1001 - 207 West Hastings, Vancouver, BC V6B 1H7
phone: 604.684.7378; fax: 604.684.1312
http://vcn.bc.ca/wcel; email: admin@wcel.org

Steven Shrybman Executive Director, LL.B.
Linda Nowlan Staff Counsel, LL.B.
Mark Haddock Staff Counsel, LL.B.
Chris Rolfe Staff Counsel, LL.B.
Patricia Houlihan Staff Counsel, LL.B.
Andrea Finch Staff Counsel, LL.B.
Kate Smallwood Campaigner, LL.B., LL.M.

West Coast Environmental Law

direct line: 604.601.2506
email: sshyrbman@wcel.org

The MAI is a treaty about international investment that is currently being negotiated under the auspices of the Organization for Economic Cooperation and Development (OECD), and represents a critical element of a larger strategy to codify the rules upon which a global system of production and trade depend. While this agenda is fundamentally the project of the worlds largest corporations, it is also enjoys enthusiastic support by many OECD countries including Canada. This support appears founded on the faith that sustained market-driven growth will bring wealth and economic stability to the world community. In order to achieve this prosperity, governments need only allow market forces to operate unfettered by regulation or other government "interference".

If this sounds familiar, that's because this global economic model is simply an amplification of the policies that have guided domestic policy for decades. Absent, as always, is any notion of ecological limits, or of the need to address how the proceeds of growth will be distributed. Also missing is any real evidence to support the grand claims of those promoting liberalized trade and investment rules. In fact, our experience with this grow-now, pay-later paradigm has been a disaster for the environment and most of the world's population. Whether measured in terms of wealth distribution, environmental impacts, or economic stability, the globalization of the world's economy has dramatically accelerated our course along a path that appears to be headed for an ecological dead-end.

The MAI and the World Trade Organization: Unfinished Business

The most significant milestone in the efforts to establish a global economic order was the creation of the World Trade Organization in 1995. In many ways, the WTO can be seen as the culmination of efforts that began over fifty years ago to establish a truly enforceable international trade regime. In simple terms, the WTO's agenda is to promote international trade, and economic growth, by curtailing the ability of governments to regulate corporate activity. To accomplish this goal, WTO rules set out a long list of laws and regulations that governments may not adopt or otherwise seek to implement. While ostensibly limited to international trade, WTO rules are now so broadly defined they effectively impose this agenda for deregulation upon most aspects of domestic economic and environmental policy. It is no coincidence that since the advent of free trade, environmentalists spend more time fighting to preserve existing environmental initiatives than they do working to establish new ones.

However, because developing countries maintained a united front, they were able to successfully resist the campaign to entrench investment rights in the WTO. Thus the MAI remains the most important missing piece of the WTO puzzle. To accomplish this unfinished business, developed countries are now pursuing this investment agenda under the auspices of the OECD, and the current schedule would see an agreement signed in May, 1998. Once the MAI becomes a reality among the world's elite countries, its proponents regard inclusion under the WTO as inevitable.

If this strategy succeeds, the MAI will fundamentally undermine the prerogatives of all WTO member governments to regulate corporate activity in the public interest. In effect, the MAI would bring about an enormous transfer of power from governments to the Boards of Directors of the world's largest corporations. It is difficult to overstate the seriousness of the challenges posed by this investment regime to environmental and other societal goals, including that of democratic governance.

The following assessment provides an overview of the essential components of this global investment treaty and describes several of the ways MAI rules will undermine environmental goals.

National Treatment: All of the Rights - None of the Responsibility

The first principle of the MAI is that of National Treatment, which prohibits government policies or laws that favour domestic companies or investors. Under this rule, foreign investors and corporations must be given every right, concession or privilege that a government might extend to local companies or communities. National Treatment would, for example, prohibit:

policies that favour community land tenure or resource management rights,

citizenship requirements for those seeking fishing or woodlot licenses; or,

subsidies to support community economic development.

It is fundamental to sustainability that the right to exploit a resource come with the obligation to ensure its long-term stewardship. The principle of National Treatment would permanently sever this fundamental relationship.

Investor Rights: Special Status for Foreign Corporations

Under the heading of "Performance Requirements" the MAI sets out a lengthy list of government measures that cannot be imposed on foreign corporations, even when these same controls apply to domestic companies and investors. In what represents a distinct departure from the principle of National Treatment, this protection from government "interference" is accorded only to foreign corporations. Thus under current MAI proposals, governments are prohibited from requiring such corporations, as a condition of the right to do business in Canada, to:

achieve a given level or percentage of domestic content, or to purchase goods or services locally;

transfer environmentally sound technology;

supply local markets or value-added producers;

achieve a given level or value of production, investment, employment, or research and development; or,

hire locally.

If we are to contain and ultimately reduce rates of resource exploitation that are seriously damaging once abundant and diverse ecosystems we must work together to build more diverse resource economies; promote local economic development; foster environmentally sound technologies; and, ensure "just transitions" for workers. MAI rules will make each and every one of these goals far more difficult, if not impossible, to achieve.

It is a central tenet of BC's natural resources policy that the right to access public resources comes with the obligation to invest in local production and processing -- the most recent example being the Jobs and Timber Accord. Moreover, access to public resources is often restricted to Canadian citizens or companies. Now under MAI rules, the obvious conclusion for a Canadian company to draw is that it would be better off carrying on business as the subsidiary of a foreign corporation. In effect, the MAI is a carrot enticing corporations to sever any ties they may have to domestic economies.

Expropriation: Entrenching Private Property Rights in a Global Constitution

Under the heading of Investor Protection, the MAI provides that governments:

shall not expropriate or nationalize directly or indirectly an investment ... or take any measure or measures having equivalent effect (hereinafter referred to as "expropriation") except ... accompanied by payment of prompt, adequate and effective compensation.

It has long been the goal of property rights advocates to have these private rights entrenched in Canada's constitution. Their campaign is primarily directed at Canadian laws that asserted that private property rights must give way, in certain instances, to the greater public good. Thus challenges to zoning bylaws and habitat protection laws as representing a "regulatory taking" of private property, have been consistently rebuffed by Canadian courts. But what has been unacceptable to the courts, and unthinkable in the context of Canadian constitutional reform, may now be accomplished by the MAI, and on terms far more expansive than any contemplated by property rights proponents.

Because the MAI defines "expropriation" in the broadest terms, its rules may well prohibit any government regulation that even indirectly reduces the profitability of corporate investment. In fact, it would be difficult to identify an environmental or conservation initiative that would not have this effect, at least on some investors. Indeed there is recent evidence that environmental regulations are the most likely target of this prohibition against government "taking".

The case in point is a law suit brought by Ethyl Corporation, a US-based transnational, now seeking $325 million in compensation from the Canadian government because of the government's decision to ban the use of MMT as a fuel additive in Canadian gasoline. Ethyl Corporation has brought this suit under the investment rules of NAFTA, which serve as the prototype for the MAI, and is claiming that Canada's MMT ban represents an expropriation of its business manufacturing this neuro-toxic fuel additive.

Here is a list of other environmental measures that according to the lawyer representing the Ethyl Corporation, would also be vulnerable to attack (and we quote):

1. Remediation orders to prevent toxic seepage.

2. Changes to existing concession licenses to protect fisheries, flora or fauna.

3. Changes to land use regulations that would reduce the value of property a foreign investor.

4. Preventative measures taken to protect public safety that caused loss or harm to foreign investors.

5. Requirements that only environmentally-acceptable resource extraction techniques be used that would increase the cost of extraction.

To paraphrase another corporate lawyer recently quoted in the Globe and Mail, never before have corporations had a more powerful tool with which to "harass" governments unwilling to heed their lobbying efforts.

Investor-State Suits: The New Star Chamber

Arguably the most significant ambition of the MAI is to eliminate the role of national governments as intermediaries when corporations wish to enforce their rights against another government under this multilateral agreement. Conventionally, only national governments have standing to invoke dispute resolution processes under international trade agreements. For this reason, national governments have often acted to constrain the appetite of their domestic corporations to assail the policies and practices of other governments.

But under the MAI, a corporation need no longer persuade any government of the legitimacy of its complaint before seeking enforcement under an agreement which, ironically, it was not even party to. Under MAI rules, foreign investors have an unqualified right to insist that any complaint be resolved under rules of international arbitration, a process so secretive that it would rival those of the Star Chamber Court abolished three centuries ago.

It is precisely this process that Ethyl Corporation is relying on in its suit against the Canadian government. That case is now proceeding behind closed doors without public notice, without access to the documents filed, and without participatory rights for any other party.

Environmental Conditionalities: and Other Greenwash

In response to an environmental critique of the MAI, its defenders will quickly point to various provisions that appear to reflect some willingness to accept that investment rights respect some environmental limits. For example, MAI negotiators are presently considering the inclusion of the following provision:

The Parties recognize that it is inappropriate to encourage investment by lowering domestic health, safety or environmental standards or relaxing domestic labour standards.

Taken from language in the Investment chapter of NAFTA, what isn't clear simply from reading this provision is that it is unenforceable and for that reason, virtually meaningless -- particularly in the context of a trade agreement that encourages countries to compete for investment by allowing corporations to externalize environmental and other social costs.

Similarly, the performance requirements noted above include an "exception" that would allow governments to regulate where "necessary":

to protect human, animal or plant life or health, or:

for the conservation of living or non­living exhaustible natural resources.

Again what isn't clear to those unfamiliar with the esoteric rules of trade agreements is that this is identical language to that used in a general exception to WTO rules. In that context it has been given such a narrow interpretation as to render it entirely ineffective in defending a growing list of environmental laws (from US Clean Air Act regulations to Canadian Salmon and Herring Conservation programs) that have been caught in the cross-hairs of international trade dispute resolution -- an encounter that not one of these environmental measures has survived.

Finally, it is important to recognize that even should this environmental language prove to be far more effective than it has been in other trade agreements, it would still have no impact on the MAI rule against "expropriation," because it simply has no application to that part of the investment treaty.

Exceptions and Reservations

When it really matters, governments have been willing to create meaningful exceptions to the MAI rules. For example, a broad and unequivocal exemption has been included, at the insistence of the US, for measures deemed necessary for the "protection of essential security interests". But so far, no government has been willing to argue that a similar exception for government actions deemed necessary for the protection of our essential ecological security.

Instead, the federal government is offering critics of the MAI its assurance that it will "reserve" various policies and practices from the full application of MAI rules. In fact reservations under NAFTA explain how Canada has sheltered such diverse programs as citizenship requirements for commercial fishing licenses and our public health care system.

There are, however, several reasons to dubious about these assurances. To begin with, the extent of reservations that Canada may claim is a subject for negotiation and compromise. Moreover, environmental reservations aren't even on Canada's list of proposed reservations. Secondly even if they were, the MAI "standstill" rule effectively precludes new policy or regulatory measures that might even marginally impair investor rights. Thirdly, the MAI "rollback" rule means that inconsistent measures, such as reservations, will be reduced and eventually eliminated.

Finally, reservations which would be broad enough to provide meaningful opportunity for progressive environmental reforms would undo much of what the MAI would accomplish. In seeking to entrench the dominant paradigm of market-driven growth by reducing the role of government's ability to regulate corporate activity in the public interest, the MAI is on a collision course with the bedrock principles upon which our environmental agenda is built.

What You Can Do

The MAI isn't a reality yet, and a growing number of Canadians and citizens in other countries are working hard to ensure that it never will be. Here are a number of ways in which you can make you voice heard:

Learn more about the MAI -- visit our web site at http://vcn.bc.ca/wcel for information and links to other MAI resources and materials. Contact our office for a reading list of materials that you can share with friends and neighbours. Write to the editor of your local paper.

Let your federal MP know that you are opposed to the MAI and insist that she or he declare their position on it. Encourage your MP to actually read the draft Agreement. We believe that once MPs actually read the Agreement, they will be as opposed to it as you are.

Make sure that your organization or union is committed to assessing the impacts of the MAI and ensuring they are addressed. Join or organize a local group that can provide a focal point for public education and community action.

Arrange to meet with your local chamber of commerce and other business groups. Unless you are a large transnational corporation with business primarily based outside Canada, the MAI is very likely to be bad for business.

Promoters of the MAI are counting on your complacence -- don't accommodate them.