Trading Away Our Water Rights

Maude Barlow's picture

Maude Barlow

As posted in the Watershed Sentinel, March 22, 2014

Over the last 25 years, corporations have been the driving force behind global, regional and bilateral trade and investment agreements that favour their interests by limiting the ability of signatory countries to set conditions on global trade and investment. The goal of free trade agreements is the elimination of tariff and non-tariff barriers to the free movement of goods and services. Non-tariff barriers include local economic development programs, domestic food sovereignty rules, and environmental laws that are thought to be “excessive” and hinder trade.

Investment treaties give foreign corporations “investor-state” rights, allowing them to by-pass their own governments and directly sue the government of another country if they believe their “right to profit” has been affected by a law or practice in that country. Investor-state rights first appeared in the 1994 North American Free Trade Agreement and have exploded since. There are almost 3,000 bilateral deals between governments, most giving corporations these extraordinary rights, and many of them are used to gain access to the common resources of other countries, putting the world’s forests, fish, minerals, land, air and water supplies under direct control of transnational corporations.

NAFTA Lawsuits
Canada’s freshwater heritage has been directly affected by Chapter 11, the investor state clause of NAFTA, which allows American corporations operating in Canada to sue for financial compensation if any changes are made to the policies or practices under which they first invested. In 2002, SD Myers, an America company specializing in the disposal of hazardous waste, including PCBs, was awarded over $8 million from the Canadian government for loss of profit after Canada banned the trade of PCBs to protect its water. Currently, Lone Pine Resources, an American energy company, is suing the government of Canada for $250,000 because in 2011, the province of Quebec passed a moratorium on shale gas fracking in order to protect its water reserves.

If the government of Alberta were to ever limit the current water access of the energy companies operating in the tar sands, say legal experts, the American companies could sue for huge sums of compensation from the government of Canada. Joseph Cumming and Robert Froehlich of the University of Toronto’s Faculty of Law warn that cancelling or limiting water licenses would be seen as a form of trade-illegal expropriation, costing the Canadian taxpayer potentially billions of dollars. Equally worrisome, they say, is that the threat of such compensation might prevent the Alberta government from taking such a step in the first place, allowing American energy corporations to dictate Canadian policy.

In a particularly disturbing development, the government of Canada awarded an American company compensation for the actual water rights it was no longer using when it abandoned its Canadian operation. After running a pulp and paper mill in Newfoundland for over a century, US forestry giant Abitibi Bowater declared bankruptcy and left the province in 2008. The Newfoundland government expropriated the company’s assets in the province, including its water rights, in order to help pay for environmental clean-up and pensions for laid-off workers. The Newfoundland government argued that the water belonged to the province and was only allocated to the company as long as it operated a mill there. Abitibi Bowater sued the Canadian government under Chapter 11 of NAFTA, and the Harper government settled without going to a NAFTA tribunal, giving the company $130 million in compensation.

This has set a dangerous precedent whereby corporations from one country operating in another can now claim ownership of local water supplies, thus providing one more way in which the world’s water is becoming commodified and privatized.

Investment Arbitration Boom
Yet in spite of the profoundly undemocratic nature of the notion that corporations can hold foreign countries hostage in this way, both investor state treaties and disputes are exploding in number. An April 2013 report by the South-North Development Monitor on the rise of international investment disputes found that there were 62 new cases of corporations challenging governments for compensation in 2012, the highest number of known treaty-based cases ever filed in one year. This brings the overall number of known cases to 518. Since most arbitration forums do not maintain a public registry of claims, the total number is likely much higher.

The strong majority of cases are laid by corporations from wealthy countries against countries from the developing world. This clearly demonstrates that the process works to favour powerful corporations and countries. As well, there are a growing number of disputes challenging environmental rules around the world, a dangerous development that threatens the rights of governments to protect vital water sources.

Meanwhile, an elite coterie of lawyers, arbitrators and financial speculators is seeking out and actively recruiting corporations to sue governments around the world over new health and safety, labour or environmental rules they may be considering. In their 2012 report Profiting from Injustice, Corporate Europe Observatory and the Transnational Institute say that the silent rise of a powerful international investment regime has ensnared hundreds of countries and put corporate profits before human rights and the environment. This “investment arbitration boom” is costing taxpayers billions of dollars and preventing legislation in the public interest.

Just fifteen arbitrators, all from Europe, Canada and the US (who can earn as much as $1 million per case), have decided 55 per cent of all the treaty disputes. “They have built a multi-million-dollar self-serving industry, dominated by a narrow exclusive elite of law firms and lawyers whose interconnectedness and multiple financial interests raise serious doubts about their commitment to deliver fair and independent judgements,” say authors Pia Eberhardt and Cecilia Olivet.

Undeterred, the Canadian government is deep in negotiations with Europe to seal a new form of trade and investment treaty that for the first time includes sub-national governments. The Canada-EU Comprehensive Economic and Trade Agreement will give French utility giants Suez and Veolia the right to challenge Canadian municipalities that try to remunicipalise their water services. It will also permit Swiss bottled water giant Nestle (whose water division headquarters are in France) the right to challenge provincial bans or limits imposed on bottled water takings.

A proposed major new investment agreement with China will give the Chinese state-owned energy company, CNOOC, the right to sue the Canadian government if British Columbia forbids the building of a controversial pipeline to carry Alberta tar-sands bitumen to the west coast for tanker export. The company will also have the same NAFTA rights that American energy companies now have to fight any move by Alberta to conserve and protect its water.

All these corporations will be able to use investor-state agreements to prevent a future federal government from undoing the damage the Harper government has done to our environmental laws. Harper has gutted the Fisheries Act, the Navigable Waters Protection Act and the entire environmental assessment process. Federal law no longer protects the vast majority of our lakes and rivers. Any attempt by a future government to re-introduce these protections could be met with a barrage of compensation claims by foreign corporations.

Canada must join the growing host of nation-states refusing to sign any deal that gives corporations such raw power.

Maude Barlow is the National Chairperson of the Council of Canadians.

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