Law Times

Law Times • November 25, 2013 Page 7 COMMENT Tricks of trade Is ICSID really good for the Canadian taxpayer? BY AntHOnY DAiMsis & tOlGA YAlKin For Law Times M up. There are no further routes of appeal. The impacts of these changes are very significant. They create the very real possibility that taxpayers will be on the hook to international investors for conservation, environmental,  and  health policies. Let's look at some examples. In 2014, British Columbia intends to enact its Water  Sustainability  Act. This act would introduce a scheme to charge companies that draw water from B.C. wells. Nestlé, a Swiss company, has been bottling and selling water in B.C. for years. These regulatory changes would affect its cost of doing business and arguably violate Canada's obligation to ensure Nestlé's fair and equitable treatment. International investment law often considers significant changes to pre-existing regulations  to be breaches of investment treaties. Prior to ICSID, Canada could have challenged a potential claim by Nestlé as conflicting with  a  legitimate public policy objective  such as conserving groundwater.  Under ICSID,  such an argument would fall  on deaf ears. And worse, Canada's courts would be powerless to refuse enforcement.  Similar disputes abound. Quebec might not be able to refuse Lone Pine Resources Inc.'s demand to conduct fracking on the St. Lawrence riverbed to extract natural gas from shale formations or British Columbia might not be able to recoup the health costs of its residents from international tobacco companies under the Tobacco Damages and Health Care Costs Recovery Act. The examples are endless.  ICSID's proponents argue it increases foreign direct investment and protects Canadian investors abroad. This may or may not be true, but at what cost? Prime Minister Stephen Harper needs to convince Canadian taxpayers they should pay foreign investors when the government seeks to protect the environment or their health. So far, he hasn't even tried. LT u SPEAKER'S CORNER ost trade lawyers across the country are lauding Canada's ratification of the International Centre for Settlement of Investment Disputes Convention. But they glaze over the serious and far-reaching effects for Canadian public policy. In order to understand how and why that's the case, it's necessary to know a little bit about international investment law, which is what the ICSID convention is all about. Canada is a party to a number of bilateral and multilateral investment treaties. In them, Canada extends protection to investors of other partner nations. In exchange, those other partner nations extend Canadian investors the same protection. Investment treaties often protect investments from expropriation, ensure their free transfer in and out of the country, and provide the investor with fair and equitable treatment. So if a Swiss investor in Canada has its investment expropriated, it can bring a claim directly against the Canadian government.  And if a Canadian investor in Switzerland has its investment expropriated, it can bring a claim directly against Switzerland. The theory behind investment treaties is that they encourage investment by reducing the risks undertaken by foreign investors. If a Swiss investor in Canada has suffered a wrong under an investment treaty, the Canadian government pays up. And if a Canadian investor in Switzerland has suffered a wrong, the Swiss government pays up. The cost of securing the overseas investments falls on the taxpayer as it's the Canadian and Swiss people who foot the bill when  their  respective governments take actions that violate  investment treaties. Investment treaties, therefore, represent a transfer from taxpayers to big business. Many proponents argue this  system  encourages foreign investment and stimulates growth. As with anything, though, there are potential downsides. Some  people, for example, criticize the  fact  that investment treaties require taxpayers to indirectly subsidize their domestic companies operating overseas. The ratification and implementation of ICSID aggravate such concerns for a number of reasons. In Canada, as things currently stand, if a foreign investor feels it has suffered an infringement of its rights under a treaty, it can seek arbitration. An arbitral panel, usually of three members, meets to decide the investor's claim. If the panel finds for the investor, it issues an award enforceable against Canada. More often than not, Canada pays the award. However, in some circumstances, it refuses and the investor must bring a claim for enforcement in the courts. The Canadian government can  resist enforcement on a number of grounds. For example, if an arbitral award results from the government's attempts to protect the environment or the safety of workers, a Canadian court may refuse enforcement. This is the public policy protection. Investors cannot bring a claim based on actions taken to fulfil a legitimate public policy. It stands as a defence against foreign investment encroaching on a society's fundamental values and policies and  reinforces  state sovereignty where it matters most: to have the final say on how best to protect the health and welfare of Canadians. With ICSID, this process changes dramatically as it eliminates the role of Canadian courts and public policy protection. If Canada doesn't agree with an ICSID award, it can only appeal the matter to an ICSID review panel. The review panel can only review the arbitral decision on a limited set of grounds that don't include public policy protection. Once the ICSID panel reviews the matter,  Canadian taxpayers must cough Anthony Daimsis and Tolga Yalkin are law professors at the University of Ottawa. Many questions as more details revealed in robocalls probe T he robocalls and the mystery man Pierre Poutine, who nobody knows for sure exists, burst onto the political scene and into Parliament once again last week. Elections Canada has come a long way in its investigation since election day on May 2, 2011, when automatic phone messages sent Liberal voters in more than 200 of the 305 federal ridings to non-existent polling stations. Elections Canada, after scrounging up information from among Conservative party workers, has charged a young Conservative organizer, Michael Sona of Guelph, Ont., with being behind the massive election fraud. Sona swears he's innocent and suggests the party has turned against him and has thrown him under the bus to cover up the fraud. It's serious business because election fraud is punishable by a jail term of five years and a $5,000 fine if the court finds him guilty. In the meantime, Elections Canada investigator Allan Matthews, a former top member of the Royal Canadian Mounted Police, has filed a sworn deposition in court called an information to obtain a production order as he seeks to probe the matter deeper. In his document, Matthews lists the evidence he has picked up so far. He says two or three Conservative staffers told him that a week to 10 days after the May 2 election, Sona appeared in their office. That would mean between May 9 and May 12. Timing is important. Arthur Hamilton (who proThey say he bragged in detail to them about how he had parThe Hill vided legal representation in the Mike Duffy-Nigel Wright ticipated in running the robocase, the in-and-out election call scam. scam of the 2006 campaign, Sona says that's all false. He and the Helena Guergis expulclaims he never appeared at sion matter) brought at least their office and never told them three of the young Conservaanything like that at all. In fact, tive election organizers to him he says he was on holiday on a as witnesses and notes he sat beach in Aruba at the time they claim he showed up. Sona has Richard Cleroux in on their interviews. Why would Hamilton be present even produced an airline ticket for the news media to examine that he during the interrogation by Matthews? He says is documented evidence confirming wasn't their lawyer. They say they had no counsel. Why were no other lawyers, such where he was. So who is telling the truth: Sona with as counsel for the other political parties, his airline ticket, stamped passport, and present for the interrogations byMatthews? According to the Matthews document, verifiable hotel reservations or the three young Conservative election workers? Sona came to the offices of Conservative Could they just be wrong about the dates staffers Rebecca Docksteader and John and everything else they say is true or Schudlo and boasted of his robocalls. But US Airways travel records to Arucould Sona be the Conservatives' scapegoat as he claims? The whole thing defies ba show Sona flying there on May 7 and the imagination. Somebody isn't telling the truth, wilfully or not. Sona goes further in describing what happened. He says that Jenni Byrne, who was the Conservative national campaign manager, told him to say nothing to the news media until she could reach a lawyer to act on his behalf. Byrne is now deputy chief of staff for Prime Minister Stephen Harper. And there's another strange twist to this story that links it closer to the Conservative party. Matthews reveals in his documents that Conservative party lawyer www.lawtimesnews.com returning on Saturday, May 14. He wasn't back in his Ottawa office until May 16. According to the Matthews document, Docksteader said Sona told her and Schudlo he had obtained a list of Liberal voters and recorded a message impersonating Elections Canada. Docksteader allegedly said Sona told her he was the person who bought a throw-away cellphone used in the robocall effort. Does that mean he was suggesting he was Pierre Poutine? We still don't know who fingered Sona to the news media. Harper said he didn't know either when asked about the matter in the House of Commons last Wednesday. So far, there are no convictions, not even of the mysterious Pierre Poutine. LT Richard Cleroux is a freelance reporter and columnist on Parliament Hill. His e-mail address is richardcleroux@rogers.com.

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