It is an understatement to say we were disappointed that the Canada-China Foreign Investment Promotion and Protection Agreement (FIPPA) was recently ratified by the Canadian government, after almost two years of delay. Since FIPPA was ratified we’ve received several inquiries asking what the ratification means for the Enbridge proposal, for other specific proposed projects, or for the environment generally. One email asked:
Does not the ratification of FIPA make any further protest against Enbridge or any other pipeline null and void? It seems quite clear that the Canadian Govt. will be sued, even if First Nations groups continue to oppose the Northern Gateway project.
Meanwhile in the Tyee, Mitchell Anderson suggested that the true purpose of the FIPPA was to gut Canadian constitutional provisions:
There is more than one way to skin a constitution, however. What if the real rationale for signing the [FIPPA] was to effectively gut those Charter protections so apparently hated by Harper?
Anderson went on to suggest that FIPPA “could lock in Harper's draconian cuts to federal environmental laws for almost eight electoral cycles.”
While the FIPPA provisions are certainly alarming, we do not think anything is to be gained by over-stating the problems associated with the FIPPA as they relate to the field of environmental law. With a few notable exceptions (such as the 31 year cancellation period), FIPPA’s provisions are not completely different than terms that appear in the North American Free Trade Agreement (NAFTA), or in other such agreements. NAFTA and other agreements have resulted in some high profile and disturbing claims against the Canadian government – including related to environmental matters – but they have not entirely removed the ability of Canadian governments to pass environmental laws. Nor will FIPPA.
What FIPPA says about the environment
Anyone who reads our Environmental Law Alert will know that we are not fans of FIPPA. In fact we wrote to Canada’s Department of Justice asking them to examine whether the treaty met Canada’s constitutional obligations to consult with First Nations prior to ratification and provided the Hupacasath First Nation with some initial funding to examine options to challenge the FIPPA in court.
But the FIPPA, like other trade agreements, does claim to give governments space to protect the environment. For example, the FIPPA states:
Art. 33(2) Provided that such measures are not applied in an arbitrary or unjustifiable manner, or do not constitute a disguised restriction on international trade or investment, nothing in this Agreement shall be construed to prevent a Contracting Party from adopting or maintaining measures, including environmental measures:
(a) necessary to ensure compliance with laws and regulations that are not inconsistent with the provisions of this Agreement;
(b) necessary to protect human, animal or plant life or health; or
(c) relating to the conservation of living or non-living exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption.
In other words, in general, absent exceptional circumstances, the agreement is not intended to prevent either country from adopting new environmental laws and measures, or maintaining existing ones.
Similarly, the sections that allow Chinese companies to claim compensation for “expropriation” of their investments do explicitly confirm that environmental regulation is not generally expropriation:
Except in rare circumstances … a non-discriminatory measure or series of measures of a Contracting Party that is designed and applied to protect the legitimate public objectives for the well-being of citizens, such as health, safety and the environment, does not constitute indirect expropriation. (Annex B.10)
Furthermore, some of the FIPPA’s key provisions also do not apply to “any measure denying investors of the other Party and their investments any rights or preferences provided to aboriginal peoples” as well as “any measure according rights or preferences to socially or economically disadvantaged minorities” (Article 8.3, Annex B.8, and Annex II to the Free Trade Agreement between Canada and the Republic of Peru, which the FIPPA incorporates). However, we remain concerned that these exemptions do not apply to claims of expropriation by Chinese companies (a point that we made in our letter to the Department of Justice).
Properly interpreted, these provisions do clarify that Canadian governments can use their law-making powers to protect the environment – including acting to stop projects like the Enbridge pipelines and tankers proposal.
So why are we concerned?
Our concern with the FIPPA is very real, but a bit more subtle than saying that FIPPA prevents environmental action. It comes from the gray areas in the agreement and the question of who will ensure that they are “properly interpreted.”
FIPPA, like other trade agreements, puts the responsibility for resolving disputes about how the agreement applies in the hands of the parties (where they can agree through a dispute resolution process) and trade tribunals – made up of trade lawyers selected by the parties. In additional to lacking the independence of a court system, trade lawyers (at the risk of stereotyping) are not known for prioritizing environmental protection.
There is also a risk that some of these trade tribunals may hear evidence behind closed doors, leading to uncertainty over the basis for their decisions. FIPPA Article 28 allows for public arbitration hearings and for hearing documents to be made publically available, if the nation involved in the arbitration determines it is “in the public interest to do so.” Any awards made by a tribunal must be made publically available, “subject to the redaction of confidential information.”
While FIPPA does broadly recognize the ability of governments to pass laws and undertake measures aimed at protecting the environment, would the threat of a FIPPA claim by a Chinese company make those governments think twice?
Or, here is a somewhat different example to consider: the recent Supreme Court of Canada decision in Tsilhqot’in Nation v. British Columbia confirmed that Aboriginal title exists on a territorial basis and, once established in Canadian law, includes the ability of the First Nation to use, control and proactively manage the title land, as well as enjoy its benefits both in present and future generations. Will governments that have allowed Chinese companies to exploit lands over which Aboriginal title is asserted negotiate in good faith with the First Nations to acknowledge such title, or will they be more concerned about avoiding potential claims that they are indirectly “expropriating” Chinese investments? This is just one example of potential concerns that may arise from the FIPPA, recalling that the entire point of the agreement is to give Chinese companies guarantees that the rest of us do not have.
Don’t despair, it’s not all over
So, yes, we are concerned. But we’re not up the creek without a paddle. There’s still room in Canada for strong environmental laws, and the powerful voices and legal arguments of First Nations and the general public standing together against the Enbridge and Kinder Morgan pipelines and tankers proposals continue to make it likely that neither project will ever be built.