Appleton study briefing notes

By Peter Bleyer, November 1997

This legal opinion throws grave doubt on assurances from the Government of Canada that Canadian interests will be protected under the proposed MAI.

The Canadian Government's position is entirely based on its stated commitment to seek country-specific reservations for key areas under the MAI.

In requesting this opinion, the Council has, in fact, given the benefit of the doubt to the Government of Canada. It is important to remember that in multilateral negotiations, proposals put forward by one party merely constitute a "wish list" which will inevitably not remain intact at the end of the process.

Furthermore, in the context of the proposed MAI this "wish list" actually becomes a "hit list". This occurs as country-specific reservations become subject to the twin provisions of standstill and rollback, described in the draft treaty as combining to produce a "ratchet effect" leading to the "elimination of non-conforming measures to the MAI".

Finally, as long as tough provisions on expropriation and compensation remain at the core of the MAI, the strength and value of any exception or reservation is moot. Under the MAI, parties agree not to "expropriate directly or indirectly" or "take any measure or measures having equivalent effect" against the interest of any foreign investor. Even if a Government's action is taken for "public purpose" - e.g. the Canadian ban on MMT - and only involves potential lost future profits, corporations will have the right to sue governments for substantial compensation before a binding international tribunal with the power to enforce its rulings. The Canadian Government fully supports this key provision of the MAI.

In his legal opinion prepared for The Council, Barry Appleton meticulously details the limited nature of reservations under international law as well as the narrow manner in which all exceptions to treaties are, by definition, interpreted. He notes that the Latin expression exceptio est strictissimae applicationis (exceptions to treaty obligations are construed restrictively) strongly reflects this fact.

Appleton concludes: "Despite the protestations of governments when making or when relying upon reservations that they are broad, reservations will be strictly and narrowly interpreted by international tribunals." (Opinion, p.11)

Social Services

Appleton also identifies a series of serious errors, weaknesses and absences in the federal government's stated position on the MAI and reservations.

With regard to social services (i.e. health care, public education, child care, etc.): y 1. Although the language of Canada's proposed reservation for social services is identical to the reservation taken by Canada at II-C-9 under NAFTA, because it applies only to the federal level, it would only totally cover the provision of public law enforcement and correctional services, thus excluding health, education, childcare, etc. (p. 13)

2. The US government's interpretation of the NAFTA social services reservation suggests that any services not directly provided by government would not be considered within the definition of the term social services. This is particularly serious in the Canadian context where a mix of providers - government, private for-profit and private not-for-profit - are involved in the health, education, childcare and other sectors. (p.13)

Culture

The Canadian government has not put forward any proposed reservations for an area that would be "significantly affected by the obligations of the MAI" (p.16). Appleton lists six examples of policy areas which would require coverage by a general exception or specific reservations in order to protect the Government of Canada's ability to act maintain, develop or foster made-in-Canada culture.

A charitable interpretation of the Government of Canada's position is that it is lying low and allowing the Government of France to do the running on culture. While the general exception for culture put forward by the Government of France might be broad enough to provide protection in the Canadian context it is important to note that it would also be subject to extremely narrow interpretation as its impact goes counter to the fundamental liberalizing objectives of the treaty as a whole.

More importantly, acceptance of the French general exception is highly unlikely given that it would "mark a retreat in the level of international protection for global cultural industries from the NAFTA" (p.18). Indeed, U.S. Government officials have already made their rejection of the French position crystal clear.

Environment

Appleton draws on the history of decisions by international trade tribunals - including NAFTA, GATT and WTO - to describe the undermining of environmental protection through trade and investment agreements.

As Minister Marchi has confirmed, the Government of Canada has chosen to accept weak, non-binding language on the environment in the preamble of the MAI. By failing to even propose reservations to try to protect the ability of government to take environmental measures that would otherwise violate the MAI, Canada has "chosen to voluntarily bind itself, its provinces and its municipalities to obligations which protect investments over the environment" (p.23).

Environmental deregulation currentlly underway at the federal and provincial levels (provincial environment budgets have been slashed by between one-third and sixty percent in most provinces in the last two years) would be permanently locked in under the MAI.

Conclusion

The proposed reservations put forward by Canada fail to deal with the critical areas of culture and environment and are virtually meaningless for health care, public education and other social services.

The Government of Canada's strategy for protecting Canadian interests at the MAI negotiating table is poorly thought out and seriously flawed.

Meanwhile, the OECD Secretariat reported in November 1996 that "MAI negotiators are determined to keep [general exceptions and country-specific reservations] to a minimum".

With an opening position this weak and only five months remaining until the OECD deadline, it is hard to imagine that the final result will not be disastrous for Canada.