As we noted recently, one of the most worrying aspects of corporate sovereignty chapters in trade agreements is the chilling effect that they can have on future legislation. That’s something that the supporters of this investor-state dispute settlement (ISDS) mechanism never talk about. What they do say, though, is that corporate sovereignty cannot force governments to change existing laws. A recent defeat for Canada before an ISDS tribunal proves that’s not the case:
An international trade tribunal has ordered Ottawa to pay ExxonMobil and another oil company $17.3 million, following a complaint that the companies were required to spend money in Newfoundland and Labrador on research and development.
The case was brought by ExxonMobil using the corporate sovereignty provisions in the North American Free Trade Agreement (NAFTA), and concerned another agreement, called the Atlantic Accord. As CBC News explains:
Under the terms of the Atlantic Accord, a federal-provincial agreement on oil development first negotiated in 1985, oil companies are required to support petroleum-focused research and development in Newfoundland and Labrador, as part of its local benefits package.
In other words, three decades ago, Canadian politicians had passed a research and development package, one of whose measures was designed to boost local employment — exactly the kind of thing that voters want their politicians to do. But the ISDS tribunal ruled that under NAFTA, this was not permitted, and awarded substantial damages to ExxonMobil for being required to comply with the Atlantic Accord. But it gets worse:
Unless the governments of Canada and Newfoundland and Labrador agree to change the R&D legislation, Ottawa could be on the hook for continued damages. The federal government is responsible because NAFTA is an agreement between sovereign nations.
That is, the corporate sovereignty provisions in NAFTA are being used to force the Canadian government to change existing and long-standing legislation — something that ISDS fans assure us never happens.