Opinion

BC Premier Urged to Consider Fast Legal Action Against China Treaty

As time ticks down, FIPA expert Gus Van Harten and office of the premier exchange emails.

By Gus Van Harten, 24 Oct 2012, TheTyee.ca

Premier Christy Clark

Premier Clark: Her BC government predecessors warned against exactly this kind of treaty language.

[Editor's note: Osgoode Hall law professor Gus Van Harten, an expert in international investment treaties, sent B.C. Premier Christy Clark and Environment Minister Terry Lake two emails, one on Oct.10, the second on Oct. 22, urging the provincial government take legal action to delay ratification of the Canada-China Investment Treaty (FIPA). The Tyee publishes here the second email (with sections originally bold faced by Van Harten), then the premier's response, and finally, Van Harten's response.]

GUS VAN HARTEN TO PREMIER CLARK, OCT. 22:

Dear Premier Clark and Minister Lake,

I wrote to Premier Clark by email on Oct. 10, 2012 urging her to take action to stop the federal government from ratifying the Canada-China Investment Treaty (aka FIPA) on or about Oct. 31, as planned, until the treaty's constitutional and other implications could be assessed properly and resolved.

I have not as yet received a reply and would like to follow up, on an urgent basis, after uncovering this weekend a B.C. legislative committee report that made essentially the same recommendation in 1998 in relation to future investment treaties.

In particular, I recalled yesterday that there was a B.C. legislative study of the OECD's proposed Multilateral Agreement on Investment (MAI) in 1998. As proposed, the MAI contained an investor-state mechanism essentially the same as that in the Canada-China treaty. It would also have empowered arbitrators outside of Canadian law and Canadian courts to review legislative, executive and judicial decisions in Canada. Ultimately the MAI was not concluded due to concerns by some OECD governments about, among other things, the implications of investor lawsuits for their ability to govern effectively. Since this time, developed Western European and North American countries have signed few if any bilateral investment treaties amongst themselves.

I found in my basement this evening a copy of the report by this commitee, the Special Committee on the Multilateral Agreement on Investment (3rd Sess, 26th Parliament; Ms. Joan Smallwood, MLA, Chair), dated Dec. 29, 1998. It states among other things and directly on point to the Canada-China treaty (I regret any typos as I have entered this by hand):

Recommendation No. 22 of the Special Committee

"Your committee recommends that when negotiating the MAI or any future investment treaty, the federal government must ensure that the agreement does not apply to matters within provincial jurisdiction, including local government measures, without the express consent of the Legislative Assembly of British Columbia. Such consent must be obtained before the federal government makes international commitments that apply to provincial or local government measures. If the federal government fails to provide for such consent, then the provincial government should explore all means, including legal action, to defend vigorously its own jurisdictional rights and those of local governments to represent the interest of British Columbians."

Relevant discussion by the committee (last pages of the report)

"Respecting Provincial Government Jurisdiction

"It must be emphasized that provincial governments are not simply another set of 'stakeholders' to be consulted by the federal government en route to treaty signature and implementation. Under the Canadian constitution, the federal government is incapable of unilaterally implementing international treaty obligations in areas that fall within provincial jurisdiction. Nor is it acceptable for the federal government to use its treaty-making powers to do an end run around the federal-provincial division of powers or in a way that diminishes Canadian federalism and democracy.

"Investor rights of the scale and breadth contemplated in the MAI would affect many matters that fall partly or exclusively within provincial legislative jurisdiction. Some of the more important to British Columbians include: the management and conservation of natural resources; health care, education, and other social services; the regulation of property and civil rights in the province; and municipal institutions and governments.

....

"How is it that the federal government can expose provincial measures to binding international arbitration without the province's consent? ... Who will pay if a provincial measure is found to violate the federal government's treaty obligations? If the provincial government maintains an inconsistent measure, might the federal government be required to pay ongoing damages? Setting aside the jurisdictional issues, is it fiscally responsible for the federal government to negotiate an agreement that exposes it to open-ended liability for provincial government measures? And, faced with an adverse ruling, what steps might the federal government take to try to force provinces or municipalities to remove offending measures?

"The cost to Canadian taxpayers to defend provincial and local government measures against challenge and to vet future measures for potential inconsistency also cannot be ignored. Nor, just as importantly, can Canadians ignore the cost to democracy of the chilling effect such potential threats exert on provincial and local governments' ability to govern.

....

"... the committee's view is that if British Columbia's support is not explicitly given, then the federal government should negotiate only with respect to federal measures. In the committee's view, if the federal government fails to gain the express consent of the Legislative Assembly, then the Province must vigorously defend its authority on behalf of all British Columbians."

The report also has relevant recommendations on the relationship between investor-state arbitration, as contemplated under the Canada-China treaty, and environmental protection, natural resource management, and conservation; health, education, and social services; human and labour rights; First Nations; and municipal governments.

Comments

On reviewing this material, I was struck by its direct confirmation of the point that the B.C. government must take legal action if it is to defend its constitutional position from potentially irreparable harm due to ratification of the Canada-China treaty on or about Oct. 31. All of the questions that it raises, as highlighted above, are directly relevant to the Canada-China Investment Treaty. This treaty clearly requires closer study before its legal consequences are locked in by the federal government for 31 years. The federal government appears to lack constitutional authority to conclude the treaty but this will make no difference, from the perspective of international law and China's legal position vis a vis Canada, once the treaty is ratified.

With great respect, I urge you please to take steps to ensure that the federal government does not ratify this treaty without resolution of the constitutional implications. Other than perhaps a First Nation, it strikes me as unfeasible for any other person or organization to be able to obtain an injunction in time due to requirements of standing. If ratified, the treaty will change fundamentally the position of provincial legislative, executive and judicial powers in relation to any Chinese-owned asset in the country. This is not just a trade and economic issue but also, fundamentally, a constitutional matter.

I stress that, if the federal government is unwilling to delay ratification, you would need to seek an injunction this week to delay ratification until the treaty's constitutional implications can be resolved in Canadian courts as necessary.

Yours very sincerely,

Gus Van Harten
Associate Professor, Osgoode Hall Law School
Open access to my publications: http://ssrn.com/author=638855
Open access to my research database: http://www.iiapp.org

p.s. For your convenience, I reproduce relevant portions of my earlier correspondence of Oct. 10:

".... 1. There is a strong case that the federal government must obtain provincial consent before ratifying the treaty. The treaty clearly impacts on provincial authority over natural resources, land and property rights, and other matters. It applies to any legislation, regulation, or court decision that affects Chinese-owned assets, with limited exceptions. There is a real possibility that, over the lifespan of the treaty, Canada will face billion dollar-plus awards, due to provincial decisions, that are not reviewable by any Canadian court.

"2. Under the treaty, provincial powers, where they affect any Chinese-owned asset, are subject to the authority of arbitrators who operate outside the Canadian legal system. The tribunals' decisions are not reviewable by Canadian courts depending on whether the arbitrators choose to site their arbitration in a foreign jurisdiction. As such, the treaty appears to contravene the judicature provisions of the Constitution regarding the role of the Canadian superior courts. In various historical cases, the Supreme Court of Canada struck down legislation that contained broad privative clauses that precluded review of tribunals by the superior courts. The treaty's transfer of judicial authority is analogous and, arguably, more far-reaching.

"3. Unlike other international courts and tribunals, the treaty's tribunals can hear claims directly by individual investors without any requirement to resort to domestic courts. The arbitrators have broad authority, lack the usual safeguards of judicial independence in international courts, and can issue unlimited monetary awards that are enforceable against Canada in over one hundred countries. They are more powerful, but less institutionally independent, than other international courts and tribunals.

.... 

"I urge you to take steps to stop the federal government from ratifying the treaty without closer study and provincial consent...."

OFFICE OF THE PREMIER TO GUS VAN HARTEN, OCT. 23:

Hello Mr. Van Harten:

Thank you for your two emails regarding the Canada-China Agreement. Please be assured that we appreciate receiving your insight. We have received a great deal of feedback on this issue. You have clearly put a lot of thought into the implications of the Agreement and the research information you have provided has been shared with our Ministry of Jobs, Tourism and Skills Development officials for inclusion in those related discussions.

Again, thank you for sharing your knowledge with us.

GUS VAN HARTEN'S RESPONSE, OCT. 23:

Dear Premier Clark,

Thank you very much for your reply and for taking the issue seriously.

I would like to highlight especially that this is not just a trade/economic issue, but also, fundamentally, a constitutional one. As such, I hope you will also involve the Attorney General, Aboriginal Affairs, and other related ministries in the discussions.

This comment (printed in the Globe and Mail) pinpoints some of the constitutional issues, although it focuses on provincial powers rather than First Nations treaty rights or the role of superior courts and legislative supremacy:

What if the Canada-China Investment Treaty is unconstitutional?

Thank you again for your attention to this matter.

Best wishes,
Gus  [Tyee]

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