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Corporation Uses NAFTA to Sue Canada for $250 Million Over Fracking Ban

Delaware company uses trade agreement to have profit trump environmental interests

Common Dreams staff

photo: Toban Black via flickr

A US company is taking advantage of a corporate-friendly NAFTA provision in suing the Canadian government for over $250 million due to lost profits from Quebec's moratorium on fracking.

The company, Lone Pine Resources Inc., which is incorporated in the state of Delaware and headquartered in Calgary, Alberta, held mining permits in the Saint Lawrence Valley and has already spent "millions of dollars" to get the permits and approvals, according to the company, but the moratorium passed in 2011 by the province to study environmental risk revoked those permits. 

As Jeff Gray reports in the Globe and Mail, NAFTA allows "U.S. and Mexican companies to sue Ottawa if they feel they have been wronged by a government policy or action."

The company filed on Nov. 8 its arbitration intent (pdf) "under Article 1117 of the NAFTA for the arbitrary, capricious, and illegal revocation of the Enterprise's valuable right to mine for oil and gas under the St. Lawrence River by the Government of Quebec without due process, without compensation, and with no cognizable public purpose."

Public Citizen, an advocacy organization for the "the people’s voice," explains NAFTA's chapter 11 further:


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If a company believes that a NAFTA government has violated these new investor rights and protections, it can initiate a binding dispute resolution process for monetary damages before a trade tribunal, offering none of the basic due process or openness guarantees afforded in national courts. These so-called "investor-to-state" cases are litigated in the special international arbitration bodies of the World Bank and the United Nations, which are closed to public participation, observation and input. A three-person panel composed of professional arbitrators listens to arguments in the case, with powers to award an unlimited amount of taxpayer dollars to corporations whose NAFTA investor privileges and rights they judge to have been impacted.

The Sierra Club's Ilana Solomon and Deb Nardone explain how Lone Pine Resources is hardly alone is using trade agreements to sue governments over lost profits.

By the end of 2011, corporations such as Chevron, Exxon Mobil, Dow Chemical, and Cargill have launched 450 investor-state cases against 89 governments, including the United States. Over $700 million has been paid to corporations under U.S. free trade agreements and bilateral investment treaties, about 70 percent of which are from challenges to natural resource and environment policies. Corporations have launched attacks on a range of public interest and environmental regulations, including bans or phase-outs of toxic chemicals, timber regulations, permitting rules for mines, green jobs and renewable energy programs, and more. This case, however, is the first to directly threaten the obligation of governments to protect its people from the destructive effects of fracking.

They add that these corporate-friendly trade practices are expected to increase under the secretive Trans-Pacific Partnership (TPP) being secretly negotiated now:

Amazingly, instead of looking for ways to scale back and eliminate the rules in our trade agreements that threaten public interest policies in favor of corporate profits, eleven countries, including the United States and Canada, are currently in the middle of negotiations to expand the NAFTA investment rules in the Trans-Pacific Partnership trade pact. Under the Trans-Pacific Partnership, our air and our water could be threatened by more cases like this one. Governments must stop writing and signing trade pacts that put the interests and profits of corporations above the well-being and rights of communities.

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