THE HILL TIMES, MONDAY, DECEMBER 17, 2012

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OPINION
CANADA-CHINA FIPA

Canada-China FIPA would lock us into runaway global system

You cant lead a country by keeping it divided and in the dark, and in the crosspartisan opposition to the Canada-China FIPA and CNOOC-Nexen takeover we may be seeing fertile soil for a broad rejection of this governments stealthy agenda.
As the days have turned into weeks, a group of FIPA proponents have spread out across our media to laud the benefits of this controversial investor deal and downplay the risks to our democracy and economy. For Canadians trying to make sense of trade agreements like this FIPA, it is important to understand that there are surprisingly few Canadians with deep expertise on the subject of FIPA agreements and investor-state arbitration, a new and rapidly changing field. Gus Van Harten is a Canadian expert with international stature who has been sounding the loudest alarm from the beginning. He has never earned income by representing a corporation or working as an arbitrator in an investor state arbitration. In contrast, in media interviews, professor Andrew Newcombe has largely dismissed concerns that the Canada-China FIPA will undermine Canadas democratic control. Newcombe shares something with many of the FIPA proponents who have been writing op-eds and conducting media interviews over the last few weeks: he has an apparent financial stake in the matter because he has earned income representing corporations in the growing investor-state arbitration industry, and could benefit from that industrys further growth if the Canada-China FIPA is signed. Newcombe represented (and may still represent) Commerce Corporation in a lawsuit that used the CAFTA investor deal to challenge El Salvadors moratorium on industrial gold mining, and lists himself as available for consulting offers and expertise requests in relation to international arbitration on his LinkedIn profile. Now consider Matthew Kronby and Milos Barutciski, a pair of lawyers who have been advocating the Canada-China FIPA with op-eds in The Globe and Mail and Financial Post. These lawyers are partners at Bennett Jones, a firm that proudly offers its investorstate arbitration services to corporate clients who want to sue governments. Kronby was the former head of the federal governments Trade Law Bureau, and the government of Canadas lead lawyer on the contentious CETA. Barutciskis recent actions on behalf of his client have completely undermined one of the key arguments put forward by industry insiders: that corporate lawsuits heard behind closed doors in the Canada-China FIPAs secret tribunals will not undermine Canadas ability to make common sense laws. Barutciski, on behalf of Bennett Jones, is representing U.S. energy company Lone Pine Resources and has just declared that it will use the investor-state arbitration mechanism in NAFTA to sue the Canadian government for $250-million because Quebec put a moratorium to halt shale gas fracking, including Lone Pines exploration permits, in order to study the health and safety impacts of the increasingly controversial practice. In doing so, Barutciski has demonstrated that foreign corporations can use these secretive mechanisms to threaten Canadian taxpayers with massive penalties for prudent democratic decisions, even if those decisions, like Quebecs moratorium on fracking, affected both foreign and Canadian corporations. Investor-state arbitration lawyers have a right to share their views, and we have a right to know where theyre coming from. The upshot is that while opposition to the Canada-China FIPA has spread rapidly, far too many Canadians, including many Members of Parliament, dont understand the stakes of the Canada-China investor deal. For example, Conservative MPs have responded to the tens of thousands of emails they are receiving from their constituents with a nearly identical set of talking points, likely crafted in the Prime Ministers Office, that reflect the industry insiders message. In addition, few politicians and pundits have recognized that this looming FIPA dramatically raises the stakes of the CNOOCNexen takeover, which the Harper Conservatives approved on Dec. 7. This takeover dramatically increases the stakes of FIPA as CNOOC will be treated as a Canadian company and be able to buy control over more Canadian resources without having to face another test to see if it is of net benefit to Canada. If this FIPA passes, CNOOC will then be able to sue Canadian governments in secret tribunals if those governments do anything to counter its growing interests. One of the biggest problems with the Canada-China FIPA is that it could lock us into this investor-state arbitration system for 31 years, and we have no way of predicting how this system will develop. How will the arbitrators interpret the interests of

BY Emma Pullman AND Jamie Biggar

ANCOUVER, B.C.Canadians from across the political spectrum are coming together to oppose the secretive and extreme Canada-China Foreign Investment Protection and Promotion Agreement investor deal. The FIPA would allow foreign corporations to sue the Canadian government if they believe any level of government has done anything to limit their interests, and the lawsuits would be heard in investor-state arbitrations that function as secret tribunals outside the Canadian court system. Within Canada, citizen opposition has fuelled a media debate that has, in turn, been dominated by people who have an apparent financial stake in the outcome. And now, a new report shows that while other countries like Australia are rejecting investorstate arbitration, this radical form of democratic override is fast becoming a booming industry that is costing taxpayers billions, and challenging government decisions and common sense laws all around the world. The opposition to the CanadaChina FIPA is diverse, growing and strong. Hundreds of thousands have joined citizenpowered campaigns. First Nations leaders have condemned the FIPA because it would grant Chinas companies extra-constitutional legal rights that could supercede the ability of First Nations to selfgovern their territory. Conservative commentators like Diane Frances have slammed the Harper Conservatives, writing in the Financial Post that Ottawa capitulated to China on everything by negotiating an agreement that will give Canadian investors little protection in China, while granting Chinas companies the ability to undermine democratic control in Canada. Many expected Prime Minister Stephen Harper to pass the Canada-China FIPA on Nov. 1, immediately after a mandatory 21-day waiting period. But the broad-based pressure seems to be having an effect and the treaty is now sitting idle, ready to be ratified at any moment, but with no clear indication of when or if that might happen.

corporations and responsibilities of governments? How big will the damages be? How often will the threat of a lawsuit stop legislation before its put in place? Today, investor arbitration is already becoming a big global business, with huge consequences for taxpayers and democratic control. According to a new report, Profiting from injustice: How law firms, arbitrators and financiers are fuelling an investment arbitration boom by the Corporate Europe Observatory and the Transnational Institute, investor arbitration has boomed in recent years, from 38 cases in 1996 to 450 known cases as of last year. And, these are only the known casesthere are cases that are not public, but we do not know how many. A small group of elite firms with for-profit arbitrators and lawyers are getting rich from these deals. Today, legal and arbitration costs average over U.S.$8-million per dispute, sometimes exceeding U.S.$30-million. Entire legal teams handle cases with elite law firms charging as much as U.S.$1,000 per hour, per lawyer. Arbitrators also earn hefty salaries: as much as U.S.$1million per case. Taxpayers are paying big money to cover much of the bill for these law firm profits and the awards they are securing for their corporate clients. A WTO arbitration panel just ordered Ecuador to pay U.S. oil company Occidental Petroleum $1.7-billion, and one of Chinas companies, the Ping An Insurance Group, has launched a lawsuit against Belgium for $2-billion. The growing damages are creating an incentive for investorstate arbitration firms to advise corporate clients to sue governments for ever larger sums, and the lawsuits are weakening or preventing laws that would put the public good ahead of narrow corporate interests. The report maps an inner network of influential firms that it alleges are disproportionately involved personally and financially in these arbitration cases. The report claims many arbitrators play double or triple roles, alleging that these arbitrators act as counsel, as academics, as government advisors, as lobbyists and as media commentators. The report also alleges that some have strong personal and commercial ties to companies. All this gives these firms huge influence over the debate about the investor arbitration system, which they have a vested interest in sustaining. Historically, the international investor-state arbitration system was justified and put in place by Western governments to protect corporations investments from

perceived bias and corruption within non-Western national courts. But the report argues that the so-called independent arbitration system is becoming a self-serving multimillion-dollar industry dominated by a narrow exclusive elite of law firms. When you combine this with the track records of the tribunals and their generous interpretation of corporate rights, its time to ask serious questions about the industrys commitment to unbiased judgments and the interests of Canadians. Finally, and perhaps most troubling of all, the report also describes a new trend in the investment arbitration industry: third-party funding. Investment arbitration is becoming so lucrative that investment funds will actually speculate on cases, lending money to companies so they can sue governmentsand then theyll take a cut of 20 per cent to 50 per cent from the final award. Countries are starting to rethink and reject investor-state arbitration, and return to settling disputes through national courts and diplomacy. Take Australia for one example: in April 2011, the Australian government announced it would no longer include investor state dispute settlement provisions in its trade agreements. Specifically, it said it will not negotiate treaty protections that would confer greater legal rights on foreign businesses than those available to domestic businesses or that constrain the ability of Australian governments to make laws on social, environmental and economic matters in circumstances where those laws do not discriminate between domestic and foreign businesses. The Australian Productivity Commission completed a report on investor arbitration that found no compelling economic rationale for including investor-state arbitration mechanisms in its trade and investment agreements, and found few clear benefits along with several worrying risks associated with investor arbitration. If Prime Minister Stephen Harper signs the Canada-China FIPA investor agreement he could lock Canada into an investor-state arbitration system that seems to be growing increasingly self-servinga network of firms that would have a significant financial interest to court Beijings business by delivering results for them. We are being told that this is a good idea by people who may have a financial interest in the outcome, and their views are being repeated by Conservative MPs who are simply repeating talking points sent to them by Ottawa. You cant lead a country by keeping it divided and in the dark, and in the cross-partisan opposition to the Canada-China FIPA and CNOOC-Nexen takeover we may be seeing fertile soil for a broad rejection of this governments stealthy agenda. Jamie Biggar is executive director of Leadnow.ca. Emma Pullman is Canadian campaigns consultant to SumOfUs.org. This piece originally ran in The Tyee on Nov. 30. news@hilltimes.com The Hill Times