The Trouble with the TPP has discussed how the agreement’s investor-state dispute settlement provisions do not meet the standard set by the Canadian government in CETA, do not address key concerns over policy making as illustrated by the Bilcon case, and raise enormous risks as demonstrated by the ongoing Eli Lilly dispute over Canadian patent law. This final ISDS post points another problem for Canada with ISDS rules: our track record is terrible.
According to the UNCTAD dispute resolution database, Canadian investors lodged 39 claims between 1998 and 2016 using ISDS provisions found in trade agreements and bilateral investment treaties. With all those claims, Canada has only won three times: a 2013 mining case against Kyrgyzstan, a 2011 mining case against Mongolia, and a 2009 mining case against Venezuela. The record is even worse in claims involving NAFTA as Apotex lost in 2008, 2009, and 2012; Canadian Cattlemen lost in 2005, Grand River lost in 2004, Glamis Gold lost in 2003, Thunderbird lost in 2002, ADF lost in 2000, Methanex lost in 1999, Mondev lost in 1999, and Loewen lost in 1998. Canadian companies just doesn’t seem to win NAFTA claims.
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The last two Trouble with the TPP posts have focused on the agreement’s investor-state dispute settlement provisions, noting that they do not meet the standard set by the Canadian government in CETA and do not address key concerns over policy making as raised in the Bilcon case. The risks associated with ISDS rules are far more than just the subject of academic or legal debate. Experience shows that the cases can place billions of tax dollars at risk, threatening to wipe out the supposed “gains” created by trade deals.
The current legal battle between the Canadian government and international pharmaceutical giant Eli Lilly provides an illustration of what can happen when ISDS rules go wrong. In the early 1990s, the company applied for patent protection in Canada for two chemical compounds, olanzapine and atomoxetine. The company had already obtained patents over the compounds, but asserted that it had evidence to support new uses for the compounds that merited further protection. The Canadian patent office granted the patents based on the content in the applications, but they remained subject to challenge.
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The Canadian Chamber of Commerce has been one of the most vocal supporters of the TPP and intellectual property reform. It recently waded into the case that most clearly crystallizes the dangers of trade and IP in Canada: the Eli Lilly claim for compensation from Canadian taxpayers for hundreds of millions of dollars due to a pair of patent law decisions. Most patent experts believe that Canada has a strong defence, yet that has not stopped the foreign pharmaceutical company from seeking $500 million in damages.
Last month, several groups submitted amicus briefs to the dispute resolution panel, including one from the Canadian Chamber of Commerce (there is also a submission from CIPPIC and the Centre for Intellectual Property Policy). The Chamber suggests that declining spending in research and development may be due to legal uncertainty, despite years of declining research and development expenditures by international pharmaceutical companies in Canada that predates the Eli Lilly issue. The brief saves the money quote until the last paragraph:
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The TPP’s investor-state dispute settlement provisions have rightly attracted considerable attention given the risks that come with a process that gives companies the right to sue governments for hundreds of millions of dollars. Yesterday’s post discussed why the TPP ISDS rules do not meet the Canadian government’s own standard for dispute settlement as reflected in the Canada – EU Trade Agreement. The CETA provisions include a clear affirmation of governmental power to regulate, an appellate process, and rules designed to ensure fairness and non-bias in settlement cases. The TPP does not contain equivalent provisions.
The Trouble with the TPP’s ISDS provisions extend beyond the absence of policy freedom and fairness safeguards. The Columbia Center on Sustainable Development has published one of the most exhaustive examinations of the problems with the TPP’s ISDS rules, noting that the deal entrenches, rather than reforms, a flawed system. While the failure to address government regulation and procedural fairness consistent with the standards articulated by International Trade Minister Chrystia Freeland tops the list, the report also points to other issues that strike close to home from a Canadian perspective.
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Chrystia Freeland, Canada’s International Trade Minister, yesterday unveiled the final legal draft of the Canada – EU Trade Agreement. While CETA is still awaiting translation, Freeland indicated that she hopes the agreement will come into force in 2017. The lengthy delay in arriving at a final legal draft arose from ongoing European opposition to investor-state dispute settlement provisions that many fear may limit governmental regulatory power and lead to expensive corporate lawsuits. The CETA text unveiled yesterday features some notable changes to the ISDS rules, with Canada largely acquiescing to European demands.
The ISDS changes raise in CETA at least two points that are relevant for TPP purposes. First, claims that completed trade agreements are non-negotiable and cannot be changed simply isn’t true. CETA was completed years ago, yet political demands for changes to the ISDS rules led all parties to go back to the bargaining table to work out a new system. While Freeland called the changes “modifications”, the reality is that a major aspect of the deal was re-worked in face of European protests. If elements of CETA can be reworked, there may be ways to re-do aspects of the TPP.
Second, CETA and the TPP are no longer consistent with respect to investor-state dispute settlement.
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