Tuesday, May 29, 2001

OTTAWA - A coalition is attacking the secrecy of NAFTA's Chapter 11 tribunals, arguing it violates Canadians' rights to freedom of the press and freedom of expression.

The coalition filed a legal challenge today in the Ontario Superior Court of Justice. The Sierra Legal Defence Fund filed the challenge on behalf of the Canadian Union of Public Employees (CUPE) and Democracy Watch. The challenge defends rights guaranteed in the Canadian Charter of Rights and Freedoms.

"The secrecy of these tribunals flies in the face of long-established principles that the judicial system must operate under the penetrating light of public scrutiny. We believe Canada's agreement to NAFTA is unconstitutional, because it incorporates this secret process," said Raymond MacCallum, lawyer with the Sierra Legal Defence Fund.

NAFTA's Chapter 11 gives foreign corporations the power to sue governments for infringing on their investments. Claims are heard by tribunals behind closed doors. The secrecy of the tribunals calls into question the legitimacy of the entire Chapter 11 process, argue the groups.

"Corporations are using Chapter 11 to launch a wholesale attack on the power of our governments to govern, to protect the environment and provide public services. Under NAFTA's rules, they can do this with impunity. This case confirms the government approaches trade without any regard for democratic rights. We will defend these rights - and our public services," said Judy Darcy, CUPE National President.

The coalition believes Canadians need access to information and the decision-making process to hold public institutions to account - particularly on environmental issues, given the poor environmental track record of international trade tribunals.

"NAFTA tribunals make decisions that have a greater impact on the lives of Canadians than many courts. Canadians and the media can walk into any court in Canada and watch what's going on, and NAFTA tribunals should face the same scrutiny," said Duff Conacher, Coordinator of Democracy Watch.

The Canadian government has the discretion to release a tribunal's final ruling, but is under no obligation to do so. The only way citizens or the press can attend a tribunal hearing is if all parties agree - which has not happened to date.

A win in the courts, leading to a declaration that Canada's agreement to NAFTA in its present form is unconstitutional, will force Canada to negotiate with the United States and Mexico to amend the secrecy rules of Chapter 11. Any new provisions will have to uphold Canadians' Charter-guaranteed rights. The case is particularly pressing, given that a leaked draft of the investment chapter of the Free Trade Area of the Americas includes a similar secretive process.

A backgrounder outlining the case is set out below and available on the web sites of all three organizations, listed below.

CUPE is Canada's largest union, representing a half-million women and men working in health care, emergency services, education, municipalities, social services, libraries, utilities, transportation and airlines. For more information visit <cupe.ca>

Democracy Watch is an independent, non-profit, non-partisan citizen advocacy group that aims to reform Canadian government and business institutions to bring them into line with the realities of a modern, working democracy.

Sierra Legal Defence Fund is a non-profit environmental law organization that provides free legal and scientific services to conservation groups and concerned citizens across Canada. For more information visit <sierralegal.org>

The case
The Canadian Union of Public Employees and Democracy Watch, represented by the Sierra Legal Defence Fund, have launched a constitutional challenge of the North American Free Trade Agreement (NAFTA), arguing that the secrecy of Chapter 11 tribunal rules infringes on freedom of the press.

The coalition members, long-time observers and critics of the current free trade process, maintain that the secrecy of NAFTA's investor-state tribunal process violates the Charter of Rights and Freedoms, specifically freedom of expression and freedom of the press and other media of communication, as guaranteed by section 2 (b) of the Charter.

The coalition filed a notice of application with the Superior Court of Justice of Ontario on May 29, 2001, seeking to have Canada's agreement to NAFTA declared unconstitutional.

Chapter 11's secret process
Chapter 11 of NAFTA outlines the rights that NAFTA governments, including Canada, are obliged to extend to corporations from another NAFTA country.

The rules oblige Canada to extend to foreign corporations: national treatment and most-favoured nation treatment; minimum international standards of treatment; prohibitions on performance requirements; and prohibitions on expropriation or measures seen as "tantamount to expropriation."

The rules are enforced in a secretive dispute resolution process. Corporations have the right to sue Canada, alleging violations of Canada's obligations under NAFTA that have harmed the corporation's investment. The claims can cover virtually all aspects of public policy-making: laws, regulations, policies and even judicial actions.

The claims are heard before tribunals in proceedings that are closed to the public and to the press. Under the tribunal rules, members of the public and the press are not permitted to attend hearings unless all parties to a claim agree otherwise. To date, this has not happened. When claims have been finally decided, the Canadian government is under no obligation to release the tribunals' rulings in any claims made against Canada. A Chapter 11 tribunal cannot overturn a Canadian law, but it can award monetary damages so large that governments reconsider and repeal the policy or law. Canadians may be completely unaware of claims underway against Canada.

Claims that have become public involve challenges to environmental laws, delivery of public services and prohibitions on bulk water exports. The closed nature of the process means matters of public concern are being debated in private, with limited scrutiny or input from the people who will be affected.

Secrecy and freedom of the press
The challenge argues that the Canadian government is bound to respect the guarantees in the Charter when signing international agreements. This includes Canada's agreement to NAFTA.

Section 2(b) of the Charter guarantees "freedom of thought, belief, opinion and expression, including freedom of the press and other media of communication." The applicants argue that the secrecy of tribunal proceedings required by Chapter 11 infringes these guarantees.

Canadian courts, most importantly the Supreme Court of Canada, have clearly condemned restrictions on public and media access to domestic courts and tribunals in the strongest terms. The courts have criticized the negative impact of secrecy on freedom of the press and freedom of expression, recognizing that restrictions on gathering and sharing information can lead the public to question the legitimacy of courts and tribunals.

The public's ability to fully scrutinize, understand and support or criticize Chapter 11 proceedings, the decision-makers and how the parties argue and behave is vital to the democratic process. The coalition feels NAFTA's secretive tribunals fundamentally undermine the democratic process, curbing the full and fair discussion of public policy and public institutions. Not surprisingly, the closed nature of the process has drawn heavy criticism from Canadian individuals and groups.

In bringing the challenge, the coalition also wants to prevent secretive and undemocratic processes from being entrenched in future trade agreements that Canada is negotiating, such as the Free Trade Area of the Americas.

The remedy
Faced with arguments that the Charter applies to Canada's agreement to NAFTA and that the secrecy of Chapter 11 proceedings infringes on Section 2(b) of the Charter, it then falls to the federal government to establish that this violation is "reasonable and demonstrably justifiable in a free and democratic society". It is hard to imagine how the government will defend the provisions of Chapter 11 in light of Charter guarantees and the clear stand courts have taken on the principle of the "open court". The sweeping level of secrecy goes far beyond what is needed, for instance, to protect any 'business secrets' of an investor.

If the courts accept the arguments of the challenge, the likely solution will be to declare invalid Canada's agreement to NAFTA to the extent that it requires a secretive process to resolve investor-state suits. The effect of this would compel Canada to renegotiate the unconstitutional aspects of NAFTA with the United States and Mexico. Presumably the judgement's full effect - that of invalidating Canada's agreement to NAFTA - would be suspended to allow the negotiations to take place.