In January 2016, TransCanada, the corporation behind the dangerous Keystone XL tar sands pipeline, laid bare the threats that two pending trade agreements pose to the movement to protect our climate and keep fossil fuels in the ground.
Just two months after the Obama administration rejected the pipeline, TransCanada announced it would retaliate by using rules in the North American Free Trade Agreement (NAFTA) that empower foreign corporations to challenge domestic policies in private tribunals.
TransCanada now plans to ask three tribunal lawyers to order the U.S. government to pay more than $15 billion as “compensation” for the Keystone XL decision that avoided increased climate disruption. But if two even larger trade deals were to take effect, TransCanada’s case may be just the beginning of a swell of such challenges to hard-fought climate protections. Those deals are the Trans-Pacific Partnership (TPP)—a controversial pact between the U.S. and 11 Pacific Rim countries that Congress may consider this year—and the Transatlantic Trade and Investment Partnership (TTIP)—a broad pact under negotiation between the U.S. and the European Union. Both deals would dramatically expand the number of corporations that could follow TransCanada’s example and use private tribunals as a backdoor way to challenge and potentially undermine U.S. policies that keep fossil fuels in the ground.
Like NAFTA, the TPP and TTIP would give foreign corporations broad rights, including the right to challenge new fossil fuel restrictions that thwart their “expectations” for a stable business environment. The trade deals would empower the corporations to bypass U.S. courts and take such challenges to tribunals of three private lawyers, unaccountable to any domestic legal system, under a process known as “investor-state dispute settlement” (ISDS). The lawyers—over half of whom also represent corporations in cases against governments—could order the U.S. government to pay the corporations the profits they hypothetically would have earned without the new climate protections. Law firms specializing in ISDS are now explicitly advising corporations, including fossil fuel firms, to see ISDS as a “tool” to “prevent” unwanted policies, as threats of costly ISDS cases can chill policy proposals.
Policies targeted in recent ISDS cases include a fracking moratorium in Quebec, a court order to pay for oil pollution in Ecuador, and new restrictions on a coal-fired power plant in Germany. Shell, BP, Chevron, and ExxonMobil are among the fossil fuel corporations that have already used ISDS, helping to spur a rapid rise in ISDS cases. Indeed, half of the new cases launched in 2014 targeted policies affecting oil or gas extraction, mining, or power generation. For the first time, the TPP and TTIP would enable some of the world’s largest fossil fuel firms to use ISDS to challenge U.S. policies to keep fossil fuels in the ground, including restrictions on fracking, offshore drilling, federal fossil fuel leasing, and dirty pipelines. Indeed, such firms have investments in these four fossil fuel sectors across at least 36 U.S. states, see a map here.