This is a guest post by Gus Van Harten, professor at the Osgoode Hall Law School and author of Sold Down the Yangtze: Canada's Lopsided Investment Deal with China. This post originally appeared on the Globe and Mail.
For years, Prime Minister Stephen Harper’s government told Canadians that it could not act on climate change until China joined in. Yet, in 2014, the government quietly finalized a 31-year investment treaty that, in essence, gives Chinese oil companies an advance bailout against a range of steps that Canada may need to take on climate change.
Take, for example, the call by more than 100 scientists for limits on oilsands expansion until a serious Canadian plan on climate change is in place. What is a serious plan? The scientists said it would need “to rapidly reduce carbon pollution, safeguard biodiversity, protect human health and respect treaty rights.”
Now, consider Canada’s new Foreign Investment Promotion and Protection Agreement (FIPA) with China.
The deal gives Chinese companies powerful rights to frustrate even modest steps that reduce the value of their oilsands holdings. That is, if governments in Canada put new limits on the oilsands, they face major liabilities under the FIPA’s system of foreign investor protection. Worse, Canadians cannot know reliably how the FIPA is being used – and whether it is affecting government decisions – because the agreement makes special allowances for confidential settlements with Chinese investors.
On a close study of the FIPA’s terms, a key purpose of the deal was to open Canadian resources to China and to preserve the value of Chinese assets in Canada. In the case of the oilsands, there are already billions of dollars in Chinese-owned assets and expected profits that would be affected by a tougher response on climate change. If China is not on board for how we decide to regulate in Canada, we will have a problem, owing to the FIPA.
Read DeSmog Canada's in-depth interview with Gus Van Harten on the Canada-China FIPA
Can we expect FIPA arbitrators to award billions of dollars in compensation to Chinese companies? The short answer is yes. In the past few years, there have been huge awards to oil companies under similar investment deals: $2-billion (U.S.) against Ecuador, $50-billion (U.S.) against Russia.
True, these cases differ from potential disputes about climate change in Canada’s resource sector. But it is not unrealistic to expect FIPA arbitrators to (1) issue compensation orders against Canada, since they’ve done so in various North American free-trade agreement cases already, and (2) order vast amounts to be paid by Canadians, since they’ve done so against other countries, and the amounts reflect the value of the foreign investor’s assets, not the Boy Scoutishness of the condemned country.
At the least, the FIPA has made it more difficult for governments in Canada to take action on climate change, assuming that governments are (usually) careful with billions of dollars in public money. Put differently, the challenging question of how to respond to climate change in the oilsands is a danger zone under the FIPA, because much of the oilsands are Chinese-owned and because the Chinese owners will not take kindly to government interference with their business plans.
You may ask, why would the federal government agree to a FIPA with China that puts an uncertain and uncontrollable price tag on Canada’s options to respond to climate change – and other important issues too? Why would the government move power over our future from Canada’s legislatures, governments, and courts to Chinese investors and FIPA arbitrators?
I think the straightest answer is that Mr. Harper seems to have wanted it that way. If one accepts climate change as a pressing concern, it is hard to imagine a more epic fail than the FIPA.