NAFTA ruling allows companies to seek damages for possible breaches of Canadian law

These agreements have included a clause giving individual companies the right to challenge the decisions of democratically elected governments, in ways that citizens themselves don’t have.

Commentary by Larry Brown, National Secretary-Treasurer, National Union of Public and General Employees (NUPGE).

Ottawa (31 March 2015) — Welcome to the bizarre world of corporate supremacy over domestic laws and governments. In this world, it's all backwards logic that provides powers to corporations to override democratic decisions by our courts and our governments.

NAFTA rulings continue to undermine Canadian decisions

For example, a company is given timber rights in Newfoundland and Labrador in exchange for setting up a pulp and paper mill. The company closes down the plant, lays off the employees, but wants to keep its timber rights. The provincial government says no, you aren’t living up to the original agreement; the federal government pays the company damages for the way they’ve been treated to avoid a NAFTA arbitration on the issue.

Or take this scenario: the Newfoundland and Labrador government says a company that wants to pump oil and gas out of the province’s territory has to agree to spend money in the province on research and development. Even though that’s perfectly legal, the government is found to have violated the company’s rights and damages are awarded. This ruling comes from a NAFTA arbitration.

And lastly, in one of the most outrageous slaps in the face to Canadian sovereignty, the Nova Scotia government turns down a company that wants to dig a huge quarry in an environmentally sensitive area that is important to the local community. The company is awarded damages through a NAFTA arbitration because they were denied the right to destroy the local landscape. 

NAFTA arbitration bases ruling on potential violation rather than reality

In this instance, the company argued that the environmental review panel relied in part on “community core values,” which they take to mean “local self-determination in planning matters." Company lawyers argued that such a notion is unacceptable.

Damages were awarded by a NAFTA arbitration in this case, because there was a “possibility” that the review panel’s decision “did not conform to the requirements of Canadian law and would have been overturned had it been subjected to judicial review by a Canadian federal court.”

It wasn’t actually taken to an open court for review. It was simply alleged that the decision might be challengeable in a Canadian court. The company could have gone to a court. It chose not to and used a NAFTA claim instead.

By treating a potential, unproven violation of Canadian law as itself a violation of NAFTA, the NAFTA arbitration decision means that companies can now seek NAFTA damages for possible breaches of Canadian law, without the inconvenience of going to a court in Canada to argue the case.

Ruling amounts to granting new power to interfere with domestic government decisions

The NAFTA panel has created for themselves, and for all future NAFTA arbitrations, a new power to interfere with decisions made by Canadian governments. A NAFTA panel can now decide, on their own, without any right of appeal, whether Canadian law has been complied with. And they can decide on their own what damages will result from their interpretation of the law.

This is a huge and chilling intrusion into the legal and governmental jurisdiction of Canada.

Socio-economic and environmental considerations being pushed aside in favour of corporate profit

It’s worth quoting from the dissenting view of one of the NAFTA panel that made this decision.

Professor Donald McRae wrote: “In effect, what occurred in this case was that an environmental review panel concluded that the socio-economic effects of a project were sufficiently negative that notwithstanding the existence of some positive benefits of the project, it should recommend against the project.”

“In this day and age, the idea of an environmental review panel putting more weight on the human environment and on community values than on scientific and technical feasibility, and concluding that these community values were not outweighed by what the panel regarded as modest economic benefits over 50 years, does not appear at all unusual.”

By way of this decision, he writes, “Once again, a chill will be imposed on environmental review panels which will be concerned not to give too much weight to socio-economic considerations or other considerations of the human environment in case the result is a claim for damages under NAFTA Chapter 11. In this respect, the decision of the majority will be seen as a remarkable step backwards in environmental protection.”

Ruling raises more concerns about impact of CETA on democratic rights of citizens

For years, many have been raising the alarm about the impact of trade deals like NAFTA and the looming Canada-European  Union Comphrehensive and Economic Trade Agreement (CETA), arguing these agreements compromise the rights of governments to actually govern.

These agreements always put the rights of corporations ahead of the democratic rights of citizens.

Experts and academics and activists have all argued that the ability of democratically elected governments to regulate on the environment, or labour law, or social services, has been terribly compromised by these "trade" deals. These agreements have included a clause giving individual companies the right to challenge the decisions of democratically elected governments, in ways that citizens themselves don’t have.

Corporations being given power to override government decisions and domestic laws

A corporation from another country that’s party to these trade agreements can access a "super right," the right to challenge the government’s decision in a secluded, private, international arbitration, and the decisions of the arbitration board can override a government’s laws and the country’s Supreme Court.

The corporations who are given this "super right" to a private judicial system are given no responsibility to match that right. They don’t have to live up to any standard. They don’t have to prove that they are delivering any benefit to the country. They don’t have to prove that their actions are not harmful to the environment or the people.

Europeans are increasingly resisting the inclusion of this super right in CETA, and in the US-EU deal being negotiated. If we are to reclaim our democracy, we need to join them in that fight, and then work to get rid of this travesty in NAFTA. This isn’t about trade. It’s about our right to govern ourselves, and not be governed by corporations.

We have seen the new world order, and it isn’t pretty.


The National Union of Public and General Employees (NUPGE) is one of Canada's largest labour organizations with over 340,000 members. Our mission is to improve the lives of working families and to build a stronger Canada by ensuring our common wealth is used for the common good. NUPGE