THE JOURNAL OF THE COMMITTEE ON MONETARY AND ECONOMIC REFORM

$3.95 Vol. 28, No. 5 • SEPTEMBER–OCTOBER 2016

CONTENTS Why the Bank of Canada 1 Why the Bank of Canada Won’t Do $40 billion in Infrastructure Won’t Do Funding Urged Readers are encouraged to review Joyce increase economic growth at a time when How Not To Fund Infrastructure Nelson’s article, “The Government’s Proposed the Bank of Canada has once again lowered Liberals Eye “Asset Recycling” and Privately Owned Infrastructure Infrastructure Bank: A 21st Century Trojan its expectations to 1.1 percent this year and Horse,” COMER, March-April 2016. 2 percent in 2017. Monopoly’s New Era The council predicts an infrastructure Canadian Cities Push Back on Plans for Infrastructure Bank $40 billion in Infrastructure bank could raise private capital at a four-to- one ratio to deliver more than $200 billion in Additional Comment Funding Urged and Quotations infrastructure over the coming decade with a 9 Part II: The Secret Court that By Bill Curry, Sean Silcoff, Ottawa, The focus on projects worth at least $100 million. Allows Corporations to Avoid Globe and Mail, October 21, 2016 Ottawa’s previous efforts to attract pri- Punishment for Enormous Crimes • Expert panel on economic growth pre- vate infrastructure investment – including 14 Canadians Launch Constitutional dicts ambitious bank proposal could de- through an agency focused on public-private Challenge Against CETA liver more than $200 billion in projects over partnerships – have had limited success. Pen- 15 Federal Court Hearing, coming decade sion fund managers say Canadian projects to December 7, 2016 • Previous government efforts to attract date have simply not been big enough. 16 Call for Members private investment have had limited success, However, the panel’s 14 members in- 17 What is Really the Matter with pension fund managers saying Cana- clude leaders of some of those institutional with CETA? dian projects too small investors, including Mark Wiseman, senior 18 Hon. Paul Hellyer: An expert panel on economic growth is managing director of BlackRock Inc., and Why I am 100% Opposed to CETA calling on the government to launch an am- Michael Sabia, CEO of the Caisse de dépôt 19 Lobbying Watchdog Probes Liberal bitious national infrastructure bank capital- et placement du Québec pension fund. “Pay‑for‑access” Fundraisers ized with $40 billion in federal funds aimed Examples of potential projects listed on 20 Medicare Threatens to Put Justin at attracting major institutional investors. Thursday include toll highways and bridges, Trudeau to the Test The proposal to entice global pension high-speed rail, port and airport expansions, funds into major Canadian investments city infrastructure, national broadband in- Publications Mail Agreement No. 41796016 goes far beyond anything promised to date frastructure, power transmission and natu- by the federal Liberals, but Finance Min- ral resource infrastructure. ister Bill Morneau – who worked directly The report also says the bank could is- with the panel over the past several months sue infrastructure bonds as a way of raising – signalled a strong openness to the recom- its own capital to invest. Another key rec- mendations announced Thursday. ommendation is a suggestion that Ottawa The Advisory Council on Economic should privatize – in full or in part – some of Growth released three reports calling for the its existing assets as a way of raising money national infrastructure bank, a greater effort that could be spent on other infrastructure to attract foreign investment and a major Continued on page 2 boost to immigration. Mr. Morneau said he’s prepared to act The next hearing before the on some of the ideas as soon as November Federal Court will take place on 1, when he will release the fall fiscal update; Wednesday, December 7, 2016. November 1 is also the deadline for Ottawa to announce its 2017 immigration targets. For details, visit www.comer.org. The goal of the recommendations is to Bank of Canada from page 1 immigration levels, the council also called priorities. on government to make it easier for skilled That advice comes as the government foreigners to immigrate to Canada. Foreign recently hired Credit Suisse AG to analyze executives, programmers and other science- several privatization options for Canadian based professionals typically now wait be- FOUNDING EDITOR airports. tween six and 12 months to have their work John Hotson 1930–1996 Mr. Morneau said the airports study is permits approved. The council called for preliminary work and indicated Ottawa is wide-ranging exemptions for those recruits PUBLISHER–EDITOR not yet committing to any asset sales. from a cumbersome, time-consuming im- William Krehm “As we think about how best to amplify migration process that requires employers ([email protected]) our impact on infrastructure investment to prove they can’t find a Canadian to fill INFORMATION SECRETARY in this country, we need to create ways for the job before offering it to a non-Canadi- Herb Wiseman institutional investors to invest in our coun- an. The council also said foreign students ([email protected]) try,” he said. “So we’ll move forward in a studying in Canada should have an easier Economic Reform (ER) way that will allow us to attract institutional time applying for permanent residency after (ISSN 1187–080X) is published bi- money and it’s not conditional on any other their studies are complete. monthly by COMER Publications government activity around government Edmonton Mayor Don Iveson, who 27 Sherbourne Street North, Suite 1 assets.” chairs the big city mayors’ caucus of the Toronto, Ontario M4W 2T3 Canada The council is chaired by Dominic Bar- Federation of Canadian Municipalities, said Tel: 416‑924­ -3964, Fax: 416‑466‑5827 ton, global managing director of the con- cities should be involved in the design of any Email: [email protected] sultancy McKinsey & Co. As The Globe new infrastructure bank. He also noted that Website: www.comer.org and Mail reported earlier this week, the many types of municipal infrastructure are council’s recommendations also include a not likely to attract investors. COMER Membership: Annual dues call to boost immigration by 50 percent to “Public good infrastructure is going to be (includes ER plus 1 book of your choice): 450,000 a year and to launch a department difficult to finance using an infrastructure CDN$50 aimed at enticing foreign direct investment bank,” he said. Economic Reform subscription only: into Canada. Canadian Union of Public Employees One year (6 issues): in Canada, CDN$20; “Now’s the time when we have to take president Mark Hancock said in a state- Foreign, CDN$40 very bold actions,” said Mr. Barton, explain- ment that he strongly opposes the call for an ing that demographic changes will produce infrastructure bank and asset privatization, Send request and payment to: a period of prolonged slower growth that re- calling it “a recipe for the cannibalization of COMER Publications quires a policy response. “They may not be Canada’s public infrastructure.” 27 Sherbourne Street North, Suite 1 Toronto, ON M4W 2T3 new. These [ideas] have been talked about “Nowhere in the report does it mention before, but they haven’t been done. And so that investors in these schemes demand a ER Back Issues: CDN/US$4, includes what we’re keen to do is to jolt it.” much higher rate of return than the govern- postage; additional copies same Federal Immigration Minister John Mc- ment can borrow at,” he said, warning it will issue, $2; additional issue same order, Callum made it clear this week that he lead to new user fees on Canadians. $3. Send requests for back issues to will not follow through on the council’s Doug Porter, chief economist at Bank Herb Wiseman, 69 Village Crescent, call to boost immigration by 50 percent to of Montreal, said the proposals, if imple- Peterborough ON K9J 0A9. 450,000 a year. mented, would not have much impact on “That’s an enormous number,” Mr. Mc- the economy in the short term, but they Copyright © 2016 Callum told reporters Wednesday. He said could improve Canada’s outlook over a COMER Publications many stakeholder groups have urged him to longer period. All rights reserved increase Canada’s current immigration tar- “We are dealing with a relatively sluggish Permission to reproduce is granted get of 300,000, but many Canadians have global economy that is impeding exports, if accompanied by: “Copyright © 2016 COMER Publications. also said they do not support a major in- and there is very little we can do about that,” Reproduced by permission of crease. He also said there is a significant fed- he said. “Here in Canada we are dealing COMER Publications” eral expense in accepting more immigrants. with fundamentally sluggish productivity In its white paper titled “Bringing For- growth and changing demographics, which Postmaster, please send address eign Direct Investment to Canada,” the are leading to slower labour force growth. corrections to: council recommends creating an FDI agen- Those two things are very difficult to turn COMER Publications cy to attract “anchor companies” to invest around.” 27 Sherbourne Street North, Suite 1 here, and to develop an accompanying strat- Toronto, Ontario M4W 2T3 egy to attract the investment. “These actions Our Comment would bring much-needed coherence to The Canadian Infrastructure Bank is PRINTING AND DISTRIBUTION what is currently a disjointed approach to indeed an ambitious bank proposal – a bold Watt Solutions Inc., London foreign investment,” the council report says, move to consolidate the neoliberal victories Printed in Canada on recycled paper. adding that such a strategy could increase of the past four decades and to ensure their GDP by $43 billion. benefits long-term. In addition to recommending increased The CIB will exemplify the neoliberal

2 | Economic Reform September–October 2016 www.comer.org principles of privatization and the limited role of government. It will amplify the financialization of the economy and reduce most Canadians to debt serfs (Guess who will pay the interest on those infrastructure bonds!) The trend to the “toll-road economy,” “represents a return to a feudal-landlord economy of unearned profits from rent- seeking” (Ellen Brown, Web of Debt, quoted by Joyce Nelson, COMER, March-April CANADIAN 2016). INFRASTRUCTURE Small wonder that Dominic Barton and BANK his confederates are “keen” to “jolt” it! “The most important Why not provide opportunities for Ca- facets of the plan are its nadian unemployed students to acquire the size, its independence skills suited to emerging needs? Why should from government and young Canadians – many of whom have to professional management.” graduate debt slaves to afford post-second- Pereira Napoleon Ronnie ary education – have to compete for work with foreign students who, presumably, can nounced that “asset recycling” would be part depend on, it also creates demand for mate- afford to study abroad? of their strategy for meeting their much- rials and jobs, which themselves create – you The observation that investors will not ballyhooed infrastructure promises, not get the picture. Business isn’t investing, so likely want to invest in “public good in- many eyebrows were raised. They should there is a big role for public investment. frastructure” raises the important issue of have been. Asset recycling is an obscure code Keepers of global order like the OECD and priorities. word for selling our public goods for private the IMF have recognized this. The IMF was Could the fact that “investors in these profit. It’s privatization by another name. applauded recently for walking back its sup- schemes demand a much higher rate of Don’t have the taxes to pay for new port for austerity. Rightly so, but the same return than the government can borrow at” buses? It’s okay, you can sell your electric- document reaffirmed support for privatiza- have a bearing on why the Bank of Canada ity utility to pay for them instead. In fact, tion. Canada’s Liberal Party is really at the won’t do? this is precisely what the Ontario Liberal forefront of this policy shift by elites. “As I see it, the governments of Canada government is doing. Already 30 percent However, getting funds for investment have broken three fundamental financial of the profitable Hydro One have been sold by selling other assets into a system that has rules. These rules are: and another 30 percent will be sold before created massive asset price inflation – seen 1. No sovereign government should ever, 2018. A public Hydro One could more in stock markets at record highs, a lack of under any circumstances, borrow money directly fight climate change, lower energy sub-million dollar homes in Vancouver or from any private bank. costs for the poor or work with First Nations smashed art auction records – seems ques- 2. No Canadian, provincial, or local on whose lands generation often happens. tionable at best. The response to the global government should borrow foreign mon- A private Hydro becomes an instrument for financial crash of 2007-08 saved the world ey when there is excessive unemployment profit first with other goals secondary. from depression but left fundamental in- here…. Deficits should be financed inter- What the Liberals have started in On- equalities in place. nally and largely through the central bank. tario will soon be rolled out across Canada. Third, shares in newly-privatized public 3. Governments, like businesses, should Here are the problems with these schemes. enterprises can become bargaining chips. distinguish between “capital” and “current Asset recycling has already created space expenditures,” and when it is prudent to Cut Taxes to Create a Funding Crisis for new and refined forms of triangulation, do so, finance capital improvements with First, there is no crisis that says you have with worse to come. The latest batch of money the government has created for itself to sell a bridge to fund a hospital or the Hydro One shares in Ontario will be sold at (Professor John H. Hotson, 1930-1996, other way around. Or, better put, we have a slight discount to First Nations for loaned Professor Emeritus of Economics, Universi- manufactured crises. Decades of slow but funds. What seems like new funding is, ty of Waterloo, Ontario, and Past Executive crippling austerity, tax cuts and restructur- however, a cynical one-off. Director of COMER). ing have led us here. We cannot afford tran- This is the Ontario government effective- Élan sit and hospitals by choice and it is in our ly saying, “we’ve underfunded your schools power to reverse things. Deficit spending and clinics, poisoned your rivers and aban- How Not To Fund can be part of a reversal in the short term; doned your communities, let’s make it right asset recycling cannot. by helping us privatize Hydro.” Beyond Infrastructure Second, remember that we need more slightly accelerating the sale of Hydro and By Michal Rozworski, The Bullet, Socialist infrastructure spending because what we coming at low political cost (the govern- Project, E-Bulletin 1296, August 26, 2016 have is often crumbling and the economy ment gets a slightly smaller share of privati- Recycling is supposed to be a good thing, faces gaps in demand. Investment in infra- zation income, rather than making explicit so when the federal Liberals quietly an- structure not only creates useful things we expenditure on First Nations), this scheme www.comer.org September–October 2016 Economic Reform | 3 does nothing to address real grievances First Liberals Eye “Asset at one way Ottawa could fund billions in Nations might have with Hydro. Seats on Recycling” and Privately public infrastructure…[Quebec’s public the Board of Directors or other regulatory pension fund manager], the Caisse de depot bodies, deeper co-governance arrangements, Owned Infrastructure et placement du Quebec, is prepared to priority hiring – none of this is on the table By Brent Patterson, rabble.ca, June 17, pump $3 billion into [a $5.5 billion light- and neither is new, stable funding. 2016 rail plan for Montreal] – and it wants the The Canadian Press reports: provincial and federal governments to kick Pension Funds on the Prowl for “The federal government has identified in the rest…. A subsidiary of the Caisse ‘Investment Opportunities’ a potential source of cash to help pay for would operate the rail network and gradu- Finally, here’s a quote from an invest- Canada’s mounting infrastructure costs – ally recoup the pension plan’s investment ment manager in a Maclean’s piece on asset and it could involve leasing or selling stakes through user fees. Eventual profits would recycling: in major public assets such as highways, rail be funnelled into Quebecers’ public nest “‘If you took a road that used to be free lines, and ports. A line tucked into [their] egg – the Quebec Pension Plan – which is and you tolled it, I think consumers are federal budget reveals the Liberals are con- managed by the Caisse.” right to say, ‘Hey, that used to be free and sidering making public assets available to Finance Minister Bill Morneau says, “I now it’s being tolled, that’s unfair,’’ he said. non-government investors, like public pen- salute the innovative efforts of the Caisse “‘But let’s remember that governments sion funds. The sentence mentions ‘asset de depot et placement du Quebec, which, need to balance their books somehow…. recycling,’ a system designed to raise money through its metropolitan electric network, I don’t think they can raise taxes too much to help governments bankroll improve- is proposing a new business model to imple- more. I don’t think any of us want that.’” ments to existing public infrastructure and, ment major infrastructure projects.” And Typical right-wing talking points. The possibly, to build new projects.” Infrastructure Minister Amarjeet Sohi says, problem is that these typical right-wing CUPE has previously explained: “I see this as a great opportunity for us to talking points are coming from someone “Asset Recycling is a new phrase de- support innovation in delivery of infrastruc- ostensibly representing union workers: this scribing corporatization, marketization and ture, because we do need to engage public investment manager works for the Ontario privatization of government assets. An asset sector pension funds, as well as private sec- Teachers’ Pension Plan. Canada is a world is ‘recycled’ when a government, corpora- tor funds, to make sure the amount of infra- leader when it comes to workers’ own pen- tion or bank either sells or borrows against structure that we build across the country sions being turned against them and young- its physical assets to get money for invest- engages other stakeholders and partners.’’ er generations. What were once simple, safe ment in new capital…. Asset recycling is We do not share the enthusiasm of these pension investments in government bonds just another scheme driven by bankers and ministers for this model. are today predatory arrangements with pen- governments desperate to hide past failures The Montreal transit project is not a sion boards acting more like hedge funds. of neo-liberal privatization policy.” public-private partnership nor the privatiza- Asset recycling only accelerates this process The term “recycling” comes from the no- tion of an existing publicly owned asset. But and binds regular people more tightly to a tion that, as described by the Mowat Centre, it is just as problematic that the ownership system that ultimately works against them. governments “dispose of legacy assets to and operation of this new rail line will be [Editor: see “Pension Funds and Privatiza- generate capital to invest in new assets or to in private, for-profit hands from the start. tion,” LeftStreamed No. 194.] refurbish existing infrastructure.” We believe that public services and pub- So, too few buses in your city? Sell an air- The clearest example of this may be the lic infrastructure, including transportation port. First Nations have inadequate health Ontario Liberal government selling 60 per- infrastructure like this rail line, is most facilities? Here’s a few Hydro shares. Need a cent of Hydro One, the provincially owned efficiently operated on a publicly owned pension? Buy a highway…and don’t forget electricity transmission utility, to generate and democratically accountable basis. The to contract out the maintenance and toll funds to spend on transportation infrastruc- involvement of a public pension fund does staff to make sure you’re earning maximum ture. The grim truth is that a publicly owned not change the reality that the service is to returns. As a friend put it, “Trudeauism is utility that generates about $750 million a be operated and controlled by a for-profit able to sublimate both neoliberalism and year in “profit” and puts another $100 mil- corporation. social democracy into itself.” Just so, asset lion a year in the provincial treasury in lieu It should also be noted that pension recycling is the wrong answer to each of the of taxes is being privatized. Federally, just a fund companies do not pay income taxes on above good questions. few examples of Crown corporations (state their profits. That’s why in some instances owned corporations) that could be subject pension funds take the lead in a consortium Michal Rozworski is an independent econo- to asset recycling include Atomic Energy of with tax-liable corporations in order to mist, writer and organizer. He currently works Canada Limited, Canada Post Corporation, shield the entire consortium of investors as a union researcher in Toronto, blogs at the Canadian Broadcasting Corporation, from their obligation to pay taxes. That is Political Eh-conomy, where this article first the Halifax Port Authority, and Via Rail. not fair and hurts the public purse. appeared. Another Canadian Press article examines CUPE has stated: more closely the issue of public pension “The Liberals are clearly hoping that Ca- Our Comment fund investments in public infrastructure. nadian pension funds could become priva- Bad policies lead to crises – crises lead to That article notes: tizers of infrastructure…. CUPE strongly worse policies. How bad does it have to get, “The Trudeau government’s newfound opposes this concept. Privately-owned and before we rise to the challenge? enthusiasm about a big Montreal transit operated infrastructure will result in more Élan proposal has given Canadians a glimpse expensive, lower quality, less accessible ser- 4 | Economic Reform September–October 2016 www.comer.org vices for Canadians. We are strongly op- to exercise monopoly control or, in labor and maintain entry barriers, often assisted posed to privatization, whether the private markets, to assert authority over workers. by conservative political forces that justify owner of the infrastructure is a profit-seek- Scholars in this area have focused on what lax anti-trust enforcement and the failure ing corporation or a worker’s pension plan. gives rise to power, how it is maintained and to limit market power on the grounds that In either case it is wrong; if future infra- strengthened, and other features that may markets are “naturally” competitive. And structure improvement and development prevent markets from being competitive. some of it reflects the naked abuse and lever- is to truly benefit all Canadians, it must be Work on exploitation arising from asym- aging of market power through the political publicly owned and run.” metries of information is an important process: Large banks, for example, lobbied example. the US Congress to amend or repeal legisla- Our Comment In the West in the post-World War II era, tion separating commercial banking from To what extent this project and others the liberal school of thought has dominated. other areas of finance. like it will lead to a further looting of the Yet, as inequality has widened and concerns The consequences are evident in the commons will depend on how soon Cana- about it have grown, the competitive school, data, with inequality rising at every level, dians address the need to sort out an accept- viewing individual returns in terms of mar- not only across individuals, but also across able balance between private profit and the ginal product, has become increasingly un- firms. The CEA report noted that the “90th common good. able to explain how the economy works. percentile firm sees returns on investments “Public infrastructure should be publicly So, today, the second school of thought is in capital that are more than five times the funded through new money borrowed at the ascendant. median. This ratio was closer to two just a government-owned Bank of Canada, paying After all, the large bonuses paid to banks’ quarter of a century ago.” near zero interest rates – just sufficient to CEOs as they led their firms to ruin and the Joseph Schumpeter, one of the great cover the bank’s running expenses.” economy to the brink of collapse are hard economists of the twentieth century, argued John Hotson to reconcile with the belief that individu- that one shouldn’t be worried by monopoly als’ pay has anything to do with their social power: monopolies would only be tempo- Monopoly’s New Era contributions. Of course, historically, the rary. There would be fierce competitionfor By Joseph E. Stiglitz, Project Syndicate, oppression of large groups – slaves, women, the market and this would replace competi- May 13, 2016 and minorities of various types – are obvious tion in the market and ensure that prices New York – For 200 years, there have instances where inequalities are the result of remained competitive. been two schools of thought about what power relationships, not marginal returns. My own theoretical work long ago determines the distribution of income – and In today’s economy, many sectors – tele- showed the flaws in Schumpeter’s analysis, how the economy functions. One, emanat- coms, cable TV, digital branches from social and now empirical results provide strong ing from Adam Smith and nineteenth-cen- media to Internet search, health insurance, confirmation. Today’s markets are charac- tury liberal economists, focuses on competi- pharmaceuticals, agro-business, and many terized by the persistence of high monopoly tive markets. The other, cognizant of how more – cannot be understood through the profits. Smith’s brand of liberalism leads to rapid lens of competition. In these sectors, what The implications of this are profound. concentration of wealth and income, takes competition exists is oligopolistic, not the Many of the assumptions about market as its starting point unfettered markets’ ten- “pure” competition depicted in textbooks. A economies are based on acceptance of the dency toward monopoly. It is important to few sectors can be defined as “price taking”; competitive model, with marginal returns understand both, because our views about firms are so small that they have no effect commensurate with social contributions. government policies and existing inequali- on market price. Agriculture is the clearest This view has led to hesitancy about official ties are shaped by which of the two schools example, but government intervention in intervention: If markets are fundamentally of thought one believes provides a better the sector is massive, and prices are not set efficient and fair, there is little that even the description of reality. primarily by market forces. best of governments could do to improve For the nineteenth-century liberals and US President Barack Obama’s Council of matters. But if markets are based on exploi- their latter-day acolytes, because markets are Economic Advisers, led by Jason Furman, tation, the rationale for laissez-faire disap- competitive, individuals’ returns are related has attempted to tally the extent of the in- pears. Indeed, in that case, the battle against to their social contributions – their “margin- crease in market concentration and some of entrenched power is not only a battle for al product,” in the language of economists. its implications. In most industries, accord- democracy; it is also a battle for efficiency Capitalists are rewarded for saving rather ing to the CEA, standard metrics show large and shared prosperity. than consuming – for their abstinence, in the – and in some cases, dramatic – increases in words of Nassau Senior, one of my prede- market concentration. The top ten banks’ Joseph E. Stiglitz, recipient of the Nobel Me- cessors in the Drummond Professorship of share of the deposit market, for example, morial Prize in Economic Sciences in 2001 Political Economy at Oxford. Differences in increased from about 20% to 50% in just and the John Bates Clark Medal in 1979, is income were then related to their ownership 30 years, from 1980 to 2010. University Professor at Columbia University, of “assets” – human and financial capital. Some of the increase in market power is Co-Chair of the High-Level Expert Group on Scholars of inequality thus focused on the the result of changes in technology and eco- the Measurement of Economic Performance determinants of the distribution of assets, nomic structure: consider network econo- and Social Progress at the OECD, and Chief including how they are passed on across mies and the growth of locally provided ser- Economist of the Roosevelt Institute. A former generations. vice-sector industries. Some is because firms senior vice president and chief economist of The second school of thought takes as its – Microsoft and drug companies are good the World Bank and chair of the US presi- starting point “power,” including the ability examples – have learned better how to erect dent’s Council of Economic Advisers under Bill www.comer.org September–October 2016 Economic Reform | 5 Clinton, in 2000 he founded the Initiative for chael Sabia, president and CEO of the infrastructure would be done in Canada,” Policy Dialogue, a think tank on international Caisse de dépôt et placement du Québec he said. development based at Columbia University. pension fund – said that decision is up to Mr. Sabia said criticism of some public- His most recent book is The Euro: How a the federal government. But both suggested private infrastructure projects, such as the Common Currency Threatens the Future the money could come from the existing initial contract for Ontario’s 407 toll high- of Europe. federal pledge to spend $60 billion in new way, is valid, but an infrastructure bank funds on infrastructure over 10 years. staffed with experts could negotiate con- Our Comment The challenge for the federal cabinet is tracts that are positive for investors and the To hear today’s finance gurus report- that some of that $60 billion has already public interest. ing on the markets, one would think that been spent on what it called Phase 1 of “It’s wrong to think about this bank the markets, like corporations, should be its infrastructure plan. Negotiations to- purely as a financial institution. This bank is considered persons – persons, indeed, of ward a second phase that would allocate intended by us to also be a national centre of superior intellect and authority! the remaining $48 billion are already well- expertise on infrastructure,” he said. How refreshing, to read Stiglitz’s clarifi- advanced with provinces and municipali- Canadian pension funds have been cation of the reality that markets lead – not ties, who are expecting to hear details this steadily adding infrastructure investments to “marginal returns commensurate with fall. Federation of Canadian Municipalities to their portfolios, buying airports, toll social contributions” – but to monopoly. president Clark Somerville said Monday the roads, bridges and shipping ports around The neoliberal rational for laissez-faire proposed bank should be funded indepen- the world. has been the excuse for many destructive dently of the Phase 2 infrastructure plan. But direct infrastructure investing is still policies, not the least of which are those “FCM has been working closely with relatively new for the country’s largest in- responsible for the disastrous exploitation of the federal government to ensure Phase 2 stitutional investors. CPPIB did its first the environment. provides predictable funding for urgent lo- infrastructure investments in 2004, but had We can hardly hope to wage a serious cal priorities like transit, housing and green $21.3 billion – or 7.6 percent of the $278.9 “battle against entrenched power” without infrastructure,” he said in a statement to The billion CPP fund’s assets – allocated to in- reversing their key monopoly – the mo- Globe. “Based on these conversations, we ex- frastructure at the end of March this year. nopoly over money creation! pect the infrastructure bank would serve as The Caisse had about $13 billion worth of Élan an additional financing mechanism, above infrastructure in its portfolio at the end of and beyond the $48 billion core investment last year, while the Ontario Teachers’ Pen- Canadian Cities Push Back committed for Phase 2.” sion Plan had $15.7 billion invested. on Plans for Infrastructure The pushback from municipalities The pension funds are less often involved highlights how difficult it is for the federal in public-private partnership deals to de- Bank government to reach agreements on infra- velop local infrastructure such as hospitals, By Bill Curry, Ottawa – The Globe and structure proposals and get projects off the prisons and transit because these are debt- Mail, October 25, 2016 ground. heavy financings where the equity portion Canada’s municipalities are pushing back While Mr. Morneau has said the idea of the deal isn’t large enough to move the against plans for a $40 billion federal in- of an infrastructure bank makes “eminent needle for the big plans. frastructure bank, warning Ottawa that it sense,” he has not formally committed to Mr. Wiseman, who left as head of the should not be capitalized with the billions the concept. That could potentially happen CPPIB in June to join BlackRock, said of dollars the Liberals have already promised either on November 1, when he delivers the council proposed $100 million as a cities for transit, bridges and other projects. a fall economic update, or November 14 minimum size for projects that would be Finance Minister Bill Morneau’s advisory when government officials meet with the supported by the bank because institutional council on economic growth – which has leaders of several institutional investment investors need scale. worked directly with top federal officials for funds to talk about Canada’s infrastructure While the council said the infrastructure months – released a report last week call- plans. A spokesperson for Mr. Morneau said bank could raise $4 in private capital for ing for the creation of a new infrastructure it is too early to discuss how the minister every $1 invested by Ottawa, he outlined development bank that would bring public might respond to the council’s recommen- several scenarios where federal investments and private money together to build major dations. could be leveraged to even greater amounts. projects across the country. In an interview, Mr. Sabia – the head of Institutional investors are looking for The council said Ottawa should capital- Quebec’s $255 billion pension fund – said large projects and predictability in terms of ize the bank with at least $40 billion over Ottawa doesn’t need to find the entire $40 revenue and regulation, he said. 10 years and predicted that would leverage billion right away. He said the priority “This is about building the type of na- a further $160 billion – if not more – in should be to get the institution running as tional infrastructure, the type of urban private capital. soon as possible so that it can gain investor transportation, that will essentially serve the The report was silent though as to how confidence as a professional and indepen- country for decades to come,” he said. the federal government should come up dent source of expertise. Andrew Claerhout, head of infrastruc- with the $40 billion. In interviews, two He described the concept as one that ture and natural resources at Teachers, is members of the council – Mark Wiseman, would avoid political intervention because heavily in favour of the infrastructure bank senior managing director of BlackRock Inc. the bank would be free to manage a project proposal. However he expressed concern who was recently the head of the Canada once it has been approved by government. that the plan could “get whittled down in Pension Plan Investment Board, and Mi- “This is a really important change in how multiple places, such that it’s no longer ef-

6 | Economic Reform September–October 2016 www.comer.org fective. That would be the thing that would cash-cow function of the bank. ment’s negotiated share of risk and profit? keep me up at night.” Remember Blackrock, the world’s big- Let your MP know how you feel and what The most important facets of the plan are gest investor, and the single biggest share- you think about this proposed infrastructure its size, its independence from government holder in Bank of America? bank! and professional management, he said. “Governments in the US, Greece, and Élan Mr. Claerhout added that the govern- Britain, went there for advice on what to do ment should not only share in the risk of with toxic assets” from crashing banks, even Additional Comment the projects, but should also share in the though Larry Fink, its co-founder, chair and rewards to avoid leaving the bad taste in any CEO, “was an early and vigorous promo- and Quotations mouths that private investors profited at the tor of the same mortgage-backed securities Of course, we already have an infrastruc- cost of government. If the government can responsible for the crisis.” Now his firm is ture bank – one that has served us well in turn a profit, support for future projects making millions cleaning up these toxic as- the past. In 1939, Graham Towers, the first with an institution such as Teachers is more sets (Joyce Nelson, COMER, March-April governor of the Bank of Canada, confirmed likely, he reasons. 2016). that “anything physically possible and so- Given that, for Finance Minister Bill cially desirable can be made financially Our Comment Morneau, the idea of an infrastructure bank possible.” Public-private partnerships have a his- makes “eminent sense,” it might be interest- From the 1940s into the mid 1970s for tory of cautionary tales. ing to ask him why? example, state funding through the Bank of In December 2014, Ontario’s Auditor “The priority should be to get the insti- Canada promoted a stunning era of growth General, Bonnie Lysyk, blasted the Liberals’ tution running as soon as possible so that it in Canada’s wealth, without causing undue use of private money to finance new hospi- can gain investor confidence as a profession- debt or the dreaded inflation. tals and transit, revealing that Infrastructure al and independent source of expertise….” Bank-created money empowered Cana- Ontario’s use of P3s had cost $8 billion Independent of whom? Of what? da’s outstanding contribution to the war ef- more taxpayer dollars than traditional pub- “This is a really important change in how fort, paid for physical infrastructure projects lic financing would have Toronto( Star, De- infrastructure would be done in Canada.” like the Trans-Canada Highway and the St. cember 9, 2014, quoted by Joyce Nelson, No kidding!!! Lawrence Seaway, and social infrastructure COMER, March-April 2016). Not to be considered “purely as a finan- projects like Old Age Pensions and universal “P3’s are not really about government cial institution,” the bank “is intended by Medicare. financing because of scarce money, but [them] to be a national center of expertise Since 1974-5, in accordance with an another con job by the corporations to on infrastructure.” Is that to say that the agreement among central bankers (most of expand their operations in order to enhance people financing it also get to negotiate whose banks are private), at the Bank for shareholder value. It is made to look like what “contracts…are positive for investors International Settlements (BIS), Canadians governments are asking for this form of help and the public interest”? have been denied that use of their central when in fact it serves the corporate interests Some of us may have reservations about bank, and successive Canadian governments for never-ending growth on a finite planet” investing Canada Pension Funds in a toll- have borrowed, instead, from private banks. (Herb Wiseman, quoted by Joyce Nelson, road economy that drags taxpayers on to By 2012, that change in monetary policy COMER, March-April 2016). “the road to serfdom” (Michael Hudson, had cost Canadian taxpayers more than What opportunities has the average Ca- Finance Capitalism and Its Discontents). $1 trillion in interest on the national debt nadian had to learn about P3s? It would be Luckily our pension funds won’t take the instructive to find out what one’s MP knows P3 rout to “debt heavy financings” because “The powers of financial capitalism had an- and thinks about them! that isn’t profitable enough! other far-reaching aim, nothing less than to It might be equally constructive both for What are we to make of Mr. Wiseman’s create a world system of financial control in one’s MP and oneself to ask about “leverag- move to Blackrock? private hands able to dominate the political ing $160 billion plus in private capital. At One has to wonder what sort of guar- system of each country and the economy what cost? Who would pay? Who would anties institutional investors will require of the world as a whole. This system was to benefit? And, wherewill that initial $40 bil- regarding “predictability in terms of revenue be controlled in a feudalistic fashion by the central banks of the world acting in concert, lion come from? and regulation”! by secret agreements arrived at in frequent The makeup of the advisory board, and “This is about building the type of na- meetings and conferences. The apex of the the plan so far revealed, portend a global tional infrastructure, the type of urban systems was to be the Bank for International feeding frenzy for big-thinking, long-term transportation, that will essentially serve the Settlements in Basel, Switzerland, a private oriented corporations, that would lead, country for decades to come.” bank owned and controlled by the world’s ultimately, to a global gobble-up of national And corporations forever? central banks which were themselves private assets for corporations, and a zooming debt- What do you suppose “[getting] whittled corporations. Each central bank…sought load for nation states on the “road to debt down in multiple places” might involve, or to dominate its government by its ability to serfdom” (term coined by Friedrich von why that might occur? control Treasury loans, to manipulate foreign exchanges, to influence the level of eco- Hayek). “The most important facets of this plan nomic activity in the country, and to influ- The expectation that the infrastructure are its size, its independence from govern- ence co-operative politicians by subsequent bank “would serve as an additional financ- ment and professional management.” economic rewards in the business world.” ing mechanism above and beyond $48 bil- The ultimate neoliberal paradise! — Carroll Quigley, Tragedy and Hope, p. 324 lion core investment” exposes the potential What, I wonder, would be the govern- www.comer.org September–October 2016 Economic Reform | 7 alone, and created a deficit that has been the (i) make loans or advances… democratic governments, and to perpetuate excuse for a disastrous slash-and-strangle (j) make loans to the Government of private profit and corporate power. It is the budget policy that continues to trash all of Canada or the government of any Prov- final coup in the transfer of power from our the social progress gained over those decades ince… (Abram). national governments to private corpora- prior to the ’70s. A separate Act, Bill 143 – “The Mu- tions. From its inception, the Bank of Canada nicipal Improvements Assistance Act an Act to The Bank of Canada was designed to has been an arena of struggle over who’s boss assist Municipalities in making self-liquidat- entrust to a democratically empowered gov- – the government or the bank! ing improvements” was passed in 1938 (the ernment the power of money to serve the There has always been a concern that year the Bank was nationalized), and was common good. politicians might abuse the power to cre- rescinded – guess when – in 1975! Andrew Clairehout’s somewhat ingenu- ate money to manipulate the electorate in In 2011, William Krehm, on behalf of ous acknowledgement that “the most im- a manner detrimental to the health of the COMER, filed a suit to restore the Bank to portant facets of the plan are its size, its economy, hence the provision that the bank its original purpose. independence of government and profes- should operate at arm’s length. The crisis of the Great Depression sional management”, pretty well reflects its “The Bank is not a government depart- sparked the appointment of the Macmillan true purpose. ment as it performs its activities at arm’s- commission struck to consider the need for No, the Bank of Canada won’t do! It length from the government; it is a Crown a central bank. won’t do because it belongs to Canadians corporation owned by the Government The most influential person to address and is mandated to serve the common good. (shares are directly held by the Ministry of that commission was Gerald Gratton Mc- The Canadian Infrastructure Bank (CIB) Finance). The Governor and Senior Deputy Geer, a brilliant Canadian lawyer who ar- will belong to the neoliberal oligarchy that Governor are appointed by the Bank’s Board gued the case for the need to establish a is behind it. It’s mandate will be to act in its of Directors. The Deputy Minister of Fi- public central bank. He campaigned across best interests. It will appropriate our nation- nance sits on the Board of Directors but Canada to encourage public support for al sovereignty, and will trim our economic does not have a vote” (Bill Abram, Money: such a bank, and was instrumental in per- and political freedom. A Servant For All Mankind: The Canadian suading Prime Minister Mackenzie King to The Bank of Canada is ours in trust. It Experience). promote the project. is not ours to surrender. We owe it to all Article 14(2) of the Bank of Canada Act, Highly pertinent to the present moment those Canadians, notably G.G. McGeer, however, makes it crystal clear that “If… in the history of the Bank, is this comment who won for us that legacy, and we owe it there should emerge a difference of opinion from his report of 1933, entitled The Toll to future generations to hand it on intact. between the Minister and the Bank con- Gate: (Bill Abram’s handbook on money and cerning monetary policy to be followed, the “The barrier that now blocks the way the Bank of Canada is an excellent reference Minister may…give the governor a writ- to progress is the misguided management of resource. If you are interested in a copy, please ten…and the Bank shall comply with that public credit by the private money system. We contact COMER at [email protected].) directive” (Abram). must wipe out that twentieth century anomaly “In practice, the Governor sets monetary in much the same way, and for the same reason Relevant Comments policy independently of the government. that we wiped out toll gates and private man- The late Professor John H. Hotson, co- This was not the intent of the Bank of Canada agement of public roads and highways in the founder of COMER: Act, as envisaged by Gerald Gratton McGeer nineteenth, and establish in its place national The Bank of Canada has sold out en- & the writers of the Macmillan Minority maintenance, control and regulation of the tirely to the country’s chartered banks. It is Report” (Abram). issue and circulation of public credit as the now their “wholly controlled subsidiary.” Article 91 of the Constitution Act of 1867 means of supplying the capital now required” That is why it now lets the private banks declares that the exclusive Legislative Author- (Abram). create all but a factor of the nation’s money ity of the Parliament of Canada extends to The Bank of Canada opened in 1935. At supply, and lets their income from interest all Matters coming within the Classes of that time, Prime Minister Mackenzie King, grow many times faster than all other forms Subjects next hereinafter enumerated; that in a radio broadcast to the nation, quoted of income… is to say, from the Macmillan Commission’s Minor- Section 1A, The public debt and property ity Report: “The right of Canadians to benefit from the Sub 14. Currency and coinage “Once a nation parts with control of its years of careful research that Parliament Sub 15. Banking, Incorporation of currency and credits, it matters not who makes conducted in the 1930s, concluding that it Banks, and the issue of paper money that nation’s laws. Usury once in control will is in the peoples’ best interests to have a nationalized Bank of Canada, needs to be Sub 16. Savings Banks wreck any nation. Until the control of the issue respected. What has been perpetrated since Sub 20. Legal Tender (Abram). of currency and credit is restored to the govern- 1974 is nothing short of a deceptive under- The purpose of the Bank of Canada is ment and recognized as its most conspicuous mining of the sovereignty of Parliament to expressed in the preamble to the Bank of and sacred responsibility, all talk of the sover- act in the national interest. It is an example Canada Act. It is “to regulate credit and cur- eignty of Parliament and of democracy is idle of the harmful cynicism that is created by rency in the best interests of the economic and futile…” (Abram). putting private gain ahead of the right of life of the nation.” The proposed Canadian infrastructure communities such as Canada to create and benefit from the public issuance of credit.” The Bank is empowered, by Article 18 to: bank is being designed to guarantee the – Alan Blanes, Canada Chapter – Public c) buy and sell securities issued or guar- unfettered growth on which finance capital- Banking Institute anteed by Canada or any Province… ism depends, to ensure private control over

8 | Economic Reform September–October 2016 www.comer.org According to him, the fundamental rules distinguish between capital and current ex- important than the war against poverty… of national finance are: penditures and, when it is prudent, finance more important than the movement to 1. No sovereign government should ever capital improvements with money the gov- protect the environment…the fight against under any circumstances, borrow money ernment created for itself. drugs and racism, and the battle for social from commercial banks at interest, when Compared to other issues, how im- justice and welfare. it can instead, borrow from its own central portant is monetary reform? – Michael “Financial reform is more important bank interest free. Rowbotham, The Grip of Death than all these problems for the simple reason 2. No federal provincial or local govern- “The reform of the debt-based monetary that the current financial system is respon- ment should borrow foreign money when supply system is the single most important sible, both directly and indirectly for caus- there is excessive unemployment here. area of reform confronting us. ing, or at least exacerbating them.” 3. Governments, like businesses, should “Reforming the financial system is more Élan Part II: The Secret Court that Allows Corporations to Avoid Punishment for Enormous Crimes By Chris Hamby, BuzzFeed, September Sajwani’s net worth at $3.2 billion, mak- symptoms of lead poisoning. The concen- 1, 2016 ing him No. 8 on the publication’s list of tration of lead in César’s blood, a test had Part I appeared in the July-August 2016 “World’s Richest Arabs” and landing him shown, exceeded the level internationally issue. on the overall list of billionaires, ahead of recognized to cause serious health problems. Meanwhile, the government has changed Oprah Winfrey and tied with the Dallas “Imagine,” Hernández recalled César its laws, stripping public-interest lawyers Mavericks owner Mark Cuban. saying after a doctor explained what the re- and average citizens of the right to file court Sajwani is now advertising a massive sults meant, “I’m the youngest son you have, challenges to dubious public contracts, such tower in London with apartments designed and I’m going to die soon.” as the sale of public land to a developer like by Versace Home, and he told an Emirati Not far away, across the street from the Sajwani. newspaper he’s eyeing continued expansion; village school, Fany Carolina held an X- One purpose of the law, according to next might be projects in the United States. ray up to the light streaming through her corporate lawyers in Cairo who said they Heba Khalil, a researcher at an Egyptian kitchen window and pointed to dark spots lobbied for it, was to prevent the domestic human rights organization, recently recalled on the images of her son José’s leg bones. court cases that had led to ISDS claims. As the chaotic but hopeful days after the fall of These, she said doctors told her, likely were a result, several cases challenging Mubarak- Mubarak. “No one knew what Egypt would deposits of lead. She unfolded reports show- era deals are now frozen. be like,” she said. “International investors ing levels of lead in her son’s blood above the Corporate lawyers cheered these devel- were kind of scared that the kind of deals safe limit. The hazardous metal had first ap- opments. But even some supporters of ISDS that they did with the Mubarak regime peared in his body when he was 5 years old. now worry that the system has been misused wouldn’t be possible anymore.” Eight years later, he has pain in his joints, to help the powerful evade justice and to Then came the ISDS claims. “I think the and Carolina worries his development has hold hostage the economy of a nation still impact of international arbitration,” Khalil been stunted. in turmoil. said, was that Egyptians “started knowing Across town, René Gómez Colocho sat “If you get something out of corruption, that, ‘Oops, if we try to expose corruption, beneath the coconut and mango trees in his you should not have your day in court; then those investors will take us to court dirt yard, pounded the table with his fist, and it should be dismissed,” said Ahmed el- internationally, and we will lose the case. choked back tears as he described his daugh- Kosheri, a native Egyptian and long-time Which means we had better just shut up ter, Ángela. She was 11 years old when tests arbitrator who recently received a lifetime and let the wrongs of Mubarak continue the had shown levels of lead in her blood more achievement award from a leading interna- way they are.’” than triple what is considered safe. Doctors tional arbitration organization. In the rural hamlet of Sitio del Niño, had tried to leach the heavy metal from her He worried that his country would be about 20 miles from El Salvador’s capital body, but the treatments left her weak and saddled with massive costs because of the city, Reyna Isabel Hernández de Avelar ill. She became depressed and eventually ISDS cases. “That’s the irony of it,” he said, slumped in a plastic chair in an alcove out- drank poison, ending her own life. “that innocent people, the Egyptian public, side her home, her eyes fixed on the small Sitio del Niño is a manmade disaster, a would pay for the mistakes committed by shrine before her – flowers, figurines of the result of environmental neglect by the lead- the regime, which was corrupt.” Virgin Mary, a crucifix, and, at the center, a acid battery factory nearby, legal documents Since settling with Egypt, Sajwani has picture of her son César in a jacket and tie. show. enticed customers elsewhere with free Lam- Six days earlier, César had suddenly col- Not long after the battery factory set up borghinis; partnered with Trump, whose lapsed and died. He was a healthy 16-year- shop on the edge of Sitio del Niño in 1998, campaign did not respond to requests for old, she said, except for one thing: the lead people began noticing clouds of ash floating comment, on a collection of luxury man- in his body. over from their new neighbor, descending on sions; and sold Damac shares on the Lon- He’d complained of unceasing pain in his fields where children played soccer and seep- don Stock Exchange, reaping a windfall. head, chest, stomach, and bones, she said, ing into their homes at night. It burned peo- This year, Forbes magazine estimated and he grew fatigued easily – all common ple’s throats and sent them into coughing fits. www.comer.org September–October 2016 Economic Reform | 9 Eventually, people started connecting the have caused limited pollution.” (The facto- going to beat you there,’” he said. ash with the persistent headaches, dizziness, ry’s other two owners are Gurdian’s mother, In the midst of the trial, the prosecu- extreme fatigue, and constant bone and joint Sandra Escapini, who directed questions tion agreed to settle. Prosecutors declined pain that children in particular were suffer- to her son, and another relative, Ronald to comment on the role ISDS played, but ing. In 2004, a committee of local citizens Lacayo, who did not respond to repeated the settlement document lays out the terms. began petitioning leaders for help, writing requests for an interview.) The company agreed to pay for a limited the town’s mayor, national government min- They were safe in Florida, and the case cleanup of only the factory site, far short of istries, and eventually even other nations’ against them did not proceed. But the case the much more expansive cleanup the gov- embassies and international aid organiza- against their company and three of its man- ernment has said is needed, and to establish tions. For years, their efforts came to naught. agers did. Before long, the company’s legal a medical clinic in the village, albeit one that Then lead started showing up at poten- team turned to ISDS. would provide only basic care and be fund- tially dangerous levels in the blood of the In May 2009, a threatening letter on ed for only three years. The company would town’s children. Testing in 2006 and 2007 behalf of the owners arrived at a govern- also pay for some of the costs associated with found that dozens of children, some as ment office in San Salvador. It was signed the prosecution and make small donations young as 3, had been contaminated. by Jonathan Hamilton, the head of Latin to the community. And it agreed to drop its The reason for the contamination, a American arbitration at White & Case, threat and not pursue an ISDS case. court would later conclude: The factory recently named by an international arbi- Lawyers for the community denounced had promised environmental regulators tration industry publication as the world’s the deal, saying it failed to address the com- it would upgrade its deficient pollution top firm in the ISDS field. By shutting munity’s problems. The judges also refused controls – installing systems to remove lead down the factory and pursuing “unlawful to sign off on the prosecutor’s bid to end the from the factory’s water, for example, and criminal proceedings” against its owners, case, instead carrying it to its conclusion. improving how it stored contaminated slag. the Salvadoran government had violated the Ultimately, the court concluded that the But the factory either delayed taking some Central American Free Trade Agreement, factory had contaminated the village. But of these steps for years, the court found, or Hamilton wrote. It had “expropriated” the that same court acquitted the three lower- never actually took them, even though the factory “without a public purpose,” treated level managers, so, it reasoned, it had no company’s profit statements showed it had the owners unfairly, and imposed an “un- choice but to exonerate the company, too. the money to make the fixes. As a result, lawful and discriminatory sanction.” They A force that helped persuade the judges, the court determined, lead seeped into the planned, he said, to file an ISDS case de- said Girón, the company’s lawyer, was the town’s water supply and blew over from manding that the Salvadoran government ISDS threat and its potential to slam the smokestacks and waste piles. pay the owners $70 million. (Hamilton government with huge compensatory dam- Angry parents and a legal aid group de- declined to comment. In a statement, White ages. Today, the legal wrangling – and the manded that the government take action. & Case said the firm “has not been involved possibility of an ISDS claim – persists. In 2007, the health ministry ordered the in the matter for many years.”) The factory is pursuing an administrative closing of the factory on the grounds that Gurdian, the company president, told case against the government, and prosecu- it lacked the proper permits. The following BuzzFeed News the ISDS threat was not tors have filed a new criminal case, accusing year, the attorney general brought charges of intended to help the criminal case. The the owners of causing physical harm to aggravated environmental pollution against architects of his company’s legal defense, the villagers. Gurdian dismissed the new the company, its three owners, and three however, said it was a key prong of their charges as “completely baseless.” But they lower-level managers. strategy. Arturo Girón, the lead criminal might leave him and the other two owners The factory’s owners, members of a defense lawyer, said it was “necessary to vulnerable to extradition. If prosecutors do prominent family in El Salvador who also strengthen” their case. In talks with the try to pursue the owners abroad, the factory hold US citizenship, fled to the US, which government, he said, he warned that the lawyer said he knew exactly what move he was asked to extradite two of them. The US company might “play that card” if the case would recommend: an ISDS claim. refused, on the grounds that environmental could not be resolved. The failure to hold the factory account- crimes are not covered under the US–El Another factory lawyer, who spoke on able is an open wound for the impoverished Salvador extradition treaty. condition of anonymity, said that the threat residents of Sitio del Niño – a village whose In an email to BuzzFeed News, José Gur- to sue in ISDS was like a chess move intend- very name, “Place of the Child,” is now dian, the company’s president, vehemently ed to send the government an intimidating a cruel joke. For six years, their commu- denied wrongdoing and insisted that his message: “I’m not so tiny; I have powerful nity has been designated an “environmental factory had been “confiscated by the gov- people behind me.” After the ISDS threat, emergency” by the government, which has ernment of El Salvador in violation of all the government officials’ tone changed. “All warned them not to eat anything grown in local and international law.” No test results of a sudden, they were very, very polite, and the town’s contaminated soil. But many of ever showed that the factory was “emitting careful,” he said. them have no other option. lead into the air,” he said, and his company And Luis Francisco López, a lawyer who The government has estimated that the had “made all the necessary investments” represented the community as an interested total cost to remove the lead from the area to meet the safeguards that environmental party in the case, said the ISDS threat came and to restore the land would be about $4 regulators required. He disputed tests con- up in meetings he attended involving the billion. “We have a solution,” the environ- ducted before the factory closed that found attorney general’s office and the factory mental minister, Lina Pohl, told BuzzFeed lead contamination, and he said that the lawyers. “The message we got from the be- News. But, she said, “We are waiting for government’s closure process itself “could ginning was, ‘Even if you beat us here, we’re someone to give us the money.”

10 | Economic Reform September–October 2016 www.comer.org Meanwhile, Rosa Aminta Rodríguez de – from which to launch attacks. told BuzzFeed News, he met with them on Morales is waiting to find out how dire her So it is that a private equity firm based behalf of his clients and said, “We want you son’s health is. When she gave birth to Luis in Texas can fly the flags of Belgium and to be aware of this concern and hope that Jr., now 14, a doctor told her, “Don’t have Luxembourg, enabling it to sue South Ko- you’ll take this point of view into account in any other children until the factory closes,” rea, which convicted one of its executives of the next round of negotiations.” she recalled. stock manipulation. The private equity firm “I don’t see that as being a conflict,” In 2007, when Luis Jr. was 5, tests declined to comment. Posner said. “I don’t think anybody gives my showed unsafe levels of lead in his blood. ISDS was designed to protect foreign in- point of view more credibility just because He has suffered dizziness, extreme fatigue, vestors, not people suing their own govern- they happen to have been a former col- and pain in his joints and bones. ment. But members of the once-prominent league. I may be able to get a call returned Recently, his dizzy spells seemed to be Turkish Uzan family – accused of perpetrat- more quickly or an email responded to more getting worse, so his parents saved enough ing a fraud worth billions and derided at one quickly, but I don’t think prior service in an money from selling homemade cheese to point by a US federal judge as “business im- agency and knowledge of how that agency take him to a private clinic. Doctors ran perialists of the worst kind” – found a way works is something that should be con- tests that indicated he had kidney disease – a to sue their native land through a variety of sidered problematic from a public-interest classic symptom of lead poisoning. companies primarily under their control in point of view.” The toxic metal is known to strike multi- Cyprus, Poland, and the Netherlands. (Tur- Private attorneys have emerged as some ple organs, and Rodríguez and her husband key won each case, but at a cost of tens of of the staunchest defenders of ISDS, accus- said they hoped to save enough over the next millions in legal fees.) The family’s telecom- ing critics – from prominent scholars, to aid month to find out whether their son’s liver munications company, however, remained groups such as Doctors Without Borders, was also failing. Turkish so it could bring a claim against to the Australian government – of failing to “Psychologically,” Rodríguez said, “he Kazakhstan, with which Turkey has a treaty understand the system and making exagger- already feels like he’s going to die.” – and win a $125 million award. Attempts ated claims. While they concede that many When NAFTA, the North American to reach the Uzans through numerous inter- arbitrators are chosen from their own ranks, Free Trade Agreement, took effect in 1994, mediaries were not successful. they say that when lawyers adjudicate cases, some lawyers at top firms took notice of ISDS lawyers also grow the market for they weigh the evidence without favor and ISDS for the first time. One heralded “a new their services by advocating for new treaties, reach just decisions in the overwhelming territory” where some pioneering attorneys and some of the most outspoken are benefi- majority of cases. Their reputation for fair- had ventured and “prepared maps showing ciaries of the revolving door between the US ness is their currency, they say. a vast continent beyond.” What they saw government and top law firms. To prove that ISDS is not biased in favor was the opportunity to expand and reshape Daniel M. Price negotiated the section of businesses, they point to the outcomes of ISDS to their benefit, and the previously of NAFTA containing ISDS when he was known cases: Governments have won about dormant system changed forever. a lawyer at the Office of the US Trade Rep- 35% of the time, while business interests “A whole industry grew up,” said Muth- resentative. He later served as a top interna- have won only about 25%. ucumaraswamy Sornarajah, an internation- tional trade official in the George W. Bush But that statistic is anything but straight- al lawyer and ISDS arbitrator who argued White House. forward. It pertains only to the outcomes that the system is now being misused. Large In between these government stints, he of known cases; ISDS is so secretive no law firms, he said, see ISDS “as a lucrative worked as a private lawyer helping clients in one even knows how many additional cases area of practice, so what happens is they ISDS cases. Twice he used the treaty he him- there have been. Also secret are most of think up new ways of bringing cases before self had helped negotiate to help US-based the settlements. Roughly a quarter of the the arbitration tribunals.” businesses pursue claims against Mexico. known cases were settled, but the terms are Lawyers’ fees make up the bulk of the He founded and chaired the unit han- almost never disclosed. roughly $5 million in legal costs that each dling ISDS claims at Sidley Austin, a lead- Moreover, subtract the cases that arbi- side pays in an average case, recent studies ing global law firm. Today, he promotes his trators tossed out because they didn’t have have found. Big firms can easily bring in sig- services as an arbitrator and, along with a jurisdiction to hear the claim, and that nificantly more. Top lawyers sometimes bill powerhouse team that includes other former win–loss balance flips: Business interests more than $1,000 an hour. Attorneys billed government lawyers, sells international ex- have won 60% of the time. Even then, cases Turkey more than $25 million in one case, pertise on ISDS and related matters. recorded as losses for the corporation can and after Russia lost a mega-case, the country Price, who at first agreed to an interview actually be wins. In one case, an executive said it paid its lawyers more than $27 million. but later stopped responding to messages, is failed to garner a monetary judgment but A key service offered by the ISDS le- only one of a number of private lawyers who obtained a finding that helped him wipe gal industry goes by various euphemisms: have exerted outsize influence on American away a criminal punishment. “corporate structuring,” “re-domiciling,” policy on ISDS. And no statistic could ever include the “nationality planning.” Critics have a differ- Ted Posner, a partner at US firm Weil, many ISDS claims that are merely threat- ent term: “treaty shopping.” It amounts to Gotshal & Manges and a former official ened, intimidating governments and shap- helping businesses figure out which coun- at the Office of the US Trade Representa- ing their policies while leaving hardly a tries’ treaties afford the most leeway for tive, has acted as a direct conduit to treaty trace. ISDS lawyers told BuzzFeed News bringing ISDS claims, then setting up a negotiators. As officials from his former that threats far outnumber actual cases. holding company there – sometimes little employer were hammering out the details Finally, companies can gain advantages more than some space in an office building of the Trans-Pacific Partnership, Posner by bringing an ISDS suit, even if they don’t www.comer.org September–October 2016 Economic Reform | 11 expect to win the case. Krzysztof Pelc, an of global finance he’d played in for years. analysis prepared for the Indonesian govern- associate professor at McGill University, Rizvi’s topflight criminal lawyer had ment by The Brattle Group, an economic found that there has been a proliferation threatened to sue Interpol if the agency consulting firm that is based in Cambridge, of frivolous cases primarily intended not didn’t delete the alert, but so far it hadn’t Massachusetts, and has a principal who won to win compensation but rather to bully worked. What Rizvi needed was an en- a Nobel Prize. the government – and other nations that tirely different type of lawyer. Someone like Rizvi and al-Warraq contended that they want to avoid a similar suit – into drop- George Burn. actually had obtained at least a few loans for ping public-interest regulations. These new Burn had spent years representing busi- the bank and that the assets had been seized cases, Pelc found, represent a fundamental nesses in corporate disputes, but, like many by creditors after the bank failed to repay transformation of ISDS: The system was of his colleagues, he was drawn to ISDS as these loans. But the bank and the experts designed to deal primarily with theft by au- the system began to flourish in the 1990s. hired by the Indonesian government said tocrats, but, in the majority of cases today, Now, he said, ISDS cases make up the ma- they couldn’t find any evidence to support businesses are suing democracies for enact- jority of his work as a London-based partner that claim. ing regulations. at the US firm Vinson & Elkins. The Brattle Group analysis summed Such cases, he found, are far less likely to The strategy he crafted for Rizvi epito- it up: “Mr. Al Warraq and Mr. Rizvi con- end in a settlement; the goal is to draw out mizes the ingenuity of elite ISDS lawyers trolled Bank Century, and treated it as their the legal fight and run up the government’s and the willingness of arbitrators – many of personal piggybank.” cost to deter future regulation. Even when a whom are also attorneys who argue ISDS A criminal court in Jakarta tried them in government ultimately wins, foreign invest- cases – to expand their own authority. It is a absentia, convicted both men of corruption ment in that country drops, another study stark example of how canny and audacious and money laundering, sentenced each to found. lawyers can work the system, crafting a win 15 years in prison, and ordered them to re- “The noble intent behind investor-state even when they technically lose. The only pay the massive sum it found they’d stolen. dispute settlement,” Pelc told BuzzFeed real losers: a nation of taxpayers. They could have returned to Indonesia News, is now “a tiny, tiny part of the ac- Born in Pakistan and educated in Great and challenged their convictions in court or tion.” The system has a legitimate purpose, Britain, Rizvi had been managing private in- tried to file a claim with a United Nations he said. “It’s just that, when it comes to this vestment funds set up in various tax havens human rights body designed to handle the kind of use of aggressive litigation, then it when he met Hesham al-Warraq, a Saudi kind of claims they were making. But they really gets away from the objective.” financier educated in the US. had a more attractive option. Not all lawyers involved in ISDS are The two started buying up shares of Enter Burn. His overarching strategy, opposed to reform. Some, in fact, say it is Indonesian banks that eventually merged to as he explained it, was to use ISDS to at- necessary in order to protect the system. In- form Bank Century. The two men assumed tack the validity of their Indonesian trial, dustry publications and conferences now are top posts, but al-Warraq “was always the arguing “that they’d never been given a fair filled with hand-wringing over the mount- junior guy in the partnership,” explained hearing and that there had been an abuse of ing public criticism of ISDS. Burn, who represented both men. Al-War- process at multiple stages.” But to get to that V.V. Veeder, a prolific arbitrator, warned raq, Burn said, “really was just in the wrong point, he had to deploy some of the most fellow ISDS lawyers during a panel discus- place at the wrong time.” controversial tactics that ISDS lawyers have sion at a London law office that, while they The bank was short on cash. It had a developed. might be convinced of the merits of the sys- hefty stash of bonds and other securities, First, Burn needed to find a treaty that tem, many members of the public are not. but it couldn’t wait for them to pay out. The would apply to this case. His team discov- “And,” he said, “the more they find out what bank needed the money now. ered an obscure agreement among pre- we do and what we say, and how we say it, Rizvi and al-Warraq got approval from dominantly Islamic nations, including In- the more appalled they are.” the bank’s other executives to sell many of donesia, where the case was unfolding, and The British financial guru Rafat Ali Rizvi these long-term investments or use them Saudi Arabia, where al-Warraq was a citizen. had a big problem: In Indonesia, where he’d as collateral to obtain loans. Step one was There was no record of anyone using that plied his trade, he and a business partner transferring them to offshore companies pact to file an ISDS claim before, but Burn had been convicted of embezzling more that Rizvi and al-Warraq controlled. audaciously forged ahead. than $300 million from one of the country’s If there was a step two, it basically never In fact, an official present at the creation banks. The government there had to bail happened; the bank never saw the vast ma- of that treaty 30 years earlier told the tribu- out the bank – sparking enraged protests jority of those valuable assets again, legal nal that the agreement was not supposed that police tried to quell with tear gas and documents show. to allow ISDS cases at all. The arbitrators water cannons – and Indonesian authorities The two men were supposed to return to waved off this objection as “irrelevant.” were pursuing him and the money they said the bank whatever they couldn’t sell or use The key argument that Burn planned to he’d stashed in accounts around the world. to get a loan, but, for the most part, they make was that the criminal trial in Jakarta Ensconced overseas, Rizvi was beyond simply didn’t, according to the documents. had violated al-Warraq’s right to fair treat- the reach of the Indonesian authorities. But In some instances, the documents state, they ment as a foreign investor. This protection the conviction came with an Interpol “red used the assets to get loans not for the bank is now commonplace in investment treaties notice,” meaning he risked extradition if he but for themselves. and trade deals, and it has become one of traveled abroad. Some of his bank accounts By the time the bank was bailed out in the most controversial aspects of ISDS. were frozen. And with this stain on his re- 2008, Rizvi and al-Warraq had siphoned off Guaranteeing foreign businesses “fair and cord, he was largely cut off from the world about $361 million, concluded an expert equitable treatment” sounds like common

12 | Economic Reform September–October 2016 www.comer.org sense. But many treaties don’t say what exact- more, the government contended, Rizvi and official in the Indonesian Ministry of Law ly that means, so arbitrators have found that al-Warraq had asked their lawyers to write and Human Rights who has been pursuing governments have acted unfairly even when to government officials, and the men had Rizvi’s and al-Warraq’s assets for years. they regulated the price of water or merely dispatched representatives to meet with In- Legal side skirmishes continue, but Rizvi complied with European Union law. Critics donesian authorities as the trial approached. and al-Warraq have won the war. Rizvi is, argue that such judgments have transformed Those actions, the government said, made it for the most part, back to traveling and con- a system that was supposed to uphold the clear that Rizvi and al-Warraq knew about ducting business, Burn said. Rizvi himself rule of law into one that places foreign busi- the case against them and could have re- did not respond to detailed questions sent to nesses above the law, able to get out of obey- turned to face the court in person, avoiding his email address, hand-delivered to a Lon- ing almost any statute or regulation, no mat- the trial in absentia, but chose not to do so. don home listed in his name, and provided ter how worthwhile, that cuts into profits. Ultimately, the tribunal did not find that to Burn and other intermediaries. Many scholars and activists say the “fair the prosecution had been politically moti- Al-Warraq has had a much tougher time and equitable treatment” provision, which vated. But siding with Martha and Burn, than Rizvi, Burn said, even though, as “the is included in the Trans-Pacific Partner- it did make a key finding: Indonesia had junior guy,” he “didn’t take any of the com- ship now being considered by Congress, is committed procedural errors that violated mercial decisions.” In addition to the Inter- the most widely abused element of treaties al-Warraq’s right to fair treatment. The ar- pol red notice, Burn said, Indonesia peti- containing ISDS. Numbers from the UN’s bitrators didn’t award any money, however, tioned Saudi Arabia to extradite al-Warraq, trade and development body show that ar- because they also determined that al-Warraq then asked Saudi Arabia itself to try him. bitrators find violations of this controversial had “breached the local laws and put the “Al-Warraq probably for the last four years provision far more than any other. public interest at risk.” has had to report to the police every week,” As it happened, though, the treaty Burn But, Burn said, winning the case outright Burn said. But, he added, the ISDS finding had invoked didn’t include that clause. But and getting monetary damages had never was the key to persuading the Saudi court to the agreement did have another common been the “primary target.” Above all, he finally drop the case. and often controversial clause, which re- said, he wanted a finding that al-Warraq’s “I am trying to bury this part of my quires a government to treat foreign busi- rights had been violated. And the ISDS life,” al-Warraq wrote in an email to Buzz- nesses covered under one treaty at least as arbitrators handed him exactly that. Feed News, but “to this date I am banned well as businesses covered under any of its Martha took that crucial finding and and unable to travel from Saudi Arabia.” other treaties. presented it to his former employer. He In reference to a detailed summary of the So Burn plucked the fair-treatment pro- argued that, unless Interpol dropped its red facts in this story, he said “so many points” vision from another agreement and applied alerts against Rizvi and al-Warraq, the inter- are “not correct,” but he did not respond it to the Islamic nations pact. In effect, he national cops themselves would be violating to follow-up questions asking for specifics. constructed his own super-treaty. international law. Interpol obliged, deleting Calling himself “wrongly accused,” he said And the ISDS arbitrators allowed it, giv- the red notices. it was “a life mistake I got involved with ing themselves the authority to rule on the “Unprecedented Concessions by Inter- bank century.” actual merits of the case. pol,” trumpeted a press release put out on As for Burn, “I take a great deal of pride Burn enlisted a lawyer with perfect cre- behalf of Martha’s firm. The international in holding states like Indonesia to account dentials for this case: Rutsel Martha, a for- cops also had agreed to delete information for their lack of rule of law,” he said. “There mer general counsel of Interpol who now about the two convicts from its files and to is no meaningful evidence that Rizvi and specializes in, among other things, challeng- send letters to certain risk profiling and due al-Warraq were involved in any frauds, but, ing the international police agency’s actions. diligence agencies, as well as the roughly even if they were, the absolutely tainted He argued that the Indonesian authori- 190 Interpol member countries, according nature of the process over a number of years ties had committed numerous procedural er- to the release. means that nobody will ever know.” rors, such as not confirming that al-Warraq “As a result, Mr. Rizvi and Mr. Al-Warraq But to Cahyo, who said that years of ef- had received the court summons and not will be able to travel and conduct business fort by his team haven’t led to the recovery enlisting the Saudi authorities to question without restriction,” the release boasted. of a single dollar of the bailout money, the al-Warraq. He also argued that Indonesia “Such results have never been obtained ISDS gambit looks rather different. hadn’t met the criteria under internation- before from INTERPOL.” Reached by “They are playing this game as if they are al law for conducting a trial in absentia BuzzFeed News, Martha at first agreed to an honest investors coming to Indonesia trying and that it hadn’t ensured al-Warraq was interview but didn’t respond to subsequent to do business,” he said. “That is not the promptly notified of the guilty verdict. He messages. case. This is really somebody robbing the even argued that the entire prosecution was a Now the legal team is trying to use the people’s money.” politically motivated ploy to scapegoat Rizvi ISDS decision to block Indonesia from ❧ ❧ ❧ and al-Warraq for the government’s own seizing the men’s foreign bank accounts. contentious decision to bail out the bank. Initially, Indonesian authorities had won Our Comment. How could any trade For its part, the Indonesian government a small victory when a Hong Kong court benefit justify surrendering government produced evidence that it had done many granted them access to a $4 million account. control over such appalling corporate prac- of the things it was accused of neglecting: It But that’s been put in doubt. tices as that causing lead poisoning, or any did seek help from the Saudi government, “The Hong Kong government is now other threat to public health for private and it did seek out Rizvi and al-Warraq at very cautious, and they are retaining inter- profit? What an insight this report is into various locations around the world. What’s national experts,” said Cahyo Muzhar, an the expansive potential of ISDS! Élan www.comer.org September–October 2016 Economic Reform | 13 Minister Justin Trudeau if he was willing to change or jettison the controversial investor- Canadians Launch Constitutional protection section of CETA in order to save the trade deal. Trudeau declined, call- Challenge Against CETA ing CETA “gold-plated,” and said, “We are confident that in the coming days we By Joyce Nelson, counterpunch, October Because of continued opposition by Bel- will see a positive outcome for this historic 28, 2016 gian regional governments, the scheduled deal.”5 Hours later, the Brussels summit was Wallonia is not alone. Not only has the October 27 formal signing of CETA at a cancelled indefinitely. region been joined by several other Bel- summit in Brussels was cancelled at the last Trudeau, Freeland, and Canadian foreign gian regional parliaments in opposition to moment on October 26. Wallonia’s minis- affairs minister Stephane Dion had been CETA (the Canada-EU Comprehensive ter-president Paul Magnette has stated, “We part of a delegation scheduled to meet with and Economic Trade Agreement), but now are not against a treaty with Canada. But we EU leaders Donald Tusk and Jean Claude a Canadian constitutional challenge against won’t have one that jeopardizes social and Juncker yesterday, but the trip was cancelled CETA has been launched in the Federal environmental standards and the protection as “crisis talks” in Belgium continue.6 While Court of Canada. of public services and we want absolutely no some CETA proponents maintain that a On October 21, renowned constitution- private arbitration [ISDS] mechanisms.”3 new signing summit could happen within al lawyer Rocco Galati filed the statement of Galati’s statement of claim similarly days, Magnette has also said, “This treaty af- claim against CETA on behalf of the Hon. warns that various articles of CETA “over- fects the lives of 500 million Europeans and Paul Hellyer (former Minister of National ride Charter guarantees that ground Can- 35 million Canadians for years and years. Defence) and two co-plaintiffs, Ann Em- ada’s ability to mount public programs on We can take a few weeks, a few months to mett and George Crowell (members of the Health, Education, Social Services and pub- analyze the problems and overcome them.”7 Committee on Monetary and Economic lic utilities including the elimination of Reform). At the October 25 press confer- subsidies, monopolies, and state enterprises Freeland’s Theatrics ence, Galati referred to the corporate sector for the public welfare.” As Galati put it dur- Magnette’s statement raises the question as “the new royalty,” and he stated, “What ing the press conference, the only Canadian of why the rush to approve CETA? The this treaty does is literally revert us back to public services and entities protected in answer for many is that the longer the delay, the divine right of kings, but they are multi- CETA are “tax collection, national security, the more people (especially in North Ameri- national corporations now.” and cultural industries,” he said. “Every- ca) will find out about the ISDS clauses and Galati’s statement of claim argues that thing else is up for grabs” for privatization. the actual contents of the massive trade deals CETA is unconstitutional for several rea- As well, CETA encroaches on “exclusive similar to CETA – the TransPacific Partner- sons, including the fact that it was never Provincial spheres of jurisdiction” and “guts ship (TPP), the Transatlantic Trade and given Canadian Parliamentary approval, and extinguishes the constitutionally pro- Investment Partnership (TTIP), the Trade while “the treaty places the rights of private tected Judiciary in Canada by creating for- in Services Agreement (TISA) – and as a foreign investors over those of the Canadian eign tribunals” for ISDS arbitration. result, shift their opinion about these deals. Constitution and Canadian citizens.” The Canadian Press asked International In other words, the rush to approve Critics on both sides of the Atlantic Trade Minister Chrystia Freeland whether CETA isn’t really about the so-called “cred- maintain that massive trade deals like CETA CETA meets the requirements of Canada’s ibility” of the EU to sign an agreement, as give far too much power to corporations at Constitution and she replied, “Absolutely.” Trade Minister Freeland and others main- the expense of citizens and governments, At his press conference the following day, tain. The rush is about the undesirability of especially through the investor-state dispute Galati said that “the Trade Minister’s elabo- the deals themselves – which are unravelling settlement (ISDS) mechanism – or the “in- rate response – ‘Absolutely’ – doesn’t cut it as more people learn what’s in them. vestor court system” (ICS) as it was rebrand- for me.” On October 21, Freeland walked out ed in CETA – that allows foreign corpora- Galati also referred to “residual Crown of talks with Magnette and (“appearing to tions to sue governments (in a private court prerogative” – the belief that the Prime hold back tears”) told the waiting press that system) over policy decisions or regulations Minister of Canada can sign a treaty with- the EU is not capable of making an interna- that harm their future profits.1 Across the out Parliamentary debate and voting – and tional agreement, “even with a country with planet, national governments have been said, “The federal court has already decided European values such as Canada, even with sued for billions of dollars by companies that this notion is a serious question to be a country as nice and patient as Canada.”8 claiming “lost future profits” because of reg- resolved.” But as Canadian law professor (and for- ulatory decisions. Walloons (and Europeans The constitutionality of CETA is also be- mer Member of Parliament) Craig Scott in general) have been consistently critical of ing challenged in German courts.4 recently wrote, “In the last week, Freeland’s ISDS tribunals for private arbitration. The statement of claim gives the Cana- focus on her own disappointment and ef- “It’s ironic that everybody is dumping dian government 30 days to respond, and it forts has projected a sense of a noble mis- on the Walloons,” Galati told the Canadian also seeks interim injunctions to prevent the sion fallen short due to Europe’s spurning Press in advance of his October 25 press federal government from signing, ratifying of a country sharing its progressive values… conference. “They have a very similar con- and implementing CETA. Freeland, holding back tears, went so far as stitution to ours except they’re respecting During the House of Commons ques- to castigate Europeans for failure to do a theirs. So I don’t know why they’re being tion period on October 26, Canadian Green deal with ‘nice’ Canada. This is all very rich. criticized for respecting their constitution.”2 Party Leader Elizabeth May asked Prime Based on a European negotiator’s briefing

14 | Economic Reform September–October 2016 www.comer.org to [New Democratic Party Members of Transnational Institute.13 They revealed that fia” includes three Canada lawyers: Marc Parliament] during CETA negotiations (the a “small club of international law firms, arbi- Lalonde, L. Yves Fortier, and Henry Alvarez; Harper government refused to brief MPs), trators and financial speculators are fueling four American lawyers: Charles Brower, Ste- it was Canada that insisted on some of the an investment arbitration boom that is cost- phen M. Schwebel, William W. Park, and most regressive and dangerous provisions ing taxpayers billions of dollars and prevent- Daniel Price; and eight other lawyers from in CETA. The provisions in question were ing legislation in the public interest” across France, Chile, Switzerland, Netherlands, – and still are – the investor-state dispute the planet. They found a handful of legal Germany and Belgium.14 settlement (ISDS) procedures.”9 firms “are actively encouraging corporate cli- After CETA opponents in Europe Freeland and others like to call CETA ents to sue governments” under investment roundly attacked the ISDS private court and Canada “progressive,” but CETA was treaties containing the ISDS clause, while system, the trade deal’s investor-protection never voted on by Canada’s Parliament or by “top arbitrators are using their influence to chapter was rewritten this past February. any provincial/territorial legislature.10 secure investor-friendly rules and sustain the But a March 2016 report from CEO called So under the Harper Conservatives, we flow of multi-million dollar lawsuits.” the rewrite basically a PR re-branding exer- had a Canadian federal government that At the heart of this “secretive but bur- cise, giving ISDS a new name: the Invest- not only insisted on the ISDS provisions in geoning legal industry,” they found an “in- ment Court System (ICS). Otherwise, “the CETA, but refused to brief Members of Par- ner mafia” of fifteen arbitrators who (as of proposed ‘new’ ICS is ISDS back from the liament on the deal and neglected to have 2012) had decided on 55% of all known dead,” Pia Eberhardt wrote in the report CETA debated and voted on in Parliament. ISDS disputes – earning millions in fees for appropriately called The Zombie ISDS.15 This all happened while Justin Trudeau was themselves and billions in ISDS settlements Under CETA’s rebranded ISDS, the leader of the federal Liberals, who Craig for their corporate clients. That “inner ma- three for-profit arbitrators (now to be called Scott says were “100 percent” behind the deal, “as evidenced by the support Trudeau gave Harper back in the fall of 2013” by Federal Court Hearing, “fawning” over CETA’s prospects.11 Scott warns about “the continuation of a December 7, 2016 Liberal-Conservative tag team pushing old- style [neoliberal] economics” and writes: On Wednesday, December 7, 2016, public awareness and to stimulate a keen “Have no doubt that the present Canadian COMER’s appeal of the outcome of the last interest in the monetary reform issue. We government is keen to resist truly progres- court hearing will be heard at the Federal have been much encouraged by the growing sive revisions to CETA. Have no doubt that Court of Appeal. interest among Canadians and from around Liberals want to retain a flawed ISDS system This hearing will be held in Toronto the world, and the many warm messages of that undermines the democratic sovereignty at the same Federal Court building as the thanks that often include the words hope of countries – and one that sets the wrong previous four hearings: 180 Queen Street and inspiration. example for future trade policy.”12 West, north side of the street, just west of There is just no way we can let people University Avenue. down. Investor Lawsuits COMER’s lawyer, constitutional expert The year 2015 saw a record high of 70 Rocco Galati, strongly recommends that What we can do to support new ISDS corporate lawsuits filed against we be there by 9:00 am to avoid entering this action: countries under NAFTA and various bi- late and annoying the three Federal Ap- • Contact the media and inform them that lateral treaties, raising concerns worldwide peal Court Justices. The Hearing will start this fifth hearing is taking place and tell about ISDS and the ways corporations use it promptly at 9:30 am and may continue them exactly where and when. to bleed governments financially while put- throughout the day. • Encourage as many people to attend as ting a “chill” on any new regulations. Even The proceedings to date for this action you can – even if they are able simply to if a government wins an ISDS lawsuit, it will began on December 12, 2011: recorded en- drop by for some of the time. Demon- have spent an average of $8 million in legal tries for the Federal Court Number T-2010- strating an interest in the proceedings will fees to defend itself. 11; recorded entries for the Federal Court be a valuable contribution. To date, the most thorough report on of Appeal, Court Numbers A-228-14 and • Should the media request an interview, ISDS is called Profiting from Injustice, writ- A-76-16. please refer them directly to Rocco Galati. ten by Pia Eberhardt of Corporate Europe As we approach the last stretch of this We are not competent to discuss the Observatory (CEO) and Cecilia Olivet of the phase of our long and expensive, historic, case or the hearing for it is not about the legal struggle, we grow ever more depen- substance of our suit per se. This hearing is dent on donations. Nearing now the pos- about our right to take our lawsuit to court. About Our Commenter sibility of getting our case at last to court, The argument will be about the law and Élan is a pseudonym representing two of the COMER’s executive is looking into the legal precedent. original members of COMER, one of whom option of enlisting the help of a professional Let us make it clear that there is substan- is now deceased. The surviving member fundraiser. Meanwhile, we are still far short tial public interest in this lawsuit, in Canada could never do the work she is now engaged in were it not for their work together over of what we need for the upcoming appeal. and around the world. many years. This signature is a way of ac- Please help in any way you can to donate See you there! Please circulate this infor- knowledging that indebtedness. or to encourage others to donate. mation. Our lawsuit has done much to raise Ann Emmett, Chair, COMER www.comer.org September–October 2016 Economic Reform | 15 “judges”) who decide each case would be aspects of ISDS that are getting little, if any, lenge plaintiff Paul Hellyer rightly called the drawn from a pool of lawyers and would be press – for example, what’s called third-party trade deal “monstrously immoral.” paid US $3,000 per day, on top of a month- funding of lawsuits. ly retainer fee of 2,000 euros per month. High Stakes As well, they can moonlight as lawyers ISDS Gambling But the stakes are even higher for Canada. with the same corporations launching the Profiting from Injustice revealed that As Rocco Galati explained, because of NAF- lawsuits. private investment funds have been specu- TA “the US and Mexico automatically get This conflict of interest is what the Wal- lating on ISDS court cases: lending money all the benefits of CETA that are not present loons have been arguing against and resist- to companies so they can sue governments, in NAFTA,” while Canada would get no ing, noting that the so-called “Joint Inter- and then taking a percentage of the final fi- further benefits from those two countries. pretive Declaration” of October 13 does not nancial award. Such a gamble can be very lu- The Canadian constitutional challenge clarify the situation. Investment law profes- crative: in a recent ISDS lawsuit, a national against CETA is bolstered by an October 17 sor Gus Van Harten agrees, informing The government was ordered to pay a whopping “Open Letter” by ten prominent Canadian Canadian Press that “Such matters should $50 billion to the claimant. academics to the Parliament of Wallonia be resolved and subject to discussion and So-called “third-party funders” have be- and Belgium voters. They write: “…In Can- debate well before relevant decision-makers come a fast growing industry as corporations ada, our democracy has suffered because the are requested to approve CETA.”16 outsource financial risk to “litigation finance federal government has insisted on pushing But there are other highly controversial shops” who receive cash to gamble with. through agreements like the NAFTA and Profiting from Injustice states, “Imagine the CETA without legislative votes at the a multinational company eager to sue a federal and provincial levels. As a result, and Call for Members government on the basis of an international without the corresponding endorsements investment treaty. It is about to hire a top by our elected representatives, we have been At the last AGM for the Council of arbitration law firm as counsel. But the law- left with a foreign investor protection sys- Canadians, motions from the Hamilton yers charge astronomical fees – more than tem that binds all levels of government and Chapter of CoC were passed to utilize the the company is willing to pay. Fortunately that will bind all future elected governments Bank of Canada for infrastructure funding. for the company, an investment firm offers in Canada for a very long time. Our experi- There are CoC chapters in many com- to invest in the case. It pays parts of the law- ence hints at the dangers faced by Euro- munities across the country. They have their yers’ pay cheque in exchange for getting a pean democracy in the case of the CETA…. own programmes and agendas but using the share of the potential profits at the end. Wel- From what we can see, you have shown great BoC for infrastructure financing has now come to the world of third-party funding…. courage in opposing the CETA and, based been approved as one of their objectives. A world flush with monumental settlements on our observations of how the foreign in- As the federal government moves forward and glaring opacity, a place where public vestor protection system has been pushed on with its plans to establish an infrastructure treasuries are treated like ATMs by arbitral Canadians over the years, we wish to express bank – described by one of our newer mem- bodies and awards can be enforced globally our support for your democratic choices.”18 bers as the “Public Asset Pilfering Bank” – in – this is a world that third-party funders are During the press conference, Galati conjunction with Blackrock investments, particularly interested in…Banks, hedge pointed to a stack of paper about three-feet the executive believes that COMER mem- funds and insurance companies also invest tall on the conference table and identified it bers across the country could work with in international [ISDS] disputes.”17 as the 1,600-page CETA text. “You’re sup- their local CoC chapters to mobilize oppo- Obviously, this little-known world of posed to read and understand this in your sition to the proposed infrastructure bank ISDS litigation – where “public treasuries spare time,” he joked to those gathered. and, instead, to promote the use of the Bank are treated like ATMs” – needs far more ex- Fortunately for other Canadians, Galati has of Canada for financing infrastructure. posure. It operates within most of the trade read the CETA text and – like the plaintiffs The other opportunity for COMER deals currently being pushed across the he represents: Paul Hellyer, Ann Emmett members is through the LEAP Manifesto. planet. So not only are signatory countries and George Cromwell – wants “democratic Their stated approach to financing infra- losing their sovereignty to the corporate choices” beyond what Canadian tradition structure is to use fiscal measures (taxing sector, they’re losing their shirts (as the allows. The erosion of democracy is becom- and spending) as suggested by the CCPA. saying goes). ing that evident. Avi Lewis, one of the founders of LEAP, While CETA would allow thousands of As reports of a new CETA compromise criticized COMER members for being “es- European companies to sue Canada under in Belgium began to emerge on October sentialists”; so, tends not to look at the role ISDS for “lost future profits,” some 42,000 27, the Council of Canadians issued a press the BoC could play. US multinationals that have branch-plants release stating, “The democratic exercise But LEAP does not recognize that the in Canada could similarly sue European that is taking place in Europe right now – current financial system is anessential com- governments through CETA – a kind of where the Walloon government has looked ponent of the environmental and social “backdoor” in case the equally controversial at the text with its citizens, and asked for issues with which LEAP is concerned. Read- Transatlantic Trade and Investment Partner- changes – needs to take place in Canada.”19 ers are encouraged to review what John ship (TTIP) between the US and the EU That is exactly why Galati and the co-plain- Hotson wrote in the early ’90s about the collapses. tiffs have filed their constitutional challenge. connection between environmental and This is another aspect of what the Wal- financial systemic problems. loons have been resisting in CETA. At Gala- Joyce Nelson’s sixth book, Beyond Banksters: Herb Wiseman ti’s October 25 press conference, court chal- Resisting the New Feudalism, can be pre-

16 | Economic Reform September–October 2016 www.comer.org ordered at: http://watershedsentinel.ca/bank- 9. Craig Scott, “Don’t Be Fooled by Liberal Spin on CETA Our Comment sters now. She can be reached through www. Deal,” The Tyee, October 24, 2016. The scourge of “free trade,” in conjunc- 10. Joyce Nelson, “CETA – No Lawyers Left Behind,” Water- joycenelson.ca. shed Sentinel, September-October, 2016. tion with the strategy of debt and the co- operation of complicit governments, has End Notes 11. Scott, op. cit. 12. Ibid. enthroned “the new royalty.” 1. Joyce Nelson, “Trudeau Bullying on Trade Deal,” Counter- How could Canadians who “have a very punch.org, October 19, 2016. 13. Pia Eberhardt and Cecillia Olivet, “Profiting from Injus- tice: How Law Firms, Arbitrators, and Financiers Are Fuelling similar constitution” to that of the Wal- 2. The Canadian Press, “Toronto lawyer files constitutional an Investment Arbitration Boom,” Corporate Europe Observa- challenge against Canada-EU trade deal,” October 24, 2016. loons, and who have been trounced more tory and Transnational Institute, 2012. 3. Reuters, “Wallonia leader rejects EU-Canada trade deal than once in the kangaroo court of the 14. Ibid. ultimatum,” October 24, 2016. ISDS, have – beginning with the FTA – 4. The Canadian Press, op. cit. 15. Pia Eberhardt, “The Zombie ISDS,” Corporate Europe Observatory, March 2016. submitted to international rules that so 5. The Canadian Press, “Canadian delegation stays put as EU compromise their democratic rights?! trade deal remains in limbo,” October 26, 2016. 16. Mike Blanchfield, “Amended CETA declaration not enough to win Walloon support: documents,” The Canadian Who knew?!More disturbingly, how 6. Jennifer Rankin, “Canadian PM cancels Brussels trip amid Press, October 25, 2016. crisis talks to save trade deal,” The Guardian, October 27, could any Canadian government have ever 2016. 17. Eberhardt and Olivet, op. cit. delivered this country into so undemocratic 7. Council of Canadians, “Canada-EU summit cancelled, 18. David Boyd, et al., “An Open Letter to the Parliament of an arrangement? Paul Hellyer’s injunction CETA’s future unknown,” October 27, 2016. Wallonia and Belgian Voters on the Proposed CETA and Its has provided us with an opportunity to 8. Marie-Danielle Smith (Financial Post), “Canada’s trade min- Foreign Investor Protection System,” October 17, 2016. ister Chrystia Freeland walks out of EU trade talks on verge of 19. Council of Canadians, “CETA cheerleaders shouldn’t break begin freeing ourselves. Further details are tears,” Vancouver Sun, October 21, 2016. out the bubbly just yet,” October 27, 2016. available on his website. Élan

What is Really the Matter with CETA?

By Leo Panitch CETA, which has aroused very considerable back door. A US company with a subsidiary Canada’s Trade Minister Chrystia Free- concern right across Europe. It was only that does business in Canada will qualify land’s sense of amour propre was clearly by a hair’s breadth that CETA secured the as a Canadian investor under CETA, so it dented last week when the latest talks to approval last month of the German Social is not just a matter of Canadian resource salvage the Comprehensive Economic and Democratic Party, the junior partners in Eu- and finance companies posing a real threat Trade Agreement (CETA) between the Eu- rope’s most powerful government. The dis- of claims against Europe. Under CETA’s ropean Union and Canada appeared to fall quiet over CETA in fact followed on directly investor-state dispute provisions, to be im- apart in face of the refusal of the Belgian from what disturbed so many Europeans plemented through a new investment court regional parliament in Wallonia to accede to about the US-EU free trade agreement that system, individual companies could sue the Belgian government’s support for it. The bore the acronym TTIP. states for alleged discriminatory practices in story is by no means over, but it would be their regulations, and if successful thereby quite wrong to think that what really threw So-Called Free Trade Agreements allow domestic investors to escape regula- this spanner in the works was that the EU All free trade agreements since the US- tion as well. Yet despite allowing special was incapable of reaching an agreement, as Canada FTA (over which the 1988 Cana- claims and access to public money by for- she put it, “even with a country with Eu- dian election was fought, with the Liberal eign investors, CETA sets out no action- ropean values such as Canada, even with a Party then strongly opposing the deal) have able investor responsibilities, domestic or country as nice and patient as Canada.” created the illusion that they have primarily foreign, alongside these rights. First of all, Canadians might be expected been about reneging on the old political “Moreover, no one else affected by such to understand why Belgium’s failure to se- economy of tariff protectionism. But this dispute, e.g., a local municipality or a province cure the consent of the Walloons mattered was already accomplished by the progressive or a First Nation, is given a right of standing so much. The Canadian federal experience reduction in tariffs that took place in the in the juridical process – making it fundamen- has often required securing inter-govern- post-war decades under the General Agree- tally unfair as well as undemocratic.” mental unanimity, and lent an effective ment on Tariffs and Trade, and in Europe That Canada under the former Con- veto not only to Quebec, but even to the itself by the Treaty of Rome and the Com- servative government of Stephen Harper tiny province of Prince Edward Island. If mon Market it spawned. The so-called free should have conceived and promoted CETA Manitoba, with a population of around one trade agreements kicked off by the FTA was perhaps not surprising, but it must million, could write finis to Canada’s last have been much more about dismantling surprise many Europeans that the Trudeau attempt at a Constitutional accord, why so-called ‘non-tariff barriers’ which establish Liberals who came to office last year with should Wallonia, with well over three mil- rights for multinational corporations, de- such progressive fanfare should now, with lion inhabitants, not be able to stop a trade ploying the talent and resources of the fore- only minor edits, be on the same page. And agreement? most international law firms, to escape and it is by no means clear that most Canadians Moreover, Canadians know well enough undermine domestic economic regulation. are really so eager to be the conduit for for- that the opposition being registered by one What is especially worrying to a great eign investors to escape economic, labour provincial government usually resonates many Europeans, now that they believe and environmental regulation, and thereby with a substantial body of opinion in other they have managed to render TTIP a dead help domestic investors escape regulation as regions. And that is certainly the case with letter, is that CETA will bring it in via the well. Indeed, under CETA, Canada’s own www.comer.org September–October 2016 Economic Reform | 17 exposure to foreign investor claims would as final until all foreign investors eligible well as undemocratic. roughly double because Western European to bring claims have not done so or have Under enormous pressure to back down, companies invest about as much in the Ca- run out of time to do so. Moreover, no one the Walloons appear to have managed to at nadian economy as do US investors. else affected by such a dispute, e.g., a local least secure the concession from the Belgian Under NAFTA, the decisions of the Ca- municipality or a province or a First Nation, government not only to assess the eco- nadian judiciary on the constitutionality of is given a right of standing in the juridical nomic and environmental impact of CETA, many laws and regulations cannot be taken process – making it fundamentally unfair as but also to insist on the right to go to the European Court of Justice to determine whether the decisions of the new investment Hon. Paul Hellyer: Why I am court system were compatible with EU law. But even as the Belgian government joins the other 27 European governments in 100% Opposed to CETA signing CETA, its ratification by all their There are two profound reasons for oppos- trillion dollars in interest, almost all of it parliaments is far from assured, since the ing the ratification of CETA. unnecessary, and still wind up $615 billion broad coalition in Wallonia that stood up It would be illegal. It would result in a in debt. All of that plus decades of under- to CETA – encompassing Christian Demo- unilateral change in the Constitution of funding for all of our essential services. We crats and Socialists as well as Marxists – is Canada – that is outside the power of both switched from prosperity to austerity, and reflective of the breadth of the opposition the government and Parliament. the international banking cartel ended up across Europe. The second reason is that to ratify CETA with a monopoly over money creation. The social attitudes of those opposing would be monstrously immoral. It would All of this has to be reversed. The Ca- CETA are quite different from those of the be the biggest betrayal of Canadian rights nadian Constitution gives the parliament xenophobic far right parties which have and privileges in the history of the country. in Ottawa the absolute right to create, or made such gains in Europe. The rejection of Not only would it give foreign banks and to have the Bank of Canada create, all of CETA as well as the TTIP would not have corporations greater rights in Canada than the money necessary to meet the legitimate anything to do with rejecting the values of those enjoyed by Canadian citizens, which needs of the Canadian people. diversity and democracy, as Ms. Freeland’s is indescribably wrong. It would give foreign In fact there is a plan called “A Social comments implied. If anything, it has been bankers an effective veto over the use of our Contract Between the Government and the failure of the mainstream parties to ar- most valuable financial asset, the Bank of People of Canada” available to parliament ticulate in a progressive manner the discon- Canada, at the very moment when we need now. This plan calls for the creation of $150 tent with what has come with state promo- it most. billion a year for seven years, to be split tion of ‘free trade’ over the last three decades The situation today is reminiscent of between Ottawa and the provinces and ter- that has opened so much political space for the 1930s. In 1938 there were no jobs in ritories on a per capita basis. the Le Pens, on one side of the Atlantic, and Canada. Then the war came along and But, if CETA were ratified and imple- for the Trumps, on the other. pretty soon everyone was working – either mented, prosperity would never be restored, in the armed forces, or building factories nor the backlog of needs met, because Eu- Leo Panitch is emeritus professor of political or making munitions. You might ask where ropean banks would sue Canada for tens or science at York University, co-editor (with Greg the government got the money to accelerate hundreds of billions if we denied them the Albo) of the Socialist Register and author growth to this extent. The answer is that opportunity to lend us the money, buy up (with Sam Gindin) of The Making of Global the Bank of Canada printed it. Printed it! our real assets for 5 cents on the dollar, and Capitalism (Verso). The money creation function was shared keep us in poverty forever. The war between between the government of Canada and the the rich and the poor, that the rich have private banks. been winning, would be over. This system was maintained after the war So CETA must not only wither but die BookStore and helped pay for our large infrastructure on the vine, and become nothing more than Books by Hazel Henderson, W.F. projects – the St. Lawrence Seaway, the a footnote to history. Hixson and William Krehm can be Trans-Canada highway, the DEW (Distant ❧ ❧ ❧ ordered online at www.comer.org. Early Warning) line, as well as help us pay By William Krehm: for a comprehensive social security system. Our Comment. Money is power. Where • Towards a Non-Autistic Economy All of this was accomplished without sig- was the government, a Liberal government, – A Place at the Table for Society nificant borrowing and with inflation in line to quietly surrender monetary policy to the • Babel’s Tower: The Dynamics with other OECD countries. Governor of the bank. Sharing the func- of ­Economic Breakdown Then in 1974 the Governor of the Bank tion of money creation has transferred that • The Bank of Canada: A Power of Canada abandoned the needs of his power from our national governments to a Unto Itself shareholders and started taking his orders global oligarchy. Either we take back our • How to Make Money in a from the Bank for International Settlements constitutional right to create money and Mismanaged Economy that is controlled by the elite banking cartel. exercise it fully, or we consign ourselves to • Meltdown: Money, Debt and the Wealth of Nations The result for Canada is that because serfdom in a vassal state of “The New World • Price in a Mixed Economy – we had to borrow in the market from fiscal Order.” Our Record of Disaster 1974/75 to 2013/14 we had to pay $1.17 Élan

18 | Economic Reform September–October 2016 www.comer.org Lobbying Watchdog Probes Liberal “Pay‑for‑access” Fundraisers By Robert Fife and Steven Chase, Ottawa – not comment on specific cases, but Ms. tycoon-turned land developer Fred George. The Globe and Mail, October 27, 2016 Shepherd noted The Globe had already re- The port authority is considering whether to Federal lobbying commissioner Karen ported that the generic drug manufacturer’s seek $1 billion from Ottawa for a new port Shepherd says she is investigating what chief lobbyist, John Duffy, has lobbied the in Dartmouth that would free up vast tracts she called the governing Liberals’ “pay-for- Finance Department three times in the past of land in Halifax for development. access” fundraisers to determine wheth- six months. The advocacy group Democ- In the Commons, opposition MPs called er senior Trudeau cabinet ministers have racy Watch also filed a formal complaint on the government to ban the special access breached the Lobbying Act. about the fundraiser, she said. fundraisers, especially in light of the lobby- The probe began in response to stories “Under the act, I have the ability to look ing commissioner’s investigation. in The Globe and Mail that revealed wealthy into a matter or as a result of a complaint. In “The Prime Minister knows this is donors are paying as much as $1,500 per the current situation with Apotex, it is quite wrong. Everybody knows this is wrong. It’s ticket for private time with senior cabinet public,” she said. damaging the integrity of his office,” Inter- ministers in charge of major spending and Apotex is involved in high-level lobbying im Conservative Leader Rona Ambrose said. policy decisions. in Ottawa. The company has also made di- Government House Leader Bardish Chag- “We are seeing in the media that this is rect representations to Innovation Minister ger read from a statement repeating what the an issue potentially creating real or apparent Navdeep Bains, International Trade Minis- government has said since The Globe began conflict of interest, which is why I am look- ter Chrystia Freeland and Health Minister reporting on the fundraisers: “Federal politics ing into it,” Ms. Shepherd told the Com- Jane Philpott. is subject to some of the strictest political mons committee on access to information, Apotex spokesman Elie Betito told The financing legislation in the country and we privacy and ethics on Thursday. “Obviously, Globe on Tuesday that the November 7 fully complied with the rules.” placing the public office holder in a conflict “fundraising event is not part of Apotex’s The ethics commissioner told report- of interest is something that would be a po- program of government relations” but sim- ers on Thursday that the current conflict- tential breach of the [Lobbying] Act.” ply a private undertaking by Mr. Sherman, of-interest law prevents her from making The act requires corporate executives or who is one of the largest shareholders in the a finding on whether the cash-for-access their lobbyists to register each time they make pharmaceutical giant. fundraisers are improper. She said the Prime a representation to a federal cabinet minister. Apotex is suing the federal government Minister’s tough new ethics rules should be Ms. Shepherd said this includes organizing for $500 million for banning the company’s included in the Conflict of Interest Act. fundraisers or selling tickets to these events. drug imports from India. Mr. Morneau sits Mr. Trudeau has chosen not to assign Ministers would be in potential breach of the on the federal cabinet committee on litiga- the enforcement of his new rules to an in- law if they attended these meetings without tion management, which deals with lawsuits dependent watchdog. Instead the Open and registering that they were lobbied. against Ottawa. Accountable Government document is the Ethics commissioner Mary Dawson also The Globe has found at least 20 exclusive responsibility of the Privy Council Office, added her voice to growing concerns that the Liberal Party fundraisers that featured key which reports to the prime minister. Liberals’ cash-for-access fundraisers appear to ministers and were held at private homes, violate the “Open and Accountable Govern- hotels or other venues. The main draws Our Comment ment” rules Prime Minister Justin Trudeau are Mr. Morneau, Infrastructure Minister If accepting “donations” of “$1.500 per laid down shortly after taking office. Those Amarjeet Sohi, Canadian Heritage Minister ticket for private time with senior cabinet rules state “there should be no preferential Mélanie Joly and Mr. Bains. ministers in charge of major spending and access or appearance of preferential access” The Liberal Party has refused to say policy decisions” doesn’t breach the [Lobby- in exchange for political donations. who attended or what was discussed, but ing] Act, the Lobbying Act is surely toothless. Ms. Dawson on Thursday called the Ms. Shepherd said her office will seek that Tracing developments that serve the fundraisers “unsavoury,” telling reporters: information. vested interests of such “donors” ought to “One wonders whether people are getting “My investigators will do everything they be easy enough. unfair access.” need to do to provide me with a complete What, one wonders, would make the Ms. Shepherd said she will probe the role picture of the situation so that I can make financial minister and the infrastructure of Apotex Inc. chairman Barry Sherman in an assessment as to whether a breach of the minister the “main draws” at “exclusive Lib- helping organize and sell $500 tickets for an code has actually occurred,” she said. eral Party fundraisers”? elite Liberal Party fundraiser on November Ms. Shepherd said she would also “look Hardly surprising that “Mr. Trudeau has 7 at the home of Toronto philanthropist into” whether Nova Scotia property devel- chosen not to assign the enforcement of his Nancy Pencer and funeral home executive oper Jim Spatz, whom the Liberals named to new rules to an independent watchdog”! Michael Benjamin. Finance Minister Bill the Halifax Port Authority, was in a potential Let’s hope The Globe and Mail will keep Morneau is scheduled to be the prize guest breach of the Lobbying Act when he paid us informed on the federal lobbying com- at the exclusive event. $1,500 to attend a Morneau fundraiser on missioner’s probe. The lobbying commissioner usually does October 13 at the mansion of Halifax mining Élan www.comer.org September–October 2016 Economic Reform | 19 province, charge whatever fee they choose and bill patients directly for the service. Medicare Threatens to Put Justin The interesting wrinkle is that for each private scan, these clinics would have to Trudeau to the Test offer one MRI free of charge to patients waiting in the public system. By Thomas Walkom, National Affairs Col- sore finger. But they could charge for the Wall says the net effect will be to reduce umnist, The Toronto Star, April 3, 2016 cost of a bandage. wait times overall. The Saskatchewan Medi- Moves in Quebec and Saskatchewan to- This deft distinction was designed to cal Association, which opposes the move, is ward two-tier health care will force the new get around the Canada Health Act’s require- skeptical. Liberal government to act, one way or another. ment that medically necessary physician Writing on the University of Manitoba’s Saskatchewan Premier Brad Wall’s govern- and hospital services must be supplied free EvidenceNetwork website, Dr. Ryan Meili ment passed a law in November allowing of charge. of Canadian Doctors for Medicare notes private MRI clinics to operate, change fees and As the Montreal Gazette has reported, that Alberta’s embrace of private imaging bill patients directly for service. some Quebec physicians interpreted this clinics didn’t solve wait time problems there. In Canada, the struggle around medicare loophole in a remarkably broad fashion. Meili notes that although Alberta has the never goes away. Some doctors performing colonosco- second highest number of diagnostic imag- To the general populace, universal pub- pies in private clinics, for instance, charged ing scanners per person in Canada, it also lic health insurance is an unalloyed asset. $600 in medication fees – this on top of suffers the longest wait times. Politicians who criticize it openly do so at the amount they received from Quebec He points out that the real effect of their peril. medicare. private-pay imaging clinics is to give those But beneath the surface, the pressure to Instead of banning such practices, how- with money an advantage in obtaining nec- eat away at medicare is relentless. ever, Quebec’s Liberal government decided essary surgery. Sometimes, that pressure comes from to further embed them in the province’s In the past, Ottawa has chosen not to get health-care providers trying to make money. medicare system. involved in the diagnostic imaging contro- Sometimes it comes from governments try- Bill 20, passed last November by the Na- versy, saying nothing when Alberta, British ing to save money. tional Assembly, accepts the principle that Columbia, Nova Scotia and Quebec went But in the end, medicare puts every gov- physicians can charge ancillary fees but gives the private-pay route. ernment to the test. Prime Minister Justin Quebec’s government the power to regulate Stephen Harper’s strategy for dealing Trudeau will find that his Liberal regime is what those fees will be. with medicare was to ignore Ottawa’s en- no exception. So far Premier Philippe Couillard’s gov- forcement role and, when the opportunity The most recent flashpoints are in Que- ernment has not yet produced a list of per- presented itself, scale back federal funding. bec and Saskatchewan. Both provinces have missible extra-billing charges. That the provinces are responding by instituted reforms that push their health When it does, Trudeau’s federal govern- moving more into two-tier care is the logi- systems toward two-tier medicine. ment will be on the spot. Will it enforce cal result. Quebec’s reforms in particular could end the Canada Health Act’s ban on extra billing Trudeau’s strategy is unclear. Except for up violating the Canada Health Act, a fed- by withholding federal health monies from a pledge – not yet kept – to devote an extra eral statute that prohibits physicians from Quebec as the law demands? $3 billion to home care, he said little in the charging extra fees for medically necessary Or, like so many federal governments be- election campaign about health. services. fore, will it ignore the problem and pretend Any ideas he may have about his prom- That province has long allowed physi- that nothing happened? ised health-care accord with the provinces cians to extra-bill patients for “medication Saskatchewan presents Ottawa with a have yet to be revealed. and anesthesia agents.” The idea, presum- murkier problem. In November, Premier I don’t recall him saying anything about ably, was that doctors couldn’t charge pa- Brad Wall’s government passed a law allow- the Canada Health Act. tients out-of-pocket for, say, looking at a ing private MRI clinics to operate in the Still, he can’t avoid medicare for ever. No prime minister can. It may not dominate the front pages. But as far as most Cana- dians are concerned, it is still the country’s number one political story. ❧ ❧ ❧ Our Comment. It’s not only Justin Trudeau who is being put to the test! We’re all going to have to face up to the challenge of creeping privatization of our health care system. Élan

20 | Economic Reform September–October 2016 www.comer.org