Legal advice on TILMA

Steven Shrybman, a lawyer at Sack Goldblatt Mitchell, offers a short summary of TILMA, drawing from a longer legal opinion in development:

February, 2007 [Updated version]

Re: A Very Short Synposis of TILMA

In April, 2006, Alberta and British Columbia entered into a Trade, Investment and Labour Mobility Agreement (“TILMA”). Certain provisions of the scheme went into effect at that time, the others become operational on April 1st of this year. Other provinces may accede to TILMA at any time, and considerable pressure is being exerted by the Conference Board of Canada and others for them to do so.

This is a very short, and incomplete, overview of the TILMA regime. It is intended simply to persuade those who are unaware of this latest neo-liberal project that it deserves their attention.

1. TILMA imposes a blanket prohibition on all government measures that “operate to restrict or impair” trade, investment or labour mobility unless such measures are exempt under the scheme. It is difficult to conceive of a government action, whether legislative, regulatory or programmatic, that would not violate this broad constraint. In this regard, the net cast by TILMA is larger than that of NAFTA and the GATS combined.

2. TILMA defines “government” very broadly to include all aspects of provincial government, including its agencies and Crown corporations; but also to include municipalities, school boards and other publicly funded academic, health and social service entities. Therefore, unless exempt, all actions taken by these public bodies must comply with the sweeping restrictions imposed by the regime.

3. To ensure compliance by government and public entities, TILMA incorporates the mostpernicious feature of NAFTA, which accords private parties the right to invoke arbitration to challenge measures that are alleged to offend TILMA constraints, including the right to claim up to $5,000,000 in damages for any such violation. There is no limit on the number of such claims that may be asserted, and the damage awards made by TILMA tribunals are enforceable as if a judgment of the superior court.

4. Because private claims may be unilaterally asserted by countless individuals and corporations, they are likely to proliferate and exert enormous pressure on governments to abandon or weaken a broad and diverse array of public policies, laws, practices, and programs.

5. The overwhelming majority of government measures that are subject to TILMA have little if anything to do with inter-provincial trade, investment or labour mobility, per se. Rather, these measures, which run the gamut from environmental controls to health care insurance plans, were established to serve broad public or societal purposes and apply equally to persons or companies whatever their respective province of origin. While such measures may impact investment, trade and labour mobility, these effects are indirect or tangential to their essential purpose. Nevertheless, because of these indirect effects, they may be challenged for offending TILMA prohibitions.

6. TILMA also expands the scope of foreign investor rights that can be asserted under NAFTA. Moreover, these rights are bestowed on US and Mexican investors without any reciprocal gains for BC or Alberta investors in the US or Mexico. TILMA establishes a new high-water mark of investor entitlement that can now also be claimed by US and Mexican investors in consequence of NAFTA guarantees of National Treatment.

Taken together, the likely impacts of TILMA represent a broad assault on the capacity of present and future governments in BC and Alberta to serve the public interest.

Furthermore, there appears to be no plausible rationale for TILMA. For as we know, Canada is a free society in which people may live, work and invest anywhere they choose. There are no customs stations along provincial borders and no tariffs on inter-provincial trade. Moreover, inter-provincial trade is a federal responsibility and provincial measures that interfere even indirectly with such trade have been consistently struck down by the courts.

Nevertheless the Conference Board of Canada has published several papers promoting the TILMA cause, and the Council of the Federation has congratulated British Columbia and Alberta on their initiative. There is an obvious and compelling case for informed public debate about TILMA before any further steps are taken to expand this regime..

Steven Shrybman

4 comments

  • Hi Steven,
    Maybe you can help me. Under NAFTA I was able to start, run and sell a successful leather business. I manufactured products and sold them to the USA. I employed people and paid taxes. NAFTA removed the duty that would have made it impossible to compete with the Americans!
    I have been to several Labour rallies where someone stands up and says they have never read NAFTA, and don’t understand it…but it is bad for Canada. What is going on?

  • Steven:
    Tilma appears to be a deliberate attempt to undermine the growing public concern about the power of corporations and business activities that harm the environment and threaten the well-being of most citizens. It is no surprise that as the public increasingly calls for more action to mitigate the harmful effects of the corporate agenda an anti-democratic initiative such as Tilma is now being pushed. Citizens need to push back. It’s only our democracy that’s at stake. As to the supposed benefits of free trade, why do millions and millions of ‘North Americans’ continue to live in poverty? How much are those workers paid anywhere? Free trade for whose benefit? Stop selling me the ‘good life’ – it’s making me sick.

  • I have an interesting idea:

    What if TILMA were used in the opposite way. What if Whistler took Alberta to court for the tar sands and its climate change contributions? What if fishermen on rivers in Alberta took BC upstream factory farmers or loggers to court for damaging fish habitat? We could use this to hit the Americans with NAFTA as well.

    Somebody have the cash for a court case?

  • My joke about TILMA at the time was that I thought it would be interesting to try to develop a resort and casino in Dinosaur Provincial Park – they surely could not complain about affecting the dinosaurs, as they have been dead for 75 million years.

    In a sense, this is already happening with NAFTA. This came via email this week:

    Domtar’s Notice of Arbitration is available from the US Department of State’
    s website: http://www.state.gov/s/l/c22195.htm

    Investment Treaty News (ITN), May 27, 2007

    Published by the International Institute for Sustainable Development
    http://www.investmenttreatynews.com

    3. Canadian softwood lumber firm files for NAFTA Chapter 11 arbitration
    against US,
    By Damon Vis-Dunbar

    A Canadian softwood lumber firm has filed a notice of arbitration under the
    North American Free Trade Agreement (NAFTA) alleging breaches of five
    provisions in the agreement’s investment chapter.

    The Canadian company, Domtar – which had been critical of last summer’s
    settlement between the Governments of Canada and the United States of the
    protracted softwood lumber dispute – is seeking some 200 Million US in
    damages.

    Domtar’s complaint hinges on antidumping (AD) and countervailing duties
    (CVD) imposed on Canadian exports of softwood lumber to the United States.
    Those duties were levied on Canadian firms in response to the determination
    by the US government that Canada was “dumping” subsidized softwood lumber
    onto the American market.

    Furthermore, thanks to the so-called Byrd Amendment, those duties were
    distributed to American lumber companies, supposedly to offset the
    competitive advantage provided to Canadian firms by their government.

    According to Domtar’s Notice of Arbitration, US actions breached the
    standards of national treatment and most-favoured nation treatment in NAFTA’
    s Chapter 11 between 2002 and 2006, given that the US duties and
    re-distribution of that money under the Byrd Amendment put the Canadian
    company at a competitive disadvantage against American and other foreign
    firms.

    Moreover, Domtar has alleged that the US failed to meet its obligation to
    treat Canadian investors with the international law standards of fair and
    equitable treatment and full protection and security. This comes in response
    to duties on Canadian softwood lumber imposed after certain NAFTA and WTO
    panels, as well as US courts, ruled that they were unlawful.

    Finally, the Notice of Arbitration argues that the US breached obligations
    related to the free transfer of capital, by first collecting AD and CVD
    deposits, and then not promptly returning those funds when certain tribunals
    and courts ruled that such collections were illegal.

    Domtar is seeking to arbitrate the dispute under the United Nations
    Commission on International Trade Law (UNCITRAL) rules of arbitration.

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