Trade Compliance

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Canada-Europe Trade Deal Could Unleash “Corporate Litigation Boom”

Posted November 24, 2014

The Comprehensive Economic and Trade Agreement (CETA) between Canada and Europe could unleash a wave of corporate lawsuits against Canada, the EU and its member states that “restrict the powers of all levels of governments.” This is the dire warning of a new report by Corporate Europe Observatory, a research and campaign group that bills itself as “exposing the power of corporate lobbying in the EU,” together with 14 other environmental NGOs, citizens’ groups and workers unions from both sides of the Atlantic.
Dangerous Shark
The “corporate litigation boom” predicted by the report would be as a result of the controversial investor protection rules in the trade deal which grant corporations “sweeping new powers” to challenge national laws and regulations, thereby effectively “sidestepping domestic courts and silencing the voices of citizens,” the authors say.

“Investor-state dispute settlement has one very dangerous goal: transfer power away from governments and to corporations. These rules have nothing to do with fair trade between nations. Our public court system is the fair and accountable way to handle any disputes about government policy,” according to Trading Away Democracy co-author and Canadian Centre for Policy Alternatives research associate Blair Redlin.

The report notes that CETA’s rules go beyond NAFTA’s Chapter 11, which U.S. and Mexican corporations have used to launch 35 suits against Canada — many still unresolved. Canada has lost or settled six cases, paying more than C$170 million in damages, as well as millions of dollars in legal fees. CETA opens the door to suits from European corporations — which have launched more than half of all investor-state challenges globally — as well as back-door challenges from American or Canadian companies hiding behind European subsidiaries.

Though obviously quite hostile to trade deals like CETA, the authors of the report conclude by making a point actually shared by a growing number of their opponents concerning this issue, questioning the need for the creation of a special legal regime to protect foreign investors, especially in stable jurisdictions like the EU and Canada.  Even the new European Commission President Jean-Claude Juncker recently stated that “My Commission will not accept that the jurisdiction of courts in the EU Member States be limited by special regimes for investor-to-state disputes. The rule of law and the principle of equality before the law must also apply in this context.”