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A First Look at the USMCA - There’s Reason to Celebrate

On October 1, 2018, a new trade deal was announced between Canada, the US and Mexico, replacing the current North American Free Trade Agreement with the U.S.-Mexico-Canada Agreement. In the early hours of October 1, the #USMCA twitterstorm began and with it, confirmation that ISDS - the controversial investor state dispute settlement provision in NAFTA’s Chapter 11 which allowed private companies to sue Canada, where $2.6 billion in damages have been claimed to date - had been removed from the re-negotiated agreement.

CELA was elated. The removal of ISDS is huge win for environmental protection and the public interest in Canada. Others have called the removal of ISDS between the U.S. and Canada an “incredible achievement” and “transformational” to Canadian sovereignty.

For 25 years, CELA has been advocating for the removal of NAFTA’s Chapter 11, which allowed foreign corporations to challenge public interest regulations in an unaccountable, secretive international trade body. Most recently, in an open letter to the federal government, CELA and other civil society and environmental non-profits requested investor-state dispute provisions be removed from consideration in the negotiation of future trade agreements. The inclusion of ISDS (or, as its more contemporarily referred to - ICS, the investment court system) allows investment arbiters to operate external to our domestic court system and review government decisions, make enforceable damage awards, and constrain the application of domestic public interest laws.

The threat of a Chapter 11 lawsuit has not only caused government ministries to change their decision-making, but has created the pretext for regulatory “chill.” In a case recently before the Federal Court, Justice Mactavish noted that the effect of a NAFTA tribunal award, where an investor sought in excess of half a billion dollars from Canada, raised “significant policy concerns” and created “potential chill” in environmental assessment decision-making.

The removal of ISDS in the USMCA means decisions can now be made to protect human health and environment, without the risk of an unlimited damage award to a United States multinational corporation from an investment tribunal.

In honour of the removal of ISDS from USMCA, we’ve taken a look back at some of the worst of the worst Chapter 11 lawsuits.

    1. When Canada banned PCB imports, the NAFTA tribunal ordered Canada pay $8 million to S.D Myers.
    2. When the government of Newfoundland and Labrador established water and timber rights as Crown assets, AbitibiBowater Inc. sued under Chapter 11, and the federal government settled the case for $130 million.
    3. In 1997 when Canada banned MMT - a potent neurotoxin in gasoline - Ethyl Corp. sued under NAFTA and Canada settled for $19 million.

There are lots more. Good riddance.

The removal of ISDS from the re-negotiated NAFTA is a jumping off point for future trade agreement negotiations. While we are not overlooking recent trade agreements like CETA and the CPTPP, which still include investor-court dispute provisions, this is a big win for environmental justice. CELA will continue to fight for ISDS’s removal from all future trade agreements.