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NAFTA'S Chapter 11 Challenges

One of the serious threats to national sovereignty of the North America Free Trade Agreement is the power it grants to corporations to sue foreign governments if their investments or profits are curtailed or threatened. The mechanism for this is Chapter 11 of NAFTA which governs "investor-state rights". The disputes are decided upon by tribunals that conduct their proceedings behind closed doors.

Currently, there are three U.S.-initiated arbitrations to which the government of Canada is a party: 1) S.D. Myers Inc.'s claim for $10 million in losses incurred during an 18-month ban on the export of PCB wastes from Canada; 2) Pope & Talbot Inc.'s claim for $510 million in damages as a result of the subsidies on softwood lumber exports from Canada to the U.S.; 3) United Parcel Services' claim for $230 million in damages for "unfair competition" from Canada Post's courier service. In addition, there are two more Chapter 11 actions in the works, including California-based Sun Belt Water Inc. which intends to sue Canada for the B.C. government's refusal to allow the company to export bulk water. Previously, under NAFTA, the Ethyl Corporation sued the Canadian government for $250 million for the government"s ban on the gasoline additive MMT (a known nerve toxin). In 1998 the company settled for $13 million and the ban was reversed.

In the case of UPS versus the Canadian government, the Canadian Union of Postal Workers and the Council of Canadians have jointly applied to the courts to take jurisdiction away from the tribunal, arguing that the secret tribunal violates the independence of Canadian courts to protect the constitutional Charter rights of Canadians. The two organizations issued a Petition to the tribunal last November indicating that they would be seeking standing as full parties to the UPS lawsuit. Their stated aim is to defend not only public postal services but, by corollary, all public services which have the potential to be threatened by NAFTA's provisions.

United Parcel Service is the world's largest express carrier and package delivery company. In the pursuit of maximum profit, it wants the greatest share possible of the most profitable sectors of delivery service, while leaving the least profitable sectors to others. The latter include delivery service to rural areas, which are necessarily lower volume and more expensive to deliver than urban letter and parcel services. The gist of the UPS challenge is that Canada Post is using its monopoly on urban letter delivery to subsidize its parcel and courier services, which provides it with an ''unfair advantage'' over its competitors. If UPS is successful in this challenge, it could lead to the dismantling of comprehensive public postal service in Canada as well as provide openings for challenges to other public sectors, such as healthcare, education and public utilities.