Corporate lawsuits against governments, like TransCanada’s legal action against the United States for its rejection of the Keystone XL pipeline, will escalate if the Trans-Pacific Partnership (TPP) trade deal is approved, environmental activists say. That, they say, will erode American sovereignty and threaten progress on climate change.
President Barack Obama rejected the Keystone project in November on the grounds that it would exacerbate climate change. But international pacts like 1994’s North American Free Trade Agreement (NAFTA) give companies the right to sue foreign governments if they enact new laws viewed as frustrating investor expectations.
The TPP broadened those rights, giving companies that invest in foreign countries certain guarantees — enshrining their right to "fair" treatment. That, according to Robert Kennedy Jr., an environmental law attorney and activist, gives more companies the right to sue over canceled projects.
“Instead of the American public making the rules that govern our country, we have foreign companies that are now in control of some aspects of American sovereignty,” Kennedy said.
TransCanada is asking U.S. taxpayers to reimburse it for all of its expected profits, not just for the cost of the pipeline, Kennedy added. That could encourage any government to think twice about enacting environmental policies that could harm foreign investments.
“This is like paying a bank robber not to rob a bank,” Kennedy said of the lawsuit.
Last week when announcing the legal action, TransCanada said that, under NAFTA rules, it had "every reason to expect its application would be granted as the application met the same criteria the U.S. State Department applied when approving applications to construct other similar cross-border pipelines."
The environmental group Sierra Club agrees that the TPP would expand the number of corporations able to sue governments for what they perceive as unfair restraints on trade.
“The TPP, in one fell swoop, would double the number of firms that could use the system to challenge U.S. policies,” said Ilana Solomon, director of the Sierra Club’s Responsible Trade Agreements program.
TransCanada would “just be the tip of the iceberg of what we would see under the TPP,” Solomon said.
Under the TPP, about 9,000 companies operating in the U.S. would receive expanded foreign investor rights and the ability to sue over lost profits, according to Solomon.
“When the government puts in place a new law or policy that can be construed as frustrating the expectations of an investor, the investor can claim damages for that policy,” Solomon said.
TransCanada had already begun leasing land and constructing sections of the planned pipeline, but was able to sue for more than just the cost of that work because of the trade agreements, according to Solomon.
To receive "unlimited cash compensation," she said, the company must take the case to a private tribunal comprised of three private attorneys under the World Bank or the United Nations.
Congress must still approve the TPP, and Solomon said there is a good change the trade deal will be defeated.
A coalition of about 1,500 groups, under the environmental justice group Citizens Trade Campaign, sent a letter earlier this month to Congressional leaders urging them to reject the TPP.
“We hope and expect members of Congress to side with their constituents and concerns about the environment rather than siding with big business,” Solomon said.
While the White House has touted the environmental protections included in the TPP — including fishing regulations, wildlife protection and conservation measures —Solomon believes deal will ultimately hurt the environment.
“The vague obligations combined with the history of non-enforcement of such environmental regulations in trade deals, and a set of rules like the new corporate rights that would severely threaten our climate, makes our overall assessment that the TPP would present a major threat to the environment,” Solomon said.
She noted that the words “climate change” do not appear in the 6,000 pages of the TPP text.
“It makes no attempt to grapple with any of these climate consequences,” Solomon said.