Luke Peterson reports on three different approaches to invesment protection treaties:
While Canadian officials are still hopeful that a Canada-EU trade deal can be finalized by next year, some EU member-states would like nothing better than to shunt talks onto a slow-track.
A particular sore point emerging in the Canada-EU Comprehensive Economic and Trade Agreement, which sees its ninth round of talks take place this month in Ottawa, is the politically-incendiary topic of foreign investment protection.
In principle, a Canada-EU pact should include protections like the ones that were written into the North American Free Trade Agreement that aim to protect foreign-owned assets from various forms of government mistreatment.
But those protections proved controversial when foreign investors attempted to use them to fend off new regulations or public policy measures. After a barrage of arbitration claims, the NAFTA governments circled the wagons and moved to clarify that such protections should not immunize foreign investors from every risk and cost of doing business in a foreign country.
While a lot of thought in Ottawa goes into striking this balance between legal security to foreign investments and giving governments the elbow-room to make public policy decisions, this cautiousness on the part of the NAFTA governments has not sat well with pro-business elements in Europe—including certain European government officials that handle trade and economic portfolios.
In a series of recent closed-door meetings in Brussels, several "Friends of Investment" have spoken bluntly about their fears of "NAFTA-contamination". Accustomed to pushing for high levels of security for European companies investing in the developing world—and not yet having suffered the legal blowback which has buffeted the NAFTA countries—they are on guard against any attempts to dilute the international legal protections given to foreign investors.
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... Canada's more cautious approach—with multiple caveats and limits written into agreements—is scorned by some European hardliners. Yet, it's not as if Canadians are throwing the baby out with the bathwater.
Australia, by contrast, has recently thrown its own treaty ambitions into reverse after being hit by threats from Chinese coal companies and foreign tobacco companies. When Australian health and environmental policy initiatives were targeted by litigious foreign investors, Australia decided that it would no longer pursue treaties that give investors broad legal protections and the ability to sue governments when those protections are endangered.
Instead, in a policy reversal announced earlier this year, the Australian government is urging companies that do business abroad to buy insurance to guard against the risk of nationalization or other misfortune.
By comparison, Canada's reaction to being sued by a string of NAFTA-waving U.S. investors has been positively restrained. Nevertheless, in certain parts of Europe, any roll-back of legal protections for cross-border capital flows is viewed dimly.