In a dramatic example of the powers assumed by the corporate world through trade deals, energy infrastructure corporation TransCanada commenced legal actions yesterday against the US president for cancelling the Keystone XL Pipeline project.
Keystone XL was designed to carry tar sands oil from Hardisty in Alberta to Steele City in Nebraska, thus increasing outlets for the most carbon-intensive oil currently produced, and reinforcing the dependency that industrialised countries like the US have on fossil fuels.
The legal case is being brought under the auspices of NAFTA, a predecessor of the current crop of free trade agreements such at TTIP, CETA and TPP. It poses four alarming propositions for us in the UK:
Firstly, the threat posed by CETA (Comprehensive Economic and Trade Agreement) between Canada and the EU. This is a prime example of the Canadian corporate world bearing its teeth. As they can no longer build a hugely profitable pipeline to the US, they want to claim compensation from the US taxpayer instead. Never mind the environmental concerns of the project, the effects on our countryside and animal habitats, there’s money to be made. Politicians need to be very conscious of this when making their minds up whether to support CETA or not when it comes up from ratification later this year.
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Secondly, and following on from the first point is the potential environmental impact this could have in Europe. Firms involved in fracking, drilling, mining and other environmentally damaging practices also look to exploiting the provisions of various trade treaties to further their profit making at a cost to taxpayers across the world. This opens up some nice possibilities from the likes of Cuadrilla, which has investment from US corporation Riverstone LLC, and similar fracking companies.
Then there is the warning that despite politicians and the business world trying to allay concerns of the corporate court system that features in TTIP, CETA and the rest by saying “don’t worry, it won’t happen here”. It is. It is happening where we were told it couldn’t. Most trade deals with ISDS (Investor State Dispute Settlement), the secretive corporate court system, are between developing countries and the industrialised west. Of course investment will flow in one direction in these partnerships, meaning the UK or the EU are relatively immune from resulting court actions. Now with these mega deals between western trading blocks, it’s open season. The attractions of suing rich governments for our tax money are too much for many corporations to resist. Expect more of this kind of action.
Finally, win or lose for TransCanada, the defending government in any ISDS case is in a lose-lose situation. It is impossible for compensation to be paid to a government in ISDS. Sixty percent of ISDS cases are won by the corporations, forty percent defended successfully by the government concerned. That is an excellent success rate for the businesses concerned (legal law firms are set to make tens of millions from this kind of action). Then there is the question of the costs of defending such a case. According to United Nations Conference Trade and Development legal costs for a government average at about US$8 million per suit and in complex cases that figure has been known to exceed US$30 million.
So, we ask again; why are our government so determined to put future governments and untold millions of pounds of taxpayer money at risk from corporate lawsuits of this type coming to our shores?