Meera Nair

dear Ms. Freeland

In Posts on November 8, 2015 at 5:38 pm

The Honourable Chrystia Freeland
Minister of International Trade
House of Commons
Ottawa, Ontario
Canada K1A 0A6

Dear Ms. Freeland,

I am pleased to see your invitation to Canadians to familiarize ourselves with the Trans-Pacific Partnership agreement (TPP) and provide comments to the government. Such an overture is much appreciated, particularly in light of the style of governance that has gone before.

But, the Canadian public may need some help in understanding the issues presented through 6000 pages of text. The media are most likely their expected guides in judging the merits of the TPP. Unfortunately, the media has shown little interest in covering, let alone assessing, what may be the most deleterious aspect of the TPP, namely the Investor State Dispute Settlement (ISDS) mechanism. (At this blog, some coverage can be found here, here, here, and here.)

This mechanism, brought to Canada through NAFTA, ostensibly secures business investments from seizure by hostile governments. Sugar plantations and oil fields in alien jurisdictions come to mind. But ISDS windfalls have come through, not for Canada, but from Canada, for international corporations seeking redress when they have felt their profits unfairly curtailed by domestic regulations.

Just prior to the conclusion of the TPP negotiations, Brook Baker (Northeastern University) and Katrina Geddes (Harvard University) posted a paper describing the rise in global applications of ISDS, from 50 instances in the first 50 years of the existence of the mechanism to 608 in the last 15 years. They write:

This sea change in investor-state claims was triggered by the belated realization that not only could investors bring claims against banana-republic confiscations but against emerging economies and even advanced democracies whenever their expectations of profit were thwarted … Accordingly, foreign corporations have used investor-state dispute resolution to challenge a broad array of environmental and land use laws, government procurement decisions, regulatory permitting decisions, financial regulations, consumer protection, public health, and public safety laws, and a range of other public interest policies (p.11).

Baker and Geddes draw attention to Canada’s current difficulties under ISDS: a $500 million challenge from Eli Lilly, all because our courts had the temerity to invalidate a patent which did not live up to assurances. Eli Lilly also complained that our system of patenting was not to their liking. It may be their prerogative to complain about our system, but it should not be their right to change it. Like any other regulatory measure, Canada’s system of patenting was set by a Canadian government, in full compliance with existing international norms. Eli Lilly had every opportunity to press their concerns through Canadian courts. They did, and they lost. The story should have ended there. Yet ISDS offers a venue for Eli Lilly to take a course of action that would render our courts’ decisions irrelevant.

As I noted in an earlier post, the former Harper Government presented the TPP investment protection measures in glowing terms. While such a rosy outlook did not ring true, it is plausible that, having curtailed the Civil Service from doing its job of meaningful scrutiny, the mandarins in Mr. Harper’s office truly did not know better. But with the release of the text we now know that what is encoded into the TPP is ISDS at its worst. Experts who condemned the agreement before it was released have been vindicated, cold comfort as that may be.

Among those experts is internationally acclaimed economist Joseph Stiglitz. In your 2012 publication, Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else, Stiglitz appears in your acknowledgement of scholars who became “important sounding boards and advisors (p.290).” It is no secret that Stiglitz views the TPP as a charade of a trade agreement; among his recent columns is this assessment:

… These agreements go well beyond trade, governing investment and intellectual property as well, imposing fundamental changes to countries’ legal, judicial, and regulatory frameworks, without input or accountability through democratic institutions.

Perhaps the most invidious – and most dishonest – part of such agreements concerns investor protection. Of course, investors have to be protected against the risk that rogue governments will seize their property. But that is not what these provisions are about. There have been very few expropriations in recent decades, and investors who want to protect themselves can buy insurance from the Multilateral Investment Guarantee Agency, a World Bank affiliate (the US and other governments provide similar insurance). Nonetheless, the US is demanding such provisions in the TPP, even though many of its “partners” have property protections and judicial systems that are as good as its own.

The tone from the participating governments of the TPP is that the agreement is good for business; they rely upon the implied orthodoxy that business well-being translates to citizen well-being. However, you have questioned this orthodoxy. In Plutocrats, you describe a heated exchange in 2011 between then-Governor of the Bank of Canada, Mark Carney and Jamie Dimon, CEO of JP Morgan Chase and write:

Are the interests of the state and its big businesses synonymous? If not, who decides? And if they do clash, does the state have the right—and the might—to curb specific businesses for the collective good (p.255)?

That our Minister of International Trade has your background suggests that the TPP will be examined comprehensively. That our civil service has been unshackled suggests that qualified personnel with backgrounds in law, commerce, human rights, and trade negotiation will be encouraged to exercise their expertise with vigour. That Prime Minister Trudeau has promised transparency suggests that, whatever decision is reached concerning the TPP, Canadians will be fully informed as to both its merits and demerits. If Canadian sovereignty must continue to be diminished, we expect to be told the truth.

But, I choose to be optimistic. The state will not be limited to serving only as a handmaiden to business. My optimism stems from an encore remark in Plutocrats:

The issue, instead, is whether the interests of business and of the community at large are always the same and, if they aren’t, whether the government has the will, the authority and the brains to defend the latter, even against the protests of the former (p.261).

You and your colleagues have been given the authority. Your collective credentials remove any doubt as to the brains. What remains to be answered is the question of will.

I wish you all the best in your endeavors.


Meera Nair, Ph.D

no surprise

In Posts on October 29, 2015 at 7:11 pm

Two weeks ago we received the unremarkable news that Google Books had prevailed at the United States Court of Appeals for the Second Circuit; that the copying of entire books in order to provide information about the books, including displaying snippets of content, was fair use. I say “unremarkable” as the outcome was expected. The Second Circuit was the appellate court that sent this dispute back to a district court expressly because the district court had not considered fair use. After due consideration, in November 2013 the district court declared that Google Books’ operations fell within fair use. That triggered an appeal from the Authors Guild (despite the fact that the appeal would be heard by the same Second Circuit).

The present decision of the Second Circuit was penned by Judge Pierre Leval, who might be best known as the founding father of the relevance of “transformative” in American fair use dialogue. It should not surprise anyone that Leval emphasized the expanded utility wrought by Google Books. Placing the decision firmly upon the American constitutional foundation for copyright, namely that the system of copyright must “promote the progress of science and the useful arts,” Leval writes: “the purpose of Google’s copying of the original copyrighted books is to make available significant information about those books, permitting a searcher to identify those that contain a word or term of interest, as well as those that do not include reference to it (p.22, emphasis in original).”

Judge Leval carries out the four-factor analysis, as per statutory custom in the United States. Mike Masick (Techdirt) provides detailed coverage of the analysis, noting in particular that the United States has yet another clear indication that commerciality does not impede fair use and that the use of bogey man arguments offered without any evidence (such as the possibility that would-be hackers could obtain the complete scans of the books) have no place in a serious consideration of law. Further analysis and coverage of this matter by Patricia Aufderheide (Center for Media and Social Impact), Brandon Butler (American University) and Kevin Smith (Duke University) all make for very good reading.

From a Canadian perspective the decision is a reminder that the United States’ culture of fair use is distinct from our culture of fair dealing. American fair use history was marked by an unfortunate period of time where commerciality and market impact became the touchstones upon which fair use was determined. Consequently, what was considered world-wide as the best exception, by virtue of flexible language that could accommodate futures unknown, lay inert in the United States. It has taken the country decades to restore fair use as a meaningful exception within the system of copyright, and establish that fair use is not simply a means to address market failure.

(Perhaps it was through observing this unfortunate path, that our Supreme Court took pains to safeguard Canada’s development of fair dealing with a strict reminder that the presence of licensing was not sufficient to deny fair dealing nor was market impact the most important factor of analysis.)

In 2010, I dealt with this portion of American fair use history in some detail. In “Fair Dealing at a Crossroads,” From Radical Extremism to Balanced Copyright (ed. Michael Geist), I wrote:

The prominence of commerciality, through the first and fourth factors, was set in the 1984 Sony decision, even though that action was inconsis­tent with the statutory language of the law. Although the United States’ Supreme Court sought to correct its mistakes, with some success in 1994, lower courts continued to place undue emphasis upon commerciality (p. 92, citations omitted).

The success of 1994 was Campbell v. Acuff Rose Music, Inc, a fair use dispute over a commercially released parody. Favoring fair use, the American Supreme Court of the day sought a way to blunt the emphasis upon commerciality and gave rise to the importance of “transformative” as “… altering the original with new expression, meaning, or message. The more transformative the new work, the less will be the significance of other factors, like commercialism … .” Their reasoning drew from the work of Judge Leval.

Since 1994, American courts have systematically returned to the language around “transformative,” giving fair use a reasonable ambit of application and chance of success, as befitting a measure that has been referred to as providing “breathing space within the confines of copyright.” But while the language of “transformative” is a key feature of American dialogue, Canadians are fortunate not to be so reliant on terminology.

Our leading decisions concerning fair dealing focused upon exact reproduction of works (whole or in part) often with the same purpose that the works were intended for at their inception. By virtue of a contextual analysis, our Supreme Court declared those circumstances as giving rise to fair dealing. True, the reasoning employed would meld along the lines of expanded utility but we need not frame our reasoning to match a particular phrase. Our Supreme Court asks us to examine uses of copyrighted work broadly, with a scope of inquiry tailored to the situation at hand. Fair dealing rests upon the entirety of that analysis.

TPP – the untold story

In Posts on October 9, 2015 at 7:28 am

Since the agreement in principle of the TransPacific Partnership Agreement was announced this week, our media coverage has focused primarily upon its adverse impact to the dairy industry in Canada. The Federal Government was quick to respond with some reassuring details including an offer of $4.3 billion over fifteen years to ease the pain of greater competition.

But the government has yet to release the complete text of the agreement, content to indicate that it will provide more information in the next few days. Unless “more information” is comprehensive, Canadians will head to the polls on October 19, without a detailed understanding of the potential ramifications of the TPP.

At this stage, all we have is the technical summary provided by the government; among other details, the TPP apparently:

1. Includes protection from expropriation without prompt and adequate compensation.

2. Provides access to an independent international investor-state dispute settlement (ISDS) mechanism that is prompt, fair and transparent, and subject to appropriate safeguards.

3. Preserves the full rights of governments to legislate and regulate in the public interest, including for public health and environmental reasons.

The language appears intended to assure Canadian companies who invest abroad that their money and property will be safe – that statement (2) protects the integrity of (1). What the government fails to indicate is that this settlement mechanism has already seen use – directed at Canada. Brought to life through NAFTA, ISDS is a process by which foreign corporations can sue domestic governments for practices that might diminish expected profits. Moreover, these suits do not take place in a court of law, but in private tribunals.

Our government’s claim that the process by which disputes are to be settled is “prompt, fair and transparent, and subject to appropriate safeguards” is less than credible. As has already been written, ISDS disputes “are managed by a trio of corporate attorneys who rotate among the positions of advocate and judge. These tribunals are not answerable to any electorate and do not address public well-being as a court of law would do when confronted with the same dispute.”

Furthermore, our government’s claim that Canada’s right “to regulate … in public interest” is protected (said another way, we maintain our sovereignty) also strains credulity. As I noted here, in 1997 Canada retracted its own ban on a gasoline additive because of an ISDS dispute. Retracting the ban was not the only punishment meted out to Canada, the government also paid $13 million in damages, covered the opposing corporation’s legal costs, and publicly proclaimed that the additive was safe, even though our own environmental protection agency had said otherwise.

The one area where the TPP might be held at bay is in the area of tobacco law suits. It has been reported that the agreement includes a carve out against disputes from tobacco companies who object to policy measures that reduce smoking rates. (The disputes are very real; Uruguay is paying a heavy price for its worthy efforts to reduce smoking among its population.)  Sean Flynn (Washington College of Law), writes that such a carve-out “validates, rather than assuages, the concerns of those who have been criticizing ISDS systems for many years. Without express carve outs, ISDS provisions do threaten common health and safety regulations.”

The destructive nature of ISDS in existing agreements has prompted careful study and analysis. One such paper seems to have been designed expressly for the Canadian electorate; on 29 September 2015, co-authors Brook Baker (Northeastern University) and Katrina Geddes (Harvard University) posted Corporate Power Unbound: Investor-State Arbitration of IP Monopolies on Medicines – Eli Lilly v. Canada and the Trans-Pacific Partnership Agreement to the SSRN network.

Canada’s prominence is due to its dubious honour of being the first country to be targeted for patent dispute via ISDS, even though NAFTA ostensibly shielded domestic patent decisions from ISDS. Yet, we are embroiled in a $500 million challenge. This dispute began because our courts had the temerity to invalidate a patent that did not live up to expectation. Among the details provided by Baker and Geddes is that the research underpinning the patent consisted of a study of 21 patients over three weeks, with modest improvement detected in the condition of 11 patients (p.28). Baker and Geddes’ work is meticulous in its evaluation of ISDS and ought to have been compulsory reading for every member of Canada’s negotiating team.

The lone media coverage of ISDS this past week came via the Winnipeg Free Press. In an op/ed penned by Ronald Labonté and Arne Ruckert (University of Ottawa), they write: “Canada is already the most sued country in the world. It has so far lost $170 million in NAFTA cases with hundreds of millions more still pending.”

What has been most perplexing about the mania for the TPP is the insistence that Canada could not be left out. Given our experience, can Canada afford to be left in?

That the TPP might have actual trade benefit could well be true. But will the gains be large enough to compensate for the losses we will endure by throwing away our capacity to make sound policy decisions, in keeping with our own aspirations with respect to clean air, clean water, public health and safety, labour laws, or allocation of intellectual property rights?

ISDS was originally deemed a necessary measure for situations where the country involved did not have a robust, functioning system of law. Canada does not fit that bill.

So far, Canadians have been presented with a take it or leave it conceptual view of the TPP. There remains a third approach: hold out for a trade agreement that is only about trade, with the expected give and take in tariffs that is required for fruitful growth across all parties. As Labonté and Ruckert noted, Europeans are pushing back on similarly flawed agreements.

International corporations do not need to be given absolute freedom to seek unbridled profit to the detriment of public interest. Canadians have an opportunity to express their concerns to our government. And when the dust settles on October 19, if the opposition parties hold the balance of power, we can only hope that they will set aside partisan sniping and work together. Canadians deserve nothing less.


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