$15 Bln TransCanada Lawsuit Against US for Nixing Pipeline

Could This Lawsuit Be the Straw That Breaks the TPP’s Back?

By Robin Broad, a Professor of International Development at the School of International Service, American University, Washington, D.C. Her most recent book, co-authored with John Cavanagh, is Development Redefined: How the Market Met Its Match. Originally published at Triple Crisis

In November 2015, just after President Obama finally stood up to the fossil fuel industry and rejected the TransCanada Corporation’s application for its tar sands pipeline through the United States, I issued a warning: In The Hill, I applauded the Obama decision and laid out the reasons why, under current trade and investment rules, TransCanada had grounds to sue the United States under the 1994 North American Free Trade Agreement (NAFTA).  I hardly need remind readers that NAFTA launched the modern era of corporate-biased investment rules, and serves as the model for the investment chapter in the TransPacific Partnership (TPP) that now awaits votes in the U.S. Congress and in the legislative bodies of the 11 other TPP countries.

Lo and behold, TransCanada came to the same conclusion that I did.  They hired a giant corporate “K Street” law firm, Sidley Austin, and in January 2016, the fossil-fuel giant put the U.S. government on notice of a potential lawsuit under the investment chapter of NAFTA.  To get the U.S. government’s attention, they claimed to have suffered $15 billion in losses because of the rejection.  In TransCanada’s “notice of intent,” they argue that the United States has never before rejected a cross-border pipeline and that repeated studies by the U.S. State Department showed that the pipeline would not have a deleterious environmental impact on climate.  They conclude that the U.S. rejection of their pipeline, some seven years after their application, is a political decision and is not permitted under the NAFTA rules.

It is vital that people pause and ponder:  TransCanada, in its legally justified yet totally outrageous reaction, is reminding us of the reality of the investment rules our governments, under heavy pressure from global corporations, have inserted into thousands of trade and investment agreements.   And, we need to contemplate the assault on democracy that these rules and the TransCanada complaint represent.

Mull this over:   In the United States, cross-border pipelines like the now-rejected TransPacific one, require a Presidential Permit.  And, it is the U.S. State Department that makes such determinations. In November 2015, the U.S. State Department did precisely this in rejecting the pipeline.  It cited “concerns about the [pipeline’s] impact on local communities, water supplies, and cultural heritage sites.”  It argued that allowing the pipeline “…would significantly undermine our ability to continue leading the world in combatting climate change.”  The State Department also pointed out that the tar sands oil that would go through the pipeline was “a particularly dirty source of fuel.”

Suffice it to say, all these reasons are just and worthy and legitimate reasons for a government in a democracy to reject a proposed corporate project.

And, as I have pointed out in previous Triple Crisis blogs, there are many other egregious corporate lawsuits under investor-state rules that have undermined the democratic will of people in other countries.  A broad set of groups in El Salvador, with allies in North America, are now in their seventh year of fighting a lawsuit by a Canadian-Australian mining firm, OceanaGold.  Like the TransCanada suit, OceanaGold’s case is attempting to undermine actions by the Salvadoran government to protect the environment, in this case from toxic gold mining that threatens the fragile water supplies of over half the Salvadoran public.  Millions of dollars of Salvadoran taxpayer money later, the suit drags on.

Now, what do these outrageous cases mean for the upcoming vote in the U.S. Congress on the TransPacific Partnership?  Republican leaders in Congress do not want to give a win to President Obama before the election, so they have signaled their plan to put off a vote on the pact until after the November 2016 Presidential elections and hold it instead in a so-called “lame duck” session of Congress, likely in December 2016.  That means that it will likely be the current Republican-dominated House and Senate that vote on the TPP.

And, this is where it gets interesting in terms of U.S. politics.  Most Republicans support the TPP and will vote for it, but certain “tea party” Republicans, who distrust both “big government” and “big business,” are opposed.  Most Democrats in both houses of Congress oppose the TPP, but a few have been convinced that it will help business in their states and are currently in favor.   Right now, a vote would be close.  Hence, any new or stronger arguments against the pact could tilt the outcome.

Throw into this mix the current U.S. presidential race. So too could strong statements by U.S. presidential contenders have an influence.  Bernie Sanders, the independent Senator from Vermont, has been opposed to NAFTA from the start and is a harsh and outspoken critic of the TPP and its investment chapter.  Sanders has made this one of his campaign issues and Hillary Clinton, under heavy pressure from the more populist Sanders, said in the fall of 2015 that she would not support the TPP in its current form.  Not surprisingly, given her past support of trade agreements, she has largely avoided the issue on the campaign trail. But the Democratic party base deeply opposes the agreement, and a broad coalition of citizen groups under the Citizens Trade Campaign is rallying people against it.  On the Republican side, all the remaining candidates support the TPP save the frontrunner and likely Republican nominee, Donald Trump.  Trump has attacked the TPP, charging that it will accelerate the shift of good U.S. jobs to Asia.

In the context of this fluid debate, it is crucial for academics, activists, politicians, and citizens in the United States and around the globe to speak out against this outrageous assault on democracy enshrined in the TPP.  In the longer-run, we need a truly democratic set of rules to replace the current investor provisions in trade agreements, a new set of rules that do not give global corporations unfair advantage over people and the environment.  This is not pie in the sky; promising alternatives have been raised in the trans-Atlantic trade negotiations that are going on right now.

In the short term, however, the current TPP strengthens these undemocratic rules.  The TransCanada case offers new chilling evidence as to why these agreements are a danger to the environment, to workers, and to democracy, and why the TPP must be stopped.

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