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Investor-State Dispute Settlement: Human Rights vs. Corporate Profits

CETA Protest in Brussels 2016

By Cassandra Knapman, J.D. candidate, University of Western Ontario

In late 2016, long-running negotiations on the EU-Canada Comprehensive Economic and Trade Agreement (CETA) came to a shuddering halt when a small French-speaking region inside Belgium refused to add its signature to the deal. Wallonia, which for complex political reasons needed to sign off on CETA in order for Belgium – the lone holdout – to join, had objected to the inclusion of an Investor-State Dispute Settlement (ISDS) mechanism. Such mechanisms permit companies to sue states for alleged discrimination against foreign investors, although in practice they have long been criticised for undermining domestic regulations.

Wallonia’s reluctance about the mechanism reflected, in part, the criticism that these mechanisms cause states to trade human rights protections for investor money, a concern that has been echoed by UN Special Rapporteurs and scholars.[2] After a flurry of negotiations, Wallonia extracted an agreement to exclude the relevant ISDS sections from the provisional application, pending an opinion from the European Court of Justice as to their compatibility with existing European treaties.[3]

According to proponents, ISDS is intended to protect investors from adverse state action and supplement domestic dispute resolution systems.[4] It permits corporations to sue the foreign nations in which they do business for discriminating against or expropriating their business ventures.[5] These claims are sent to arbitration before the applicable judicial body outlined in the relevant treaty, with arbitrators typically chosen by the parties involved.[6] Under CETA, the proposed judicial body is the Investment Court System.[7]

Arbitration is an expensive process and traditionally requires each party to pay its own fees, regardless of the outcome. Alongside the costs of the arbitration, successful arbitration for the investor typically results in a monetary penalty against the state.[8] A study of eighty-two ISDS cases found the average monetary award for investors to be 10.4 million USD.[9] While the majority of international treaties do not allow arbitration decisions to permanently annul or infringe on domestic laws, arbitrators often order certain actions by the state, such as preliminary injunctions.[10] Alongside the costs and potential payouts, states are concerned that successful arbitration by investors will discourage future investment.[11]

One of the main critiques of ISDS is that it causes states to avoid passing more stringent legislation on human rights, labour, or the environment for fear these could trigger investor claims.[12] Some states have rescinded or watered down legislation challenged by investors before their claims proceed to arbitration. An example is Germany’s relaxation of pollution controls in response to arbitration claims from Swedish nuclear company, Vattenfall.[13] Canada has also conceded human rights protections to avoid arbitration.[14] For instance, in 1998 Canada backed down from a proposed ban of a neurotoxic fuel additive, after an American company sued the government under NAFTA. As part of a negotiated settlement, Canada was forced to issue a statement declaring that the company Ethyl’s MMT additive was not dangerous to public health or the environment.[15] This statement directly contradicted many studies warning of the environmental and health risks of the additive.[16]

According to a report by several UN Special Rapporteurs, ISDS mechanisms have penalized states for enacting legislation on issues such as “food security, access to generic and essential medicines, and reduction of smoking … or raising the minimum wage” among other human rights concerns.[17] As the effects of ISDS ultimately affect the rights and protections of individuals, arbitrations have also been criticized for their lack of transparency and their failure to allow public participation.[18] These concerns have led to states either hesitating or refusing to enter into treaties with ISDS clauses, including CETA.[19]

In developing CETA’s ISDS, the parties, including Canada, attempted to address these criticisms. They clarified the meaning of “fair and equitable treatment” of investors, which is usually not defined and so its interpretation has been left to tribunals.[20] Since tribunals have no formal system of precedent and are often composed of different members for each hearing, the meaning of “fair and equitable treatment” has varied by dispute.[21] Without a consistent definition, it is difficult for states to ascertain whether they have provided investors with “fair and equitable treatment.” Building on interpretations commonly used by international tribunals, CETA defines “fair and equitable treatment” to refer to discrimination on protected grounds, loss of due process or access to legal proceedings, arbitrariness and abusive treatment.[22] This stricter definition appears to provide for greater predictability of arbitration outcomes, and may also decrease investor claims by limiting what is included as unfair and unequal treatment by the state.

In addition to clarifying the language of ISDS, CETA’s provisions aim to introduce greater objectivity, certainty, and transparency into the arbitration process. CETA incorporates the UN Convention on Transparency in Treaty-based Investor-State Arbitration to allow for greater transparency in the arbitration process.[23] Furthermore, the arbitration process is made more objective by the introduction of the Investment Court System (ICS).[24] The ICS will have a standing arbitration panel to hear all ISDS claims made under CETA.[25] The panel members are appointed for five to ten-years by the CETA Joint Committee. During an arbitration, arbitrators must demonstrate independence from those involved in the dispute.[26] The ICS also maintains an appellant body to review arbitration decisions and ideally create greater consistency in arbitration decisions.[27] Greater objectivity and consistency should allow states to better foresee the outcome of arbitration and thus decrease the number of states self-limiting human rights legislation to avoid unknown arbitration outcomes. Lastly, CETA alters the rewards available as a result of ISDS arbitration such that the unsuccessful party pays all costs of arbitration. Moreover, should the state lose the arbitration, only monetary awards can be assigned.[28] These changes in arbitration awards will hopefully limit the negative effects that ISDS can have on human rights.

Despite these apparent improvements, many remain critical of the CETA approach. Belgium – or to be more accurate, Wallonia – lists “arbitrator remuneration,” “ability to seek external employment,” and “selection and dismissal” amongst its concerns that the ICS will not function as an independent and objective judicial body. Critics are also concerned that despite CETA’s additional environmental, labour, and human rights protections, ISDS arbitration will continue to deter states from instituting further such legislation.[32]

While CETA has taken steps to address concerns related to ISDS, critics remain concerned about how the ICS will function in practice and whether the additional protections will actually limit negative arbitration effects on domestic human rights legislation. However, depending on the decision of the European Court of Justice, the current ISDS mechanism may never be put into practice.

Whatever form the dispute resolution system between investors and states under CETA ends up taking, it is clear that human rights must outweigh investor profits.

CK

[1] “CETA Belgian Request For An Opinion From The European Court Of Justice” (6 September 2017), Kingdom of Belgium, Foreign Affairs, Foreign Trade and Development Cooperation, online: <https://diplomatie.belgium.be/sites/default/files/downloads/ceta_summary.pdf>. [Belgium]

[2] “Investor state dispute settlement (ISDS): Background”, Business & Human Rights Resources Center, online: <https://business-humanrights.org/en/investor-state-dispute-settlement-isds/investor-state-dispute-settlement-isds-background> [Resource Center]

[3] Ibid.

[4] Ibid.

+ Organisation for Economic Co-operation and Development Investment Division, “Investor-State Dispute Settlement” (16 May 2012), Organisation for Economic Co-operation and Development, pg 13, online: < http://www.oecd.org/investment/internationalinvestmentagreements/50291642.pdf >.

[5] “The Arbitration Game”, The Economist, (11 October 2017), online:< https://www.economist.com/news/finance-and-economics/21623756-governments-are-souring-treaties-protect-foreign-investors-arbitration>. [Economist]

[6] “The Basics”, ISDS Platform, online: <http://isds.bilaterals.org/?-the-basics->.

[7] J. A. VanDuzer,” Investor-state Dispute Settlement in CETA: Is it the Gold Standard?” online: (2016), C.D. Howe Institute at pg 9 – 16 <https://www.cdhowe.org/sites/default/files/attachments/research_papers/mixed/Commentary%20459.pdf>. [CD Howe]

[8] Organisation for Economic Co-operation and Development Investment Division, “Investor-State Dispute Settlement” (16 May 2012), Organisation for Economic Co-operation and Development, pg 24-25, online: < http://www.oecd.org/investment/internationalinvestmentagreements/50291642.pdf >. [OECD]

[9] European Commission, “Investor-to-State Dispute Settlement (ISDS) Some facts and figures” (12 March 2015) European Commission, pg 8, online: < http://trade.ec.europa.eu/doclib/docs/2015/january/tradoc_153046.pdf >.

[10] CD Howe, supra note 7.

OECD, supra note 8.

Resource Center, supra note 10.

[11]Resource Center, supra note 10.

[12] Ibid.

[13] Ibid.

[14] Ken Traynor, “How Canada Became a Shill for Ethyl Corp.” (July 1998), Canadian Environmental Law Association, online: <http://www.cela.ca/article/international-trade-agreements-commentary/how-canada-became-shill-ethyl-corp>.

[15] Ibid.

MMT is methylcyclopentadienyl manganese tricarbonyl and has been linked to heavy metal poisoning.

[16] Ibid.

[17] Alfred de Zayas, Catalina Devandas Aguilar et al, “UN experts voice concern over adverse impact of free trade and investment agreements on human rights” (2 June 2015), Office of the United Nations High Commissioner for Human Rights, online: <http://www.ohchr.org/EN/NewsEvents/Pages/DisplayNews.aspx?NewsID=16031>. [OHCHR]

[18] Resource Center, supra note 10.

[19] Economist, supra note 5.

[20] Ibid.

[21] Ibid.

[22] Ibid.

[23] OHCHR, supra at note 12.

[24] CD Howe, supra at note 7.

[25] Ibid.

[26]Ibid.

[27] Ibid.

[28] Ibid.

[29] Belgium, supra at note 1.

[30] CD Howe, supra at note 7.

Scott Sinclair and Stuart Trew, “Why progressives oppose Canada-EU trade deal”, Toronto Star, (22 September 2016) online: <https://www.thestar.com/opinion/commentary/2016/09/22/why-progressives-oppose-canada-eu-trade-deal.html>. [Sinclair]

[31]Sinclair, supra at note 24.

[32]Ibid.

By |January 3rd, 2018|Blog|

The Omar Khadr Controversy:
Child Soldiers in Canadian and International Law

Omar Khadr being interrogated by CSIS 2

 

By Madeline Torrie, J.D. candidate, University of Toronto Faculty of Law

One of the biggest controversies of 2017 was the Trudeau government’s decision to pay $10.5 million in compensation to Omar Khadr, a Canadian citizen and former child-detainee at Guantanamo Bay. Khadr had sued the Canadian government for violation of his s.7 Charter rights while in U.S custody, where he had been interrogated by Canadian officials. Supporters of the payment highlighted Khadr’s age ­­­— he was 15 years old at the time of the alleged grenade attack which killed U.S. soldier Christopher Speer — and role as a child soldier. Opponents of the payout – including the vast majority of the Canadian public – argued that, at best, the government should have waited for the courts to decide on the lawsuit. According to Shelly Whitman of the Roméo Dallaire Child Soldiers Initiative, this may have related to the idea of Khadr as “child terrorist”: the public believes there is less responsibility owed to children who were “recruited for terrorism”, compared with those abducted as child soldiers.

In an official statement on Khadr, Senator Roméo Dallaire wrote “International law and norms, which Canada is signatory to, are put in place so as to protect those children who are unscrupulously used as weapons of war and to hold those who recruit and use them to account.” In an interview for Global News, War Child founder Dr. Samantha Nutt stressed the importance of rehabilitation and reintegration, even for child soldiers who have done worse than Khadr, who have “raped, killed dozens of people, who have slaughtered villages and wiped out entire communities.” A Globe and Mail editorial echoed these sentiments, pointing out that our justice system “gives special protection to children, because of the diminished moral and mental capacity of youth, rather than singling them out for special forms of mistreatment.”

On the other side of the debate, Jenni Byrne, a Conservative Party political advisor, drew a sharp distinction between the teenaged Khadr and, i.e., the seven-year-old children who were kidnapped and drugged during the Sierra Leone Civil War. For Byrne, Khadr was “no child soldier.” In a commentary for Global News, radio host Andrew Lawton cited Howard Anglin, a former policy advisor to Stephen Harper, to argue, “no international law or treaty prevents the prosecution of minors for war crimes.”

Child Soldiers in Canadian Law

In the 2010 decision Canada (Prime Minister) v. Khadr, the Supreme Court of Canada specifically noted Khadr’s status as a minor to highlight the severity of the breach to fundamental justice caused by Canada’s role in interrogating him while he was detained in Guantanamo: “Interrogation of a youth, to elicit statements about the most serious criminal charges while detained in these conditions and without access to counsel […] offends the most basic Canadian standards about the treatment of detained youth suspects.”

Section 7 of the Canadian Charter of Rights and Freedoms clearly protects the right to “life, liberty and security of the person” except in “accordance with the principles of fundamental justice,” which the Supreme Court concluded were violated in the case of Omar Khadr. Furthermore, while the crime took place outside of Canada’s criminal law jurisdiction, the treatment of Omar Khadr in Guantanamo did not align with the values that Parliament outlined for young offenders in the Youth Criminal Justice Act. The Act requires that convicted and detained youth be separated from adults, and places a strong focus on rehabilitation rather than detention.

Canada’s military became the first in the world to adopt a doctrine issuing guidelines on how to address child soldiers in combat on March 2, 2017. The doctrine instructs that a detainee under the age of 18 must be “immediately removed from the adult population,” again emphasizing separation and rehabilitation. While the doctrine also acknowledges the right of soldiers to use force to protect themselves, even against child soldiers, it is a meaningful policy step towards addressing the reality of child soldiers in international conflict while also respecting their status as minors.

Child Soldiers in International Law

The treatment of Khadr contradicts Canada’s long history of supporting protections for child soldiers in international law and treaties. The 1977 Additional Protocols to the Geneva Convention prohibited the recruitment of children under the age of 15 in armed conflict and stipulated protection for child detainees which included separation from adults. This was followed by the 1989 Convention of the Rights of the Child which also included the 15-year-old age limit. This age limit of recruitment was raised to 18 in the Optional Protocol to the Convention on the Rights of the Child on the Involvement of Children in Armed Conflict, which Canada helped create and ratified, and was adopted by the UN General Assembly in 2000. However, the recruitment of soldiers between the ages of 15-18 is still debated in some jurisdictions.

The Supreme Court wrote in Khadr (2010), that since Khadr was 16 at the time of his detention and he had no access to counsel, that “Canada’s Participation in the illegal process in place clearly violated Canada’s binding international law obligations.” Canada has chosen to recognize children recruited younger than 18 as child soldiers. As such, its participation in the interrogation of Khadr without proper counsel contradicts Canada’s commitments to international treaties protecting the rights of child soldiers.

That said, child soldiers are not immune from war crimes prosecution. Dominic Ongwen, who was abducted by the Lord’s Resistance Army in Uganda at age 10, is currently facing 70 counts of crimes against humanity and war crimes at the International Criminal Court, for crimes he is alleged to have committed as he rose through the LRA’s ranks. The Ongwen indictment raises difficult questions about whether to see child or youth soldiers as victims or perpetrators. Like Ongewen, Khadr was a victim of his circumstances, but who also allegedly committed a war crime.

In the end, the decision to settle, though politically unpopular, was informed by a combination of legal factors, including the Canadian Charter of Rights and Freedoms, the earlier Supreme Court decision, the Youth Criminal Justice Act, and decades of international law. These all point to the conclusion that Khadr was deserving of the rights and protections Canada affords to minors, and the reintegration and rehabilitation Canada has committed to provide to child soldiers.

What’s next for Khadr?

Khadr’s legal troubles are not over, however. Although out of prison, he was only released on bail from his eight-year prison sentence, under conditions which have affected, for example, access to his controversial family. In 2015, a Utah court ordered Khadr to pay out US$134.2-million in a wrongful death lawsuit filed by the widow of Christopher Speer. Khadr has so far refused to pay, and analysts are skeptical that it will ever be enforced in a Canadian court.

MT

By |December 15th, 2017|Blog|

Genetic Non-Discrimination:
Civil Rights in the 21st Century

Cadena de ADN

By Gregory Ringkamp, J.D. candidate, University of Toronto Faculty of Law

As genetic information becomes increasingly easy to access, new questions have arisen as to how society should permit the information to be used. When the United States adopted the Genetic Information Nondiscrimination Act in 2008, Senator Ted Kennedy couched it in terms of human rights, referring to it as the “the first civil rights bill of the new century of life sciences.”[1] The Genetic Non-Discrimination Act, which became law in May 2017, is set to bring similar protections against genetic discrimination to Canada.

Genetic testing is a powerful predictive tool, and rapid advances in medical technology have made it more available to the public than ever before. 23andMe, a private genetic testing company, allows users to learn about their susceptibility to certain diseases, and about their likelihood of passing them on to their children, for the cost of just $249. The medical community is moving toward a better understanding of how a person’s unique genetic characteristics influence their response to treatment, opening the door to a future of better-tailored drugs.

But the increasing prominence of genetic information has also brought new concerns about how such powerful predictive information ought to be used. An accurate prediction about someone’s future wellness may be of particular interest to employers and insurers, who could plausibly use the information to make hiring or coverage decisions. Because one’s genes cannot be changed, such a possibility raises issues of fairness. Individuals cannot choose their genes any more than they can choose their race, sex, or national origin; it would seem to offend basic notions of fairness to allow someone to be treated differently on this new basis. Additionally, fears of genetic discrimination (even if unrealized) may make it harder for researchers to advance the field of genetics. Fear of genetic discrimination has been found to be a significant reason why patients choose not to participate in genetic studies.[2]

The Genetic Non-Discrimination Act, like similar acts in the United States and Europe, addresses these concerns. By assuring Canadians that the genetic tests they undergo will not be used against them by insurers, employers, and others, the Act theoretically makes the tests more attractive, while also preventing unfair discrimination on the basis of genetic information.

In addition to amending the Canadian Human Rights Act to add “genetic characteristics” as a prohibited ground of discrimination, the Act amends the Canada Labour Code to prevent employers from requiring their employees to undergo genetic testing. The Act also prohibits anyone from requiring genetic testing, or the disclosure of genetic results, as a precondition for providing goods or services. In its most obvious application, these provisions of the Act would prohibit insurers from requiring genetic information when deciding whether or not to cover someone.

However, the Act faces a number of challenges – first, on its fundamental usefulness. Although it might seem logical that a genetic non-discrimination act would make genetic tests more attractive by easing fears of discrimination, at least one study has found this not to be the case.[3]

Furthermore, although the Act would prohibit discrimination on the basis of genetic characteristics, it would create a new inequity – patients with genetic conditions would gain the unique ability not to disclose a preexisting condition to their insurer. It would be fraud for any other patient to do the same, even if their condition was similarly unavoidable.[4]

Additionally, individuals whose genetic tests show that they are at risk for developing a condition tend, naturally, to seek more insurance coverage to offset the risk.[5]. Because of this, the Act may result in increased rates for policy-holders, as insurers increase premiums to account for the greater number of high-risk individuals receiving coverage. Indeed, the Canadian Institute of Actuaries has suggested the Act may cause term life insurance premiums to rise by up to 30 per cent for men and 50 per cent for women.[6] The people least able to afford insurance will be hardest-hit by any such increase in rates.

The Act’s constitutionality is also in question. In July 2017, the Quebec government referred the constitutionality of the act to the Quebec Court of Appeal, asking whether the Act is ultra vires Parliament’s power over criminal law. At the time of writing, the question has not been decided.

GR

 

References

[1] David H. Kaye, “Gina’s Genotypes” (2010) 108 Mich. L. Rev. First Impressions 51. Available at: http://repository.law.umich.edu/mlr_fi/vol108/iss1/5

[2] AA Lemke, “Public and Biobank Participant Attitudes Toward Genetic Research Participation and Data Sharing” (2010) 13:6 Public Health Genomics 368-377

[3] Amalia Miller & Catherine Tucker, “Privacy Protection, Personalized Medicine, and Genetic Testing” (2017) Articles in Advance, Management Science 1-21

[4] Canadian Institute of Actuaries, “Proposed Amendment to Bill S-201, An Act to prohibit and prevent genetic discrimination” (November 2016), Available at: http://www.ourcommons.ca/Committees/en/JUST/StudyActivity?studyActivityId=9194069#DT20161201JUSTMEE38ID9194069

[5] In the REVEAL Study, Harvard researchers found that individuals positive for a certain version of the APOE gene, which is associated with a greater risk of developing Alzheimer’s disease, were five times more likely to purchase long-term insurance. (https://mobile.nytimes.com/2014/04/08/science/fearing-punishment-for-bad-genes.html).

[6] “Proposed Amendment”, supra at p 2

 

By |November 22nd, 2017|Blog|