Trade lawyer Lawrence Herman talks about the local versus federal aspect of investor-state rulings:
All of this raises the question as to how the federal-provincial aspects of Chapter 11 reviewed in this article will play out and how the two levels of government will deal with these issues in the months and years ahead. Admittedly, the problem is moot if none of the NAFTA investors succeed in their claims. But it may not be satisfactory to let these matters drift unresolved. For one thing, it is Ottawa that is required to respond to every claim and to prepare the legal defenses in the dispute. And sooner or later we are bound to be faced with a situation where Ottawa is required to pick up the tab for provincial action.
The issue has come to the fore in the AbitibiBowater claim against Newfoundland and Labrador, where vast amounts of money are at stake but where St. John’s and not Ottawa is the object of the dispute. Yet, it is the federal government that is the respondent in the litigation. Even though it does not call the tune, it is Ottawa that will be forced to pay the piper if AbitibiBowater wins its case. While it remains far from certain that the company will succeed, this illustrates the significance of the problem for Canada.
Given these unresolved questions, consideration should be given to a federal-provincial understanding or protocol settling responsibility for payment of NAFTA awards that concern provincial measures.
Some sort of pragmatic arrangement, in the best traditions of Canadian federalism, would help resolve issues in what appears to be increasing challenges to provincial, and potentially, municipal actions. Such an agreement need not be black and white and should be flexible enough so avoid the extreme case of a province having to pay an inordinately large sum in settlement of a claim.
An agreement along these lines is preferable to Ottawa simply waiting to send the bill to the province at the end of a lost case and scrambling to find out how to recover payment, inviting images of a collection agency knocking on the doors of the provincial premier’s residence with the unpaid bill in hand.
Progress on this front may ultimately lie in maturity and good faith at the highest levels of political leadership in Ottawa and the provinces.
