Expert warns NZ about foreign lawsuits, as TPPA bill passes first reading
Foreign investors will have immeasurable influence on New Zealand's future laws thanks to the TPPA, an international expert has warned.
The caution comes as the bill to ratify the Trans-Pacific Partnership Agreement successfully passed its first reading on Thursday.
Canadian professor Gus van Haarten said Kiwis should be worried about the investor-State dispute settlements (ISDS) mechanism in the agreement.
It allows foreign investors to protect their assets by suing Governments for actions they consider unfair, unjust or discriminatory under TPPA provisions.
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Van Haarten said this was a "turning point" in the history of the ISDS.
Having the clause in the TPPA, as well as in a proposed trade deal between Europe and the United States, would expand coverage from 20 per cent to up to 90 per cent of the world economy, he said.
"It means a lot of foreign-owned assets that are not covered by ISDS directly by a treaty will become covered."
Lawyers and arbitrators who decide on any cases brought against governments will have "immense powers" over affected countries.
"That power allows companies to have influence on reviews of legislation, regulations, court decisions and policy".
Unlike a local court of law, the arbitration process was based on making a profit.
He described the process as having "three lawyers sitting as arbitrators who can rule on the legal boundaries of the sovereign, and have the power to award uncapped amounts of public money".
The ISDS was unusual compared to international law because it was one-way - the investor suing the state.
"The TPP does not address that problem at all."
But the Ministry of Foreign Affairs and Trade insisted there were exceptions to the ISDS to protect the government from litigation.
"Numerous safeguards are also included throughout the Investment chapter that protect the Government's right to regulate for legitimate public policy reasons," according to the public factsheet.
For example challenges over tobacco control measures are ruled out, and there are restrictions around public health and welfare measures.
Trade Minister Todd McClay has consistently played up the huge economic benefits of the trade deal, and played down the risks.
He has said the ISDS clause provided "the most protection" to New Zealand's law-making decisions, and denied it would stop the government passing laws (often referred to as the "chilling effect").
The bill was backed by National, Act, United Future, while the Labour Party (apart from Phil Goff), Greens, NZ First and the Maori Party voted against it.
Van Haarten said Canada was the only Western country to use ISDS with the US. Many specialists regarded it as a "big mistake".
"Canada is approximately the fifth most sued country in the world in ISDS."
However, the country has never won any case against US investors under the North American Free Trade Agreement (NAFTA), he said.
The threat of a lawsuit stopped Canada from banning the export of bulk water in the 90's, he claimed, adding: "Maybe New Zealand's the same, we really care a lot about our water."
According to OECD research, it costs an average of $8million to litigate a case. If less than $10million is at stake, it wouldn't make sense for companies to go down this route.
For wealthy multinational entities, it's much easier to sue under ISDS.
"Policy-makers don't know what arbitrators will award this investor down the road. It could be even 10 years later."
Governments can rack up financial liability in the meantime, and retrospective would be passed on to next government.
However, in New Zealand, MFAT has stated that claims must be submitted before three and a half years have passed, and the investor must initially enter into consultation and negotiations to attempt to resolve the claim with the New Zealand Government.
New Zealand has a three-year period following entry into force to implement the TPPA.