How Corporate Sovereignty In Trade Agreements Can Force National Laws To Be Changed

from the they-said-it-couldn't-be-done dept

As we noted recently, one of the most worrying aspects of corporate sovereignty chapters in trade agreements is the chilling effect that they can have on future legislation. That’s something that the supporters of this investor-state dispute settlement (ISDS) mechanism never talk about. What they do say, though, is that corporate sovereignty cannot force governments to change existing laws. A recent defeat for Canada before an ISDS tribunal proves that’s not the case:

An international trade tribunal has ordered Ottawa to pay ExxonMobil and another oil company $17.3 million, following a complaint that the companies were required to spend money in Newfoundland and Labrador on research and development.

The case was brought by ExxonMobil using the corporate sovereignty provisions in the North American Free Trade Agreement (NAFTA), and concerned another agreement, called the Atlantic Accord. As CBC News explains:

Under the terms of the Atlantic Accord, a federal-provincial agreement on oil development first negotiated in 1985, oil companies are required to support petroleum-focused research and development in Newfoundland and Labrador, as part of its local benefits package.

In other words, three decades ago, Canadian politicians had passed a research and development package, one of whose measures was designed to boost local employment — exactly the kind of thing that voters want their politicians to do. But the ISDS tribunal ruled that under NAFTA, this was not permitted, and awarded substantial damages to ExxonMobil for being required to comply with the Atlantic Accord. But it gets worse:

Unless the governments of Canada and Newfoundland and Labrador agree to change the R&D legislation, Ottawa could be on the hook for continued damages. The federal government is responsible because NAFTA is an agreement between sovereign nations.

That is, the corporate sovereignty provisions in NAFTA are being used to force the Canadian government to change existing and long-standing legislation — something that ISDS fans assure us never happens.

Follow me @glynmoody on Twitter or, and +glynmoody on Google+

Filed Under: , , , , , , ,

Rate this comment as insightful
Rate this comment as funny
You have rated this comment as insightful
You have rated this comment as funny
Flag this comment as abusive/trolling/spam
You have flagged this comment
The first word has already been claimed
The last word has already been claimed
Insightful Lightbulb icon Funny Laughing icon Abusive/trolling/spam Flag icon Insightful badge Lightbulb icon Funny badge Laughing icon Comments icon

Comments on “How Corporate Sovereignty In Trade Agreements Can Force National Laws To Be Changed”

Subscribe: RSS Leave a comment
Pragmatic says:

Re: Re: I don't get it:

They’re industry lawyers. If they didn’t rule in favor of the litigating industry, their pay might drop or they might find that their services are no longer required where they work as part of an unofficial quid pro quo setup with business partners.

Direct conflicts of interest might be hard to prove but it’s the indirect ones I’m interested in.

It’s why I hate the idea of corporations ruling the roost.

Paul Clark (profile) says:

Frederal vs provincial Politics

One quirk of the Canadian political structure is that trade deals are the responsibility of the federal goverment and resource development is the responsibility of the provincial government. The provinces can do what they like with foreign multinationals and its the federal government that has to pay the penalties. Soemtimes provincial/ federal relationships are strained ….

GEMont (profile) says:

What Me Worry?


Well, ya, we’d be very upset about this pay-off to EM, if that money was coming out of our own pockets, but hey, the Canadian Taxpayer is footing the bill for all of this, as usual, and a lot of our friends and relatives have stock in ExxonMobil, so its not really as bad as it looks… at least not for us career politicians, anyway.

Karla Toowatt,

Spokesperson, Canadian Career Politicians Club


Add Your Comment

Your email address will not be published. Required fields are marked *

Have a Techdirt Account? Sign in now. Want one? Register here

Comment Options:

Make this the or (get credits or sign in to see balance) what's this?

What's this?

Techdirt community members with Techdirt Credits can spotlight a comment as either the "First Word" or "Last Word" on a particular comment thread. Credits can be purchased at the Techdirt Insider Shop »

Follow Techdirt

Techdirt Daily Newsletter

Techdirt Deals
Techdirt Insider Discord
The latest chatter on the Techdirt Insider Discord channel...