Of Free Trade Agreements, Corporate Power and Suing Countries for Protecting Biodiversity

Last month, Mongabay ran a story about how IFC, the private-sector lending arm of the World Bank, was forced to divest its stake from Canadian mining giant Eco Oro’s goldmine in Colombia, in view of the mine’s potential threat to newly-protected moorland ecosystem. The seemingly positive news had a disturbing side – Eco Oro is suing the Columbian government for ‘limiting the company’s future prospects’ by according protection to moorlands, in an apparent violation of the Colombia’s obligations under the Canada-Colombia Free Trade Agreement. Colombia recently passed a law that prohibits mining in moorlands, an important watershed providing water to a million people.  Three other mining companies (one American and two Canadian) have also sued the Colombian government for a total of $16.5 billion in compensation claims based on clauses in various free trade agreements as mining titles granted to these companies fall in newly-created protected areas

It is well known that the globalization of trade in commodities (agricultural, mineral as well as energy) has taken habitat conversion driven biodiversity loss to an entirely new level, by ratcheting up demand, creating mass markets and driving down prices. What is not so well known, though, is the impact Free Trade Agreements can have on biodiversity. A Free Trade Agreement entails cooperation between two or more countries to reduce trade barriers e.g. import quotas and tariffs, with a view to boost trade.  However, free trade agreements have been criticized for granting inordinate amounts of power to corporations vis-à-vis national governments. The investor-state dispute settlement (ISDS) provisions contained in several bilateral trade agreements and certain multi-lateral trade agreements (such as NAFTA, CETA, the proposed TPP and TTIP) allow corporations to sue governments over policy decisions that may affect their profits. Examples abound of countries being sued for passing laws to protect their biodiversity. What is even more troubling is that the liability created under ISDS continues even if a country decides to pull out of the free trade agreement.

While most corporate behemoths are listed in developed countries, they operate in resource-rich (and biodiverse) developing countries – the asymmetric free trade agreements that force developing countries to relinquish their legislative powers have been often been branded as instruments of neocolonialism.  But even developed countries do not remain untouched by lawsuits under ISDS. Canada, which faces $2.6 billion in ISDS claims, is a case in point.

National legislation is the only effective means of defending critical ecosystems against industrial expansion, as international conventions and regulations (such as CBD, UNESCO World Heritage Convention, Ramsar Convention etc.) are only advisory in nature and do not hold statutory force. By curtailing countries’ right to enact and enforce stricter no-go restrictions, free trade agreements undermine their sovereignty and limit their ability to protect biodiversity. This does not bode well for biodiversity. As it is, most national governments are inclined to dilute laws and redraw protected area boundaries to accommodate corporate interests. Thanks to the ISDS provisions of free trade agreements, countries that do manage to put biodiversity concerns before the development imperative are faced with a dismal choice: either let an multinational extractive company ride roughshod over your biodiversity or compensate them for not doing so. In fact, the very threat of lawsuits becomes a factor in decision-making – much environmental legislation doesn’t even see the light of the day because of potential lawsuits under ISDS, as governments hesitate to risk millions of dollars in claims, a phenomenon termed as the chill effect.

International trade is governing biodiversity policy in more sinister ways than we can imagine. It is important to understand the unseen yet powerful overarching system that impinges biodiversity, if we are to make even a decent attempt at protecting it.


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