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Friday, 15 January 2016 00:00

TransCanada's Financial Claim Against the US Shows the Danger of Trade Pacts

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aaaaaaaaaaaaaaaaaaakeystonexlnorth32Advocates in 2014 demonstrated in front of the White House in opposition to the northern section of the Keystone XL Pipeline. (Photo: Stephen Melkisethian)

In a January 13 opinion piece in the Wall Street Journal, Kristine Delkus, an executive vice president and general counsel at TransCanada, announced that TransCanada was going to file a claim against the United States for allegedly violating NAFTA. At issue is the Obama administration denial of a permit to construct the northern section of the Keystone XL pipeline:

The administration’s decision violates international agreements. When the U.S. government signed Nafta, it committed to provide Canadian investors with various protections against unfair, inequitable, and uncompensated expropriatory and discriminatory U.S. regulatory actions. The agreement enables companies, like TransCanada, to recover damages through international arbitration when Nafta’s provisions have been violated....

The damage to TransCanada is clear. It has lost the value of the project and incurred significant costs in pursuing what should have been a robust regulatory process based on facts and established criteria, not based on meeting misplaced symbolic political objectives.

Delkus also detailed how TransCanada was simultaneously pursuing a federal lawsuit in the US, charging that President Obama's decision to prohibit the construction of the northern Keystone XL section violates the US Constitution.

The NAFTA claim highlights longstanding fears of opponents of massive corporately written trade deals that such agreements allow companies to pursue "remedies" that supersede the sovereign powers of individual nations. This is because NAFTA and similar trade pacts allow for a separate arbitration trade-agreement tribunal process for adjudicating claims. According to the Canadian publication Oilweek, TransCanada has indicated that it intends "to file for $15 billion in damages against the U.S. government under the North American Free Trade Agreement (NAFTA) based on its rejection of the [northern section of the] Keystone XL Pipeline."

Oilweek interviewed the former head of the Government of Canada’s Trade Law Bureau, Matthew Kronby, who believes that a NAFTA tribunal finding favorable to TransCanada could have a profound impact on US policy decisions regarding corporations in nations that are signatories to mega-trade agreements:

[The claim is] going to increase the scrutiny on investor state arbitration not only under the NAFTA but in other treaties that the U.S. either has negotiated or is negotiating, for example the Trans Pacific Partnership, and possible inclusion of investment arbitration provisions in the free trade negotiations between the U.S. and the E.U. The U.S. is also in the process of negotiating a bilateral investment treaty with China.

What a claim like this demonstrates is that the U.S. can also be on the receiving end of claims and foreign investors will be looking to hold the U.S. to the same standards that it demands of foreign governments with respect to U.S. investors.

In an article in DeSmogBlog, Farron Cousins points out that the US could place some hope of defeating a TransCanada Keystone XL filing by seeking a finding from the NAFTA Commission for Environmental Cooperation. However, given that corporations worked with governments to craft NAFTA, the triumph of environmental interests over alleged "lost profits" should be viewed with skepticism.

Cousins also warns about even more serious threats to sovereignty and the environment as mega-trade pacts become even more weighted toward the interests of corporations than governments, asserting that NAFTA - which took effect in 1994 - is “nothing compared to the massive Trans Pacific Partnership (TPP) that President Obama is currently pushing.” Cousins adds:

According to Lori Wallach of Public Citizen’s Global Trade Watch, the TPP would allow multinational corporations to overstep federal environmental regulations in the name of business, thereby putting the interests of the company ahead of the laws of the governments involved in the agreement.  This means that corporations will legally be allowed to ignore existing environmental protections if they interfere with their “business as usual.”

If TransCanada proceeds with its intent to recover "damages" through an arbitration tribunal, it may be years before a final decision is issued in regards to its claim of $15 billion. However, the tar sands pipeline company's decision to use NAFTA as a means of "recovering" lost business opportunities due to a sovereign decision of the United States is ominous as far as the threat of mega-trade agreements.


Also read The Billions Made by Lawyers When Multinationals Put Countries in the Dock to learn more about the tribunal process for international corporate "lost profit" claims.

Not to be reposted without permission of Truthout.