The TPP’s investor-state dispute settlement provisions have rightly attracted considerable attention given the risks that come with a process that gives companies the right to sue governments for hundreds of millions of dollars. Yesterday’s post discussed why the TPP ISDS rules do not meet the Canadian government’s own standard for dispute settlement as reflected in the Canada – EU Trade Agreement. The CETA provisions include a clear affirmation of governmental power to regulate, an appellate process, and rules designed to ensure fairness and non-bias in settlement cases. The TPP does not contain equivalent provisions.

The Trouble with the TPP’s ISDS provisions extend beyond the absence of policy freedom and fairness safeguards. The Columbia Center on Sustainable Development has published one of the most exhaustive examinations of the problems with the TPP’s ISDS rules, noting that the deal entrenches, rather than reforms, a flawed system. While the failure to address government regulation and procedural fairness consistent with the standards articulated by International Trade Minister Chrystia Freeland tops the list, the report also points to other issues that strike close to home from a Canadian perspective.

One of the biggest problems with recent ISDS cases involves the question of whether the breach of an investor’s “expectations” gives rise to a minimum standard of treatment claim. A NAFTA lawsuit launched by Bilcon against the Canadian government highlights the problem. Bilcon wanted to develop a quarry near Digby Neck in Nova Scotia but was stopped due to an environmental assessment that concluded that the project was likely to cause significant and adverse environmental effects. Bilcon claimed that the assessment conducted by the Canadian government and the Province of Nova Scotia was arbitrary, discriminatory, and unfair. Using the ISDS rules, it sought over $100 million in damages. A split panel ruled in favour of the company. The CCSD report summarizes the problem with the decision:

the majority of the tribunal indicated that interference with investors’ economic “expectations”, standing alone, would not violate the FET [fair and equitable treatment] obligation but was a factor to take into account in determining whether there had been a breach of that treaty provision. Applying that approach, the tribunal gave disproportionate legal significance to the allegedly “reasonable expectations” of the investors that had been generated by non-binding statements of certain Canadian officials and general promotional materials designed to help the region attract new mining investments. Those “reasonable expectations”, the tribunal determined, were later frustrated by federal and provincial environmental approvals processes, which ultimately resulted in decisions by federal and provincial officials to deny the investors their requested environmental permits. That the governments’ actions frustrated the investors’ “legitimate expectations” led the tribunal to conclude that Canada violated the NAFTA’s FET obligation.

My colleague Professor Don McRae served on the same panel, issuing a stinging dissent that warned the decision “will create a chill on the operation of environmental review panels” “import[] a damages remedy that is not available under Canadian law” and intrude “into the environmental public policy of the state.” Unfortunately, the TPP does not adequately address these concerns. Instead, it keeps many of the same problems in place and threatens to expand the risk by bringing ISDS rules to a wider scope of companies and countries. The CCSD report highlights many other weaknesses of the TPP ISDS provisions and in posts later this week, I’ll discuss how the Canadian experience beyond Bilcon demonstrates that policy sovereignty and billions of dollars may be at risk.

(prior posts in the series include Day 1: US Blocks Balancing Provisions, Day 2: Locking in Digital Locks, Day 3: Copyright Term Extension, Day 4: Copyright Notice and Takedown Rules, Day 5: Rights Holders “Shall” vs. Users “May”, Day 6: Price of Entry, Day 7: Patent Term Extensions, Day 8: Locking in Biologics Protection, Day 9: Limits on Medical Devices and Pharma Data Collection, Day 10: Criminalization of Trade Secret Law, Day 11: Weak Privacy Standards, Day 12: Restrictions on Data Localization Requirements, Day 13: Ban on Data Transfer Restrictions, Day 14: No U.S. Assurances for Canada on Privacy, Day 15: Weak Anti-Spam Law Standards, Day 16: Intervening in Internet Governance, Day 17: Weak E-commerce Rules, Day 18: Failure to Protect Canadian Cultural Policy, Day 19: No Canadian Side Agreement to Advance Tech Sector, Day 20: Unenforceable Net Neutrality Rules, Day 21: U.S. Requires Canadian Anti-Counterfeiting Report Card, Day 22: Expanding Border Measures Without Court Oversight, Day 23: On Signing Day, What Comes Next?, Day 24: Missing Balance on IP Border Measures, Day 25: The Treaties With the Treaty, Day 26: Why It Limits Canadian Cultural Policies, Day 27: Source Code Disclosure Confusion, Day 28: Privacy Risks from Source Code Rules, Day 29: Cultural Policy Innovation Uncertainty, Day 30: Losing Our Way on Geographical Indications, Day 31: Canadian Trademark Law Overhaul, Day 32: Illusory Safeguards Against Encryption Backdoors, Day 33: Setting the Rules for a Future Pharmacare Program, Day 34: PMO Was Advised Canada at a Negotiating Disadvantage, Day 35: Gambling With Provincial Regulation, Day 36: Why the TPP Could Restrict Uber Regulation, Day 37: Breaking Digital Locks for Personal Purposes, Day 38: Limits on Canadian Digital Lock Safeguards, Day 39: Quiet Expansion of Criminal Copyright Provisions, Day 40: Mobile Roaming Promises Unfulfilled, Day 41: ISDS Rules Do Not Meet the Canada’s New “Gold” Standard)