Share
Canadians broadly support the federal government’s plans to “build big things” and diversify exports away from the United States. Unfortunately, the government’s tools for achieving these goals—the deregulatory Building Canada Strong Act (Bill C-39) and a slate of last-generation trade and investment treaties—promise too much and create avoidable future liabilities.
By inflating investor expectations that big energy, mining and infrastructure projects will be fast-tracked, Bill C-39 sets Canada up for an onslaught of trade and investment treaty lawsuits when public opposition, environmental reviews or other factors get in the way. Ironically, this obvious risk could be minimized by a more careful, democratic approach to selecting and reviewing projects of national interest.
Speed and scale
Since forming a “new” Liberal government last year, Prime Minister Mark Carney has seized upon the “rupture” in the so-called rules-based international order, caused primarily by the second Trump presidency, to govern as a crisis manager. “We’re building across Canada at a speed and scale not seen in generations,” Carney repeated, in his Thanksgiving message to Canadians this year.
So far, the “speed and scale” the government has promised has mainly shown up in the tabling of legislation, rapid negotiation of trade and investment deals, and mushrooming of CEO-led arms-length agencies to replace public sector decision-making on important economic matters. The announcements (and re-announcements of past budgetary initiatives) come in fast and furious. The actual building, however, is yet to happen on a significant scale, as domestic and foreign investors continue to weigh which direction the Canada-U.S. trade war is heading.
Corporate Canada, which historically lacks any drive to invest or produce here, nonetheless seems very pleased with Bill C-39, the Building Canada Strong Act, currently under review by members of Parliament and the Senate. Business lobbyists like the one-year time limit on major project approvals, ability of cabinet ministers to deny core labour rights to workers in “strategic” sectors, and broad ministerial discretion to ignore environmental laws on projects or entire regions of “national interest.”
All of these measures are rightly controversial. Unions want to remove the new restrictions on the right to strike. First Nations claim the Prime Minister is “weaponizing the parliamentary process” to override their “inherent, Treaty and constitutionally protected rights.” Environmental groups, who refer to C-39 as the Bulldoze Nature Bill or Reckless Approvals Act, at least want a robust study at the committee stage this month.
It’s not clear this will happen, as the Liberals and Conservatives have agreed to speed discussion on C-39 through a special parliamentary committee that excludes members of the NDP and Green Party. Bloc Québécois concerns about carefully studying the bill are simply outvoted on the committee. There is no time for debate for this government, just as there will be no chance of rejecting projects of national interest, like the new West Coast pipeline, once they make it to Schedule 1 of the Building Canada Act.
Trade and investment treaty risk
Bill C-39 is an attempt to assure domestic and foreign investors that the things they want to build and profit from in Canada—mines, pipelines, energy projects, etc.—will be approved and built at the lowest possible cost and risk to the investor. It is a promise the government is destined to break, over and over, for obvious reasons.
First, nothing in this world is built on schedule or under budget. Delays are inevitable and unavoidable, and not always a sign of government incompetence. Second, projects that don’t seek or cannot attain broad social licence (e.g., due to heavy impacts on nature or nearby communities) are destined to attract resistance.
Reasoned public opposition to major projects leads to political pressure to adjust or cancel project approvals. Public opposition can also be channeled into litigation and Canada’s courts may end up overruling decisions to fast-track projects, especially when constitutionally protected rights are being violated.
This is where Canada’s growing network of trade and investment treaties come in. Under these treaties, if the government promises too much and cannot deliver, even (and often) for legitimate and unavoidable reasons, they can be dragged through a private international arbitration system called investor-state dispute settlement (ISDS).
Through ISDS, investors can seek hundreds of millions or even billions of dollars in compensation for losing the opportunity to profit from a failed project. The fossil fuel and mining industries that are set to benefit the most from Bill C-39 are the biggest users of ISDS globally.
Here in Canada, the government is currently embroiled in an ISDS case brought by the American firm Ruby River Capital, which had proposed an LNG facility in Quebec. The project faced significant public opposition and was eventually rejected at both the provincial and federal levels due to concerns about adverse impacts on local First Nations and the environment. Part of Ruby River’s argument is that the Government of Quebec had initially voiced support for the project and made efforts to facilitate the investment but then backtracked for “political reasons.”
Further afield, the ISDS case stemming from a rejected coal mine in West Cumbria, in the U.K., provides important lessons for Canada. The investors in this case were granted planning permission in 2022 (the first approval for a new coal mine in 30 years), but this decision was challenged by environmental and local community groups in the courts.
In 2024, the British High Court struck down the planning permission for the mine on the basis that the project was incompatible with the U.K.’s climate ambitions. The company is now suing the U.K., using ISDS as if it were a supranational court of appeal, for upwards of £300 million (more than $560 million CAD).
Investors win more than 50 per cent of ISDS cases that make it to the award stage. It’s a coin toss, in other words, and not just statistically speaking. Arbitration panels often rule in different ways based on similar and, sometimes, the same set of facts and circumstances. For example, Canadian mining companies have both won and lost ISDS claims against Colombia related to the same mining prohibitions in the country’s sensitive mountain highlands.
The point to underline is that by unrealistically inflating investor expectations of an easy ride to project approval, Bill C-39 is destined to draw costly ISDS lawsuits when those expectations are dashed. Canada has spent hundreds of millions of dollars defending against ISDS cases under NAFTA, according to government records. The Ruby River and West Cumbria arbitrations, and a pipeline full of similar international cases, are proof positive of the risk.
Canada lowered the threat of such cases when it agreed not to give U.S. investors access to CUSMA’s ISDS process. However, investors from Japan, Australia, South Korea, the U.K. and dozens of other capital exporting nations will be able to sue Canada for delays or cancellations to harmful or unpopular major projects.
While many countries including Australia, South Africa and the European Union have found ways to extricate themselves from investment treaties, the Carney government is extending these excessive protections to investors from the United Arab Emirates (big players in Canadian ports and prospective investors in energy and minerals projects), Saudi Arabia, Indonesia and Türkiye in new trade and investment treaties, expanding Canada’s future liabilities.
Not the way to Build Canada Strong
Real projects of national interest would be determined openly and democratically by the federal and provincial governments in consultation with First Nations and the public. Instead, they have been selected through a kind of project lottery in which domestic and foreign investors, and provincial cabinets, proposed what they would like to build or invest in (because it would be profitable) and someone in the Prime Minister’s inner circle thought it was a good idea.
These projects are then deemed, by some non-transparent process, to be so important to the national interest that we must make them as cheap to build (for the private investors) as possible, including by ignoring our own environmental laws, international labour rights, and obligations to consult publicly, including with Indigenous Peoples with constitutional rights in this this respect.
Taken together, this process for “Building Canada Strong” is a recipe for public unrest, political second-guessing and the inevitable barrage of investor-state claims. Canada could minimize future ISDS liabilities by cancelling its investment treaties. Unfortunately, we suspect the government and new trade partners like the UAE see these investment constraints as beneficial to the “speed and scale” agenda, as the pressure to avoid costly lawsuits will drive future governments to stay the course over public outcry.
This is faulty thinking. There is no crisis in the world trading order, no dearth of investment severe enough to warrant short-circuiting democracy, as Bill C-39 will do. The trade and investment treaty risk is another reason to go back to the drawing board.
About the authors
Stuart Trew
Stuart serves as director of the CCPA’s Trade and Investment Research Project (TIRP), which pools the expertise of academic, labour and non-governmental organization researchers to understand the impacts of trade and investment treaties and policy on the Canadian economy, public services, human rights and international relations.
