisions with many of the smaller EU members – Poland, Romania, Hungary, Slovakia, Croatia and the Czech Republic.

Regarding the 15 or so others EU governments, if ISDS has to be removed from the Canada-EU agreement because of German opposition, there’s nothing to prevent Canada negotiating separate FIPAs where there’s a serious investment interest (probably not too much Canadian interest investing in Bulgaria, Latvia, Estonia, Macedonia, I’d venture to say).

So, standing back and taking another look, can the CETA exercise go forward with either an attenuated set of investor arbitration provisions or even a removal of ISDS from the agreement altogether? I would think so. It might take some effort to re-jig the treaty language (which we haven’t seen yet), but it would seem do-able.

For example, the Australia-Japan free trade agreement excludes investor arbitration but has provisions allowing both sides to review the possibility of including ISDS in the future.

Another view is that, while ISDS may give some comfort to investors, when it comes to investing in Europe, Canadian companies should do their own risk assessments and make their investment decisions accordingly.

CETA Rescue is Possible – Don’t Despair

The German position rejecting investor-State dispute settlement (ISDS) in the CETA– while a last minute surprise and reprehensible for that reason – doesn’t spell the end of the Canada-EU deal by any means.

The Germans have simply come out with a position that has been bubbling for some time. More and more stakeholders, beyond the typical left-leaning organizations, have been expressing disquiet over the standard ISDS model.

The Australian government has abandoned ISDS as a standard feature in its trade agreements. Its new deal with Japan doesn’t have one.

While the Americans are pushing hard for binding investor-State arbitration in the Transpacific Trade talks, several TPP governments are increasingly skittish of including this.

The Germans are worried that if ISDS is included in the Canada-EU deal, it will be impossible to resist it in the current EU trade and investment negotiations with the Americans. That’s the real reason for this last-minute change of position on CETA.

So the German position in a way is just a statement on ISDS that at least lays things out clearly.

ISDS was conceived 20 years ago to ensure a level of comfort for investors from the wealthy, industrialized countries into developing economies where the rule of law was shaky.

A level of protection was there to prevent arbitrary and discriminatory seizures of assets by unreliable governments. It provided recourse where local measures were targeted against investments and failed to meet international standards of “fair and equitable treatment.”

But the process has morphed into something much more, with the aggressive use largely by well-funded American companies to challenge an array of government policies.

This is illustrated by the large number of American challenges brought against Canada under the NAFTA, the most recent one claiming that a judgement of the Supreme Court of Canada on patent rights has breached Canada’s treaty obligations. The owner of the Ambassador bridge at Windsor-Detroit is even claiming that Canada is in breach of the NAFTA by building a second crossing over the Detroit River.

There are now third-party financing mechanisms available to fund investor-State litigation by complainants.

So there is growing disquiet over the direction that investor-State arbitration is going and reasons justifying at least a re-thinking of the standard ISDS model.

Coming back to CETA, it certainly won’t be a fatal blow if ISDS isn’t included in the deal. While the Harper government has touted these investor rights as a cardinal feature of advantage to Canadian companies, do we really need one? Are Canadian investors at serious risk of European governments engaging in arbitrary seizure of their assets or unfair and discriminatory treatment?

The Germans clearly don’t feel their investors in Canada need that kind of protection. Other European governments may feel the same. Canada is a safe and reliable place to put your money. The Germans are actually giving Canada an endorsement in this regard.

In my view, the advantages of CETA in terms of opening up the EU market to Canadian companies on a preferential basis far outweigh the need for a system of binding arbitration in the deal.

There may be ways of modifying the arbitration provisions  to meet German concerns. But even if ISDS is dropped from the deal completely, the Canada-EU agreement remains very much worth doing.

Russian Sanctions – A Moving Target

Canada’s sanctions against Russia and Ukraine are a moving target and are expanded on an ongoing basis, particularly in light of the evolving situation in that part of the world. This note adds to comments I made previously on this Blog.

I anticipate that Canada will tighten the Russian sanctions in light of the downing of the Malaysian aircraft last week.

 As an ongoing compliance issue, Canadian companies should consider maintaining a Google alert and keep the Department of Foreign Affairs, International Trade and Development (DFATD) sanctions web-site under constant monitoring (http://www.international.gc.ca/sanctions/russia-russie.aspx?lang=eng).

 The Department issues e-press advisories when additional names are added to the sanctions list and companies can subscribe to these.

 As in the case of Iran, the Russian (and Ukrainian) sanctions apply broadly. The Russian sanctions state that, 

    3. It is prohibited for any person in Canada and any Canadian outside Canada to

  • (a) deal in any property, wherever situated, held by or on behalf of a designated person;
  • (b) enter into or facilitate, directly or indirectly, any transaction related to a dealing referred to in paragraph (a);
  • (c) provide any financial or other related service in respect of a dealing referred to in paragraph (a);
  • (d) make any goods, wherever situated, available to a designated person; or
  • (e) provide any financial or related service to or for the benefit of a designated person.

 Note the words “any” and “directly or indirectly”. Pretty wide in scope. This makes it is critical for Canadian corporations to undertake all reasonable diligence to not contravene these prohibitions.

 Another matter that requires care are the US sanctions against Russia. These are enforced by the Office of Foreign Assets Control (OFAC), part of the US Treasury Department.

 On 16 July 2014, the Obama administration expanded these significantly, enlarging the so-called sectoral sanctions and, for example, adding Rosneft and Novatek, major Russian energy companies, to the prohibited list. While directed to capital-raising transactions of these entities – debt and equity – these sanctions may be expanded to prevent commercial dealings by persons in the US with these Russian companies.

In addition these prohibited capital transactions, there is a series of Executive Orders by the President that prohibits virtually all commercial dealings in the US with other Russian companies listed in those Orders. This applies to any entity organized under US laws, including branches of Canadian entities operating in the US.

All of this requires careful attention to compliance for any Canadian company potentially involved in Russian dealings. It is expected that these prohibitions will be expanded further in light of the deteriorating situation in that part of the world..

 

Thoughts About Investment Agreements

There is growing debate about foreign investment protection agreements – what Canada calls “FIPAs”, the Americans call bilateral investment treaties or “BITs” and what others refer to simply as international investment agreements or “IIAs”. Acronyms abound.

According to the UN Conference on Trade and Development, there are 3,200 of these around the world, proliferating in the last decade or so. Canada’s FIPAs have been around for about 25 years, the first concluded with Poland in 1990.

Foreign investor protection regimes have been embedded in Canada’s bilateral trade agreements like the NAFTA and in the recently concluded Canada-EU trade negotiations. Canada has stand-alone FIPAs as well, such as the one with Poland. And there are many others, some in force, some signed but not yet ratified, like Canada’s FIPA with China.

They are generally considered to be a positive force in promoting international stability and in aiding foreign direct investment (FDI) from wealthier economies to the developing world. They have many positive attributes, assuring stability, non-discrimination, due process and “fair and equitable treatment” of investors by foreign governments. They prohibit expropriation without prompt and adequate compensation.

One of their central features is that they give private investors the right to bring legally-binding arbitration actions against host governments that fail to abide by these obligations. This is referred to as investor-State dispute settlement or ISDS.

ISDS is often criticised, mostly by left-leaning organizations who claim that these agreements respond to a mercantilist agenda and – because they give investors binding arbitration rights – allow corporate interests to thwart legitimate public policy measures by host governments.

Investor claims have been proliferating, as UNCTAD reports, with 58 new cases in 2012 alone, the highest number in a single year, confirming foreign investors’ growing inclination to litigate against host governments and their agencies.

So there are controversies surrounding these IIAs and some are coming to roost in various free trade initiatives now underway, like the Trans-Pacific Partnership (TPP) negotiations.

One of the challenges in these efforts has been to refine the standards of investment protection, mostly the meaning of the “fair and equitable treatment” obligation of host states. In the Canada-EU trade agreement, for example, the two sides have narrowed the meaning to avoid wide-ranging and dubious claims by private investors.

US businesses have criticised that approach. In the current US-EU trade and investment negotiations, they argue that it will circumscribe the recourse available to investors when their economic interests have been trampled on by governments. This runs right up against the concerns of civil society who want to protect the freedom of governments to legislate for the common good, even if foreign investors are impacted.

There are related issues taking on traction. One is that these investor-State arbitrations are ad hoc in nature and inherently impermanent, with panels often made up of experts from distant places who are appointed to hear a single case but may not know much about the parties or the government involved.

Unlike judges on domestic courts who are part of the local community and essentially known quantities, ISDS arbitrators, deciding public issues of great importance, are strangers from afar who then fade back to their own countries and their own callings.

This boils down to matters of legitimacy, as UNCTAD puts it, whether three individuals, appointed on an ad hoc basis, can be intrusted with assessing often critical public policy measures undertaken by governments.

Another weakness is the absence of an appeal process. In the quest to make ISDS efficient, governments developed a dispute settlement model that was final and binding. But what if arbitrators err on a key legal or factual issue?

Interestingly, the International Centre for the Settlement of Investment Disputes (ICSID), the dispute settlement arm of the World Bank – and now headed by a Canadian – has been looking at these concerns, considering how to improve transparency and consistency ISDS but also the possibility adding an appellate mechanism to its structure.

The solutions to all this are not out of reach. They will require some creative ingenuity and international consensus-building, but there are answers. At the very least, we should be actively discussing these issues and testing, even at this late stage and even with 3,200 of these investment agreements in force, whether the old paradigm, including Canada’s current model, fully serves the broader public interest.

 

 

Are Trade Negotiators Really Up to No Good?

The Council of Canadians, the self-styled champion of the public interest, has blasted governments for their collective secrecy in the TPP negotiations being held in Ottawa July 3-12. They issued demands for access to TPP negotiating documents and, in effect, for virtual inclusion the TPP talks on an ongoing basis.

This is a standard ploy by the Council and its fellow-travellers, portraying governments as being up to no good and conspiring collectively to betray the interests of their people.

Happily, there was relatively scant take-up of this stuff in the media, indicating an ennui with this kind of rhetoric. On the contrary, the public in Canada and elsewhere are paying less attention to these overdrawn concerns and seem willing to let the TPP negotiators get on with their business.

Their business is to negotiate. And to do that effectively, you can’t do it in public. It would be destructive of that process to have negotiating texts released, and indeed the leakage that has occurred to date in the TPP talks has not been helpful.

What is bothersome with interest groups like the Council is the implication that governments are intent on evil doings and just can’t be trusted with looking after the public interest. They imply some secretive effort by the twelve TPP governments to sell down the river millions of their own people.

That is so much nonsense. The claim that governments are bent on betraying their people behind closed door is hyperbole that should be dismissed for what it is.

This is not to say that every aspect of the TPP talks should be completely shrouded in secrecy. Governments have a duty to be as transparent as possible, to explain what’s on the table and to respond to reasonable expectations on the part of the public.

But there is a balance to be struck, recognizing the nature of the negotiating process. And because that process is a delicate one, having texts released in public and having self-styled interest groups involved in the talks would be like bringing Clydesdales into a china store.