Is NAFTA’s Chapter 11 constitutional?

A colleague emailed me a submission to the Supreme Court of Canada seeking to have them interpret whether the investor-to-state dispute settlement regime of NAFTA (in Chapter 11) is in violation of the Charter of Rights. We will know in a few months time whether the highest court in the land will hear this appeal of a decision made by the Ontario Court of Appeal, which dismissed the allegations as premature.

As an economist I find much of this legal stuff bewildering, but here are the key points of the argument, as put forward by Bruce Porter and the Charter Committee on Poverty Issues:

Investor-State Regime Violates Section 7 of the Charter

Section 7 is “intrinsically concerned with the well-being of the living person.” In contrast to the U.S. Constitution, section 7 does not guarantee “corporate-commercial economic rights” of the type protected under NAFTA Chapter 11.

… investor-state adjudication frequently engages issues related to personal security or health, and the threat of such adjudication has had significant effects on government policy. It is clear that investor-state tribunals do not have the authority or competence to consider how their adjudication may impact upon section 7 interests or to ensure that any ambiguities or gaps in NAFTA are resolved in favour of protecting such interests. Further, where an investor challenges a government measure as amounting to direct or indirect expropriation, there is no provision in Chapter 11 that enables the government to justify the measure based on its paramount Charter obligation to protect the right to life and security of the person.

… In addition, this Court has recognized in the Charter context that monetary awards and settlements against governments for public policy undertaken in good faith can interfere with the efficient functioning of government and reduce governments’ ability to provide essential social programs and services, including health care. Investor-state tribunals are under no obligation to consider or balance competing social interests in granting compensatory damage awards, even when Charter interests such as the right to health are engaged. Delegation of such unconstrained adjudicative authority to investor-state tribunals without ensuring that the rights to life, liberty and security of the person will be adequately considered or protected amounts to a violation of section 7. …

… An infringement of a section 7 right will offend “principles of fundamental justice” if it violates “basic tenets of our legal system.” These include principles recognized both in domestic law and under international conventions, and require a consideration of core values that are fundamental to our legal system. … [The Supreme] Court has emphasized the convergence between international human rights law and the principles of fundamental justice. The failure to ensure that substantive domestic and international human rights norms are taken into account in investor-state adjudication infringes fundamental justice.

Investor- State Regime Violates Section 15 of the Charter

In the interpretation and application of law and the exercise of discretion, interpretive approaches that favour substantive equality and the amelioration of disadvantage must be preferred over those that do not. In order to comply with Charter equality values, decision-makers must consider and respect the needs of disadvantaged or vulnerable groups.

… Disadvantaged groups such as women, people with disabilities and people living in poverty will often have limited access to courts and tribunals, and must depend on adjudication being informed by section 15 and equality values so that their needs and interests receive appropriate consideration, even in their absence.

… This critical component of section 15: the guarantee that decision-making authorized by statute will protect the needs and interests of disadvantaged groups, has been revoked in granting NAFTA investor-state tribunals authority to adjudicate investor challenges to regulatory or protective measures without considering the equality rights of vulnerable groups. CCPI submits that this deprivation exacerbates the disadvantage of protected groups and amounts to a clear violation of section 15.