October 31, 2019 – US investor-state disputes against Canada still loom under NAFTA, with five unresolved claims outstanding and the possibility that more could emerge, according to a new report from the C.D. Howe Institute. In “Keeping Score: Investor-State Dispute Awards between the US and Canada,” respected trade lawyer Lawrence Herman notes the ratification of the new Canada United States Mexico trade agreement (CUSMA) would not put an immediate end to investor-state claims.
“With the approval of the new North American trade deal, now dragging through Congress, the window will begin to close on the ability of US investors to launch claims against Canada,” says Herman. “Passage would trigger a three-year transition period for filing new claims. If the deal dies, investors would still be free to file claims under NAFTA.”
In the report, Herman notes that, over the past 25 years, US investors have launched the vast majority of claims under the investor-state dispute settlement (ISDS) chapter of NAFTA, but with decidedly mixed success, most cases against Canada having been dismissed by the panels.
ISDS is a system within trade agreements that allows companies to sue governments for practices that they allege discriminate against them. Since the inception of NAFTA, Canada has borne the brunt of defending investor claims, all of which have been prosecuted by American companies – 23 in total, five of which are still in process.
Canada’s success in these arbitrations is often overlooked in public commentary, he says, but the record of wins is quite impressive. The record shows that the total of panel awards against Canada comes to about $32.4 million, a relatively modest sum compared to the billions of dollars originally claimed.
Nevertheless, Herman argues, the current and possible future disputes could mean Canada is on the hook for more money. And if CUSMA is not ratified, the door will remain open for future claims to be filed.
“As to the basic question of whether ISDS is appropriate or necessary in Canada-US relations,” said Herman, “the agreement to put an end to this in CUSMA makes sense. Canada and the US are mature democracies governed by the rule of law and respect for procedural and substantive rights of private parties, with recourse guaranteed through the ordinary court system, unlike other parts of the world where these safeguards are lacking and where investors need recourse to third-party protection.
“Let’s hope CUSMA proceeds to ratification and these kinds of ISDS claims are ultimately removed from the agenda as bilateral irritants.”
For more information contact: Lawrence L. Herman, Counsel, Herman and Associates; or David Blackwood, Communications Officer, C.D. Howe Institute, phone 416-865-1904 ext. 9997, email: dblackwood@cdhowe.org
The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada's most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.