Such flaws should be fatal to the deal, especially when US corporations are responsible for more investment disputes than any other country.
The litany of recent cases, seeking hundreds of millions of dollars compensation, has produced a groundswell of resistance to investor-state dispute settlement (ISDS).
The French and German Governments have said they won't accept ISDS in the parallel deal being negotiated between the US and the EU. That follows disputes against Germany involving phasing out nuclear power plants and climate change mitigation measures.
An ISDS decision last week is especially pertinent, given the protests against Auckland's proposed harbour reclamation. An international investment tribunal under the North American Free Trade Agreement (the template for the TPPA) held Canada liable for a decision by an environment panel in Nova Scotia to deny US firm Bilcon approval for a controversial quarry and marine terminal.
A review panel established under local environmental laws criticised Bilcon's poor consultation with indigenous peoples, fishers and other communities and found the project contrary to "community core values". Bilcon complained local officials had encouraged the project and called the review panel a "rare, cumbersome and costly obstacle" to its investment.
In a split decision, the majority - the investor's nominee and the chair - said the panel failed to explore alternative ways to address public concerns. Bilcon's treatment was considered unfair and discriminatory, because similar panels in other parts of Canada had approved such projects subject to conditions. The US firm wants $300 million damages.
The dissenting arbitrator, appointed by Canada, objected that Bilcon gained financial compensation that was not available from the domestic courts, where the matter should have been resolved. Decisions about Canadian law now end up being made by offshore investment tribunals. He also warned the decision will "create a chill" on the operation of future environmental review panels.
The Canadian Government is expected to demand the province reimburse it for the damages, as it did with a recent dispute where Exxon was awarded $17 million because a provincial government's requirement to invest more R&D funds locally breached a rule prohibiting performance requirements on investors.
The Government and its negotiators know these investment chapters, especially ISDS, are facing a crisis of legitimacy. But nothing has been done to rein in the adventurism of arbitrators who pass judgment on vital matters of public policy. There is no code of conduct for arbitrators to address conflicts of interest arising when investment lawyers also act as the judges in investment disputes. There is no appeal.
The leaked text underscores again the anti-democratic essence of the TPPA negotiations. Not only are negotiations secret, but the agreement puts handcuffs on future central and local governments for the indefinite future without people or Parliament having an effective say.
Jane Kelsey is a law professor at the University of Auckland.
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