UK at risk of lawsuits if Pacific trade deal not amended, warn civil society organisations and academics
Photo: Global Justice Now

Global Justice Now | 24 October 2023

UK at risk of lawsuits if Pacific trade deal not amended, warn civil society organisations and academics

THE UK faces “huge financial risk” of lawsuits if the Pacific trade deal is not amended, warn civil society organisations and academics in a joint letter published today.

The letter, coordinated by the Trade Justice Movement, Global Justice Now and the Canadian Centre for Policy Alternatives and signed by 56 academics and 37 organisations including Greenpeace UK, UNISON and Friends of the Earth, urges Rishi Sunak and Canadian prime minister Justin Trudeau to “take immediate steps” to ensure the UK’s recent accession to the treaty does not block its ability to “enact mandated climate and environmental policies”.

The UK joined the Pacific trade bloc, known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), in July. Legislation to begin the ratification process is expected to be announced in the King’s Speech on 7 November. It is the UK’s largest trade agreement since Brexit. Critics of the treaty previously highlighted the government’s own estimates suggest joining will add a miniscule amount to the UK’s economy – the equivalent of only 0.08% of Britain’s GDP following a decade of membership.

The trade deal stipulates UK and Canadian investors operating in each other’s countries will have access to investor-state dispute settlement (ISDS) provisions. The letter’s signatories warn that this detail poses “huge financial risk” to the UK and Canada, as well as providing companies with the tools to obstruct a just green transition.

ISDS is a controversial mechanism written into international agreements that allows companies to sue governments over policy changes they allege could affect their profits. The cases are heard in secretive tribunals outside countries’ national legal systems.

The letter states that the UK is especially at risk given England’s “troubled” water utilities sector, where Canadian investors are the second largest investors. Compounding this risk, it states, is the fact that Canadian investors are “aggressive” users of ISDS, having brought 65 cases over 25 years – the majority over energy or environmental policies.

The Confederation of British Industry (CBI) has stated, drawing on Canada’s experience under NAFTA, that there is “a risk of the UK becoming disproportionately targeted through ISDS.”

The UK government has already signed ‘side letters’ excluding ISDS provisions with Australia and New Zealand. Signatories are now calling on Sunak and Trudeau to do the same in this scenario in order to avoid financial risk being “locked in” through the trade deal.

Cleodie Rickard, trade campaign manager at Global Justice Now said:
“Given that the UK has already signed side-letters to scrap dangerous investor tribunals with Australia and New Zealand, it beggars belief that they have not yet with Canada, whose companies sue foreign states the most out of all Pacific trade deal members. The UK Government has even said it wouldn’t include ISDS in a free trade agreement with Canada, so what’s the sense in locking it in here? While Kemi Badenoch may say it’s a done deal, there’s no technical barrier to signing a side-letter – a simple and prescient way to remove the financial risk of ISDS. The only block is a lack of political will to prioritise protecting the UK’s public purse and policy space, instead of flashy optics in our trading relationships.”

Tom Wills, Director at the Trade Justice Movement said:
“The UK has shown signs that it is willing to exclude ISDS, as seen in its agreement with Australia and New Zealand, so we are baffled that we haven’t seen the same commitment for CPTPP. Signing a side-letter removing ISDS from the Pacific trade deal will show clear UK leadership and commitment to its climate obligations. We have enough cases on file to know that these corporate courts obstruct the urgent need to tackle climate change. Not only does this system make it harder for governments to take the sort of action they desperately need to protect the planet, it actually maintains the profits of the most reckless parts of the fossil fuel industry.”