ISDS: Obscure Free Trade Rules Turn Malignant – Part 3

Series: ISDS: Obscure Free Trade Rules Turn Malignant

From being an obscure clause originally designed to protect foreign investors from weak local legal systems, the Investor-State Dispute Settlement provisions embedded in many trade agreements are increasingly used by multinationals to bypass domestic legal systems.

Part 2 of the series lays out the major flaws of the ISDS regime and key liabilities faced by sovereigns, along with real cases faced Canada, Australia and other developing countries.

With the TransPacific Trade Partnership ever closer to getting passed by the US Congress, and with a rare opportunity of access to the political parties thanks to the upcoming federal election, what should Canadians do to ensure their social values and those of the political parties are aligned?

federal-leaders-debate-in-toronto(image: CBC)

In Part 1 and Part 2 of our series, we brought to your attention the recent explosive growth of lawsuits brought by foreign multinational corporations against sovereign countries under the terms of free trade agreements known as the Investor-State Dispute Settlement mechanism (ISDS).

Under the ISDS regime, foreign corporations are granted rights to litigate against a sovereign country as equals, and the cases are presided by tribunals consisting of three private sector lawyers, whose decisions override the legal system of the sovereign county, including its supreme courts.

The ISDS regime is increasingly used by foreign corporations against government legislations on domestic health, environment, labor and other public interests, when the corporations feel their private interests are threatened.

ISDS Threatens Canada’s Sovereignty

All over the world, sovereign countries’ right to decide their own health, environment and labor rules are being threatened by foreign multinationals which are increasingly using ISDS as a means to protect their private interests.

The cases which attract the most attention are the lawsuits brought by tobacco giant Philip Morris against Australia and Uruguay for introducing stricter regulations on tobacco advertising. (details)

If you think this can only happen somewhere else, perhaps the number of ISDS cases brought against Canada for introducing environmental and health legislations would open your eyes.

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[counter_box value=”70″ delimiter=”” unit=”%” unit_pos=”suffix” icon=”” direction=”up”]of all NAFTA investor lawsuits since 2005 are against Canada[/counter_box]

Little known to the general public is the fact that of the 78 investor-state claims filed under NAFTA since it came into effect just over two decades ago, 36 of them involved Canada, helping the country secure the honor of being the most sued developed country in the world. Canada also happens to be on the sh*t “wrong” end of the stick in 70% of all NAFTA investor lawsuits since 2005. (Huffington Post)

Using existing NAFTA ISDS provisions, the Canadian federal government and individual provinces experienced firsthand how foreign companies tried, successfully in many cases, to neuter or water down regulations designed to protect our health, environment and social well being.

Check out these real life examples presented in Part 2 of this series.

  • Eli Lilly vs Canada – how Canada is being sued for $480 million for invalidating a big pharma’s monopoly drug patent for failing to present sufficient evidence.
  • Meyers vs Canada – how Canada paid $6 million and had to apologize for trying to close its border to trade in toxic PCB.
  • Ethyl Corp. vs Canada – how Canada had to pay $13 million to settle out of court and issue an apology for trying to ban the import of a gasoline additive, a suspected neurotoxin also banned in the US.
  • Ontario – how Ontario was being sued for $746 million for its green jobs program which encouraged sourcing from sustainable local sources.
  • Ontario — how the province paid $15 million to settle out of court for preventing a foreign company from turning a site near Hamilton into a quarry because of local groundwater concerns.
  • Quebec – how despite 90% popular support, Quebec’s ban toxic ingredient 2,4-D in lawn pesticides resulted in a suit and the province managed to escape with just a humiliating about-face statement that the ingredient is safe.
  • Newfoundland – how the province is being sued for requiring an oil company to invest R&D back into its local economy where the oil resources are extracted.
  • Newfoundland – how the province had to pay $130 million for reclaiming its timber and water rights after a foreign corporation closed its last mill in the province.
  • Nova Scotia – how the province got itself on the losing end of a $300 million claim after a joint provincial-federal environmental review panel, in the face of significant community opposition, disapproved a quarry and marine terminal development application.

Growing Global Concerns over ISDS

Due to the secrecy placed around the TPP negotiating process, little is known about the details as it relates to the ISDS provisions herein. All we do know, based on what has been leaked out by whistleblowers and those un-captured legislators such as Elizabeth Warren (see her Washington Post op-ed) who had read the treaty draft, is that the ISDS provisions are even more ‘encompassing’ than similar provisions in existing treaties.

Not only are developing countries which have been on the receiving end of the ISDS lawsuits getting more concerned (details), developed countries like Australia are starting to steer a different direction when it comes to ISDS (report), Germany is now also officially opposing ISDS in the Transatlantic Trade and Investment Partnership treaty currently under negotiation (details).

Political Parties Should Clearly Articulate Their Positions

On the eve of the federal election, parties and individual candidates should take a clear position on where they stand and what they plan on doing if elected as it relates to the TPP and Comprehensive Economic and Trade Agreement (CETA, EU-Canada free trade treaty) in general and their ISDS provisions in particular. Specifically, the party should state clearly:

  • How it will make the details of the TPP public so that proper debate by the public can meaningfully take place.
  • The party’s position on whether ISDS is a threat to our ability to determine our future as it relates to health, environmental and labor regulations, or whether this risk is overblown.
  • What the party plans to do regarding ISDS provisions in the continuing negotiations.

I encourage everyone to take advantage of the unusual opportunity of access to all parties and candidates afforded by the election campaign to post these questions and request a written response from each of the parties/candidates.

A sample template for their written response is provided below.

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As Canadians we have the following key concerns over the Investor-State Dispute Settlement provisions contained in the Trans-Pacific Partnership (TPP) and Comprehensive Economic and Trade Agreement (CETA) currently under negotiations.

  • ISDS completely bypasses our legal system, including the Supreme Court of Canada.
  • Such overriding authority is given to tribunals made up of private sector industry lawyers who are allowed to switch roles from representing a client firm suing a country one week, acting as one of the 3-person panel ‘judges’ ruling against another country, and handing out an arbitrary compensation amount the next week. It is the epitome of conflict of interest and revolving doors.
  • ISDS is increasingly used by foreign corporations to force governments to stop or roll back health, environment and labor regulations.
  • At $8 million per ISDS case on average, the mere threat of a lawsuit would stop governments at different levels from even contemplating regulations which might remotely give rise to such claims.


Please indicate your level of agreement to the statements above and your plan of actions if elected.

Party position (1 to 5)

  1. The risk as stated is overblown. I would be happy to point you to the right information to ease your concerns.
  2. The party will study this matter in detail and decide accordingly.
  3. The party will disclose the terms of the treaty and conduct an open forum for the public to fully discuss the TPP in general and ISDS in particular.
  4. The party will actively lobby and work with other treaty countries to remove the ISDS provisions from the TPP.
  5. The party will insist on the removal of the ISDS provisions from the TPP, and would be prepared to walk away from the treaty if these provisions are not removed.

Specific actions to be taken by the party if elected:




Candidate position (1 to 5)

  1. The risk as stated is overblown. I would be happy to point you to the right information to ease your concerns.
  2. I agree with the statements and will study the matter closely but would ultimately vote in unity with my party.
  3. I will actively work with my party leader and lobby my colleagues to have the ISDS provisions removed.
  4. I will actively work with my party leader and lobby my colleagues to have the ISDS provisions removed. Failing to convince my party to vote otherwise, I would abstain from voting along party line.
  5. I will actively work with my party leader and lobby my colleagues to have the ISDS provisions removed. Failing to convince my party to vote otherwise, I am prepared to vote against party line.



Specific actions to be taken by the individual candidate if elected:

Investor State Dispute Settlement (ISDS)

This article is part of the Investor State Dispute Settlement (ISDS) in-depth topic. Get a crash course and read the latest developments on this topic.


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