Canadian investors have exploited a controversial mechanism in international investment treaties to challenge public interest regulations in 24 different countries, according to a study released today by the Canadian Centre for Policy Alternatives (CCPA).
The report, by trade and investment researcher Hadrian Mertins-Kirkwood, documents the 55 known cases of Canadian investors using the investor-state dispute settlement (ISDS) system to sue foreign governments in international trade tribunals. It finds that the ISDS process has overwhelmingly been used by Canadian resource companies to dispute resource management and environmental protection measures in developing countries.
The study comes out on the heels of a request for investor-state arbitration, filed at the World Bank on July 30, by Canadian mining firm Gabriel Resources Ltd. The company is claiming that delays to the controversial Rosia Montana gold mine in Romania have violated the government’s investment treaty obligations.
“ISDS is supposed to protect foreign investors from arbitrary government actions, but in practice it is being used by multinational corporations to bully democratic governments into backtracking on actions taken in the public interest,” says Mertins-Kirkwood. “Canadian companies—particularly Canadian mining companies—are among the worst in the world when it comes to ISDS.”
Among the study’s findings:
- 62% of the 55 ISDS cases involving a Canadian investor are in the resource or energy sectors. Since 2006, 78% of cases have been in those industries.
- 58% of cases involve a Canadian investor challenging a foreign government’s resource management or environmental protection measures. Since 2006, the proportion is 72%.
- 56% of cases have been brought against developing countries, especially in South and Central America. Since 2006, the proportion is 72%.
- Canadian investors have only won or favourably settled four out of 28 concluded cases—a “success” rate of just 14%—and none of the winning “Canadian” investors were both based in Canada and invoking a Canadian investment treaty.
- 17 ISDS cases involving Canadian investors are still in progress.
The federal government claims it has aggressively pursued new investment treaties containing ISDS in order to provide a more “transparent and predictable climate for Canadian investors abroad.” However, the study finds that it is not at all evident that the supposed benefits of these treaties for Canadian investors outweigh the proven social, political and economic costs incurred by ISDS disputes at home and abroad.
Of the 55 cases identified in the study, only four resulted in a favourable outcome for the Canadian investor. In comparison, Canada has lost nearly half the ISDS cases it has faced from foreign investors, and has been pressured into backtracking on important public health and environmental regulations as a result of those losses.
"Investment treaties have compromised Canadian democracy and the democratic policy space of Canada’s trading partners—yet historically, and in aggregate, these deals have also not created a 'transparent and predictable' investment environment for Canadian investors,” says Mertins-Kirkwood. “Given these high costs and meagre benefits, the evidence does not support the continued expansion and intensification of Canadian investment treaties, or the inclusion of ISDS in larger free trade deals such as CETA and the TPP.”
A Losing Proposition: The Failure of Canadian ISDS Policy at Home and Abroad is available on the CCPA website.
For more information contact Stuart Trew, Canadian Centre for Policy Alternatives, at 613-563-1341 x304.