Here's what we had to contribute to the Newfoundland and Labrador Fracking Panel that is accepting submissions up until June 1st.
To:
Members of the NLHFRP Fracking Panel
What
are the risks of investor-state lawsuits if we allow fracking?
I’m writing on
behalf of a St. John’s based group, Citizens against CETA, to
present arguments against allowing fracking to take place in
Newfoundland and Labrador. Our focus is not the potential
environmental and health effects of fracking, but rather the risk
they bring of investor-state lawsuits.
Investor-state
lawsuits are permissible under the auspices of trade agreements like
NAFTA and take place in independent, offshore tribunals. There are no
permanent judges in these tribunals and judgements are decided by
three lawyers, appointed each time a corporate investor chooses to
sue government. Neither is there an appeals process, which is
particularly alarming given that independent studies have revealed
that corporate bias and conflict of interest are inherent to these
tribunals.
If Newfoundland and
Labrador go ahead with fracking the ensuing legal costs for our
provinces could be very high. Here’s why:
Fracking
companies use investor-state lawsuits:
There is already fracking litigation under NAFTA. Lone Pine
Resources, a Canadian company with registration in the US, is suing
Canada for $250 million because of the Quebec government’s
decision to impose a temporary moratorium on fracking.
Suing
governments has become an industry in itself:
The likelihood of a corporate lawsuit is much greater than in the
past. That’s because hedge funds and other financial institutions
are increasingly offering to finance the corporate share of lawsuits
in return for a percentage (usually between 30-50%) of the
settlement or damages awarded. Mining companies are the most
frequent users of investor-state lawsuits worldwide.
Damages
awarded can be huge:
Increasingly, damages are based on the estimated loss of future
profits. The largest award to date is $2.3 billion against Ecuador
for cancelling the operating contract of an oil company in the
Amazon region.
Canadian
and NL laws count for nothing in these tribunals
as judgements are based on treatment according to the language in
the trade agreement(s). For example, in February of this year a
NAFTA tribunal awarded Exxon Mobil and Murphy Oil $17 million in
damages after our province tightened up requirements relating to
their research and development spending in this province. What most
people aren’t aware of is that three levels of Canadian courts had
already rejected the corporations’ argument that they were being
unfairly treated. The Canadian courts cited the oil companies’
responsibilities under the Atlantic Accord as their reason for
denying them damages. That argument counted for nothing in the
NAFTA tribunal.
Who
will pay the costs? It is
Canada, not the provinces, that has to pay the the costs of
investor-state lawsuits because it is the federal government that is
sued, even if it is a municipal action that causes the lawsuit.
However, the federal government has served notice that it
will find ways in the future to reclaim
costs and damages from the provinces.
Will
the federal government defend us against lawsuits?
They did not do so in the case of the Abitibi-Bowater dispute, in
spite of a request from the province. The result was a $123 million
settlement.
What
will be the impact of CETA? If
the CETA trade agreement between the European Union and Canada is
ratified, the risk of investor-state lawsuits will be made greater
as CETA’s environmental regulatory protection is weak. That will
encourage lawsuits. Over half of the investor-state lawsuits
worldwide so far have been filed by European corporations.
If our province
allows fracking and then tries to back out or tighten up regulations
at a future date we risk very costly lawsuits in tribunals with
dubious legal and ethical legitimacy. Where are the long term
benefits of fracking that would justify this undermining of the
Canadian judicial system and possibly cost us huge amounts in
damages?
Marilyn Reid
for Citizens against CETA
