Public vs. corporate rights: NAFTA Chapter 11 invoked in Quebec fracking decision

Public vs. corporate rights: NAFTA Chapter 11 invoked in Quebec fracking decision by Bertrand Schepper, December 5, 2012,
On 15 November, the American firm Lone Pine Resources Inc. threatened to sue the federal government for $250 million. The company claims it is a victim of an arbitrary decision which violates NAFTA laws. As a legal basis to its lawsuit, it invokes NAFTA’s Chapter 11 which allows a company to sue a state if it deems that its “economic rights” have been violated. Hence, Lone Pine Resources considers that its “potential profits” have been inflected by Quebec’s decision to prevent fracking beneath the St. Lawrence River. It demands a monetary compensation. As Canada is multiplying negotiations in the hopes of signing free-trade agreements notably with Europe, China, and Pacific countries, it is becoming more and more urgent to understand the legal (and political) implications of NAFTA. During 1990s negotiations leading up to the agreement, Chapter 11 was the result of a desire to protect private investments of American and Canadian companies from laws put in place in Mexico (the third partner in NAFTA) that they would deem unjustified. However, an article’s use is not based on the text’s authors’ original motives but on the judges’ interpretation. Chapter 11 has thus been transformed into an instrument used by private companies to threaten governments when the latter’s decisions are detrimental to the former’s profitability, or even just their dreams of profitability. To this day, only a few international courts’ decisions have favoured companies. The reason is rather straightforward: governments prefer settling out of court (examples can be found here). Simply threatening to sue has allowed these companies to receive millions of dollars in public money based on virtual hopes of profit. In the case of Lone Pine Resources, the company taking up arms hopes to squeeze out $250M from the state despite the fact that the oil resources under the St. Lawrence riverbed were not yet in use. To get $250M without producing a single drop of oil from a risky resource, now that’s tremendous success. Business success that is. … There is no evidence that Lone Pine will succeed in demonstrating that Quebec’s decision was arbitrary. The company is nonetheless going down a path potentially leading to huge sums cashed through an out-of-court settlement without having to demonstrate its capacity to produce shale oil. The government would be penalized for having acted in a prudent and responsible manner. [Emphasis added]

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