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Date: Tue, 20 Jan 1998 00:57:59 -0500
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From: Bob Olsen <bobolsen@arcos.org>
Subject: Corporate Legal Assault
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From: Michael Joseph Welters <mwelters@sfu.ca>
Subject: (ASCII) Corporate use of the legal system against Canadian
governments and activists trying to prevent corporate harm
To: bobolsen@arcos.org
Date: Mon, 19 Jan 1998 21:11:29 -0800 (PST)

The battle to stop corporate harm: Corporate use of the Canadian legal system

By Michael Welters, December 1997

Corporate harm is a serious problem in the capitalist world, that affects the environment, consumers, the economy, humanity, and employees. Citizens, often working within citizen organizations, and governments will often take action to try to prevent or mitigate this harm. How corporations have used the legal system to stop Canadian citizens and Canadian governments from trying to prevent corporate harm shall be explored here. In doing so, cases involving Daishowa and the Friends of the Lubicon, Cambior Inc. and Recherches Internationales Quebec, Shell Products Canada Ltd. and the City of Vancouver, and Ethyl Corp. and the Government of Canada will be examined.

The context is Canadian. Citizens of Canada, and the governments of Canada, are the focus of concern, though the corporations involved are multinational in nature. As well, the legal system involved here goes beyond domestic Canadian courts to a North American Free Trade Agreement (NAFTA) tribunal. Despite the international aspects, the implications discussed remain Canadian in context.

This essay will not touch on labour disputes. While this issue is related, it is sufficiently different and involved to exclude it from the following discussion. It is important to remember that there have been cases where corporations have failed in their attempts to use the courts to their advantage. Such cases are not of interest here. Only cases where the corporations have been successful will be examined, along with the implications of their success.

General background information of each case will be given so that the reader has a good understanding of the circumstances that gave rise to the legal proceedings. Invariably, these factors are important when the court (or tribunal) makes its decision. Following this, the corporate harm in each case shall be summarily stated. The decision of the court will be delineated where possible. Finally, in each case the broader implications for citizens and citizen groups, or for governments, will be discussed.

Most of the cases to be discussed here have not yet been finally resolved, and the area is still developing. Nonetheless, developments to date are of sufficient importance and will have wide implications, so they are worth exploring now. Where possible, original sources and legal cases were used. Many developments were too recent, however, and so information from the World Wide Web, as well as personal E-mail communications, have been utilized.

Corporations have made use of the legal system to stop Canadian citizens and Canadian governments from trying to prevent corporate harm. The results have wide implications and should not be ignored.


Daishowa v. Friends of the Lubicon

The first case for examination is that of Daishowa Inc. V. Friends of the Lubicon et al (1996), 27 O.R.(3d) 215 (Ont.Div.). This is an extremely important case, as it threatens any effective boycott in Ontario.

The Lubicon are a band in Northern Alberta comprising of about 500 Cree, who were not included in Treaty 8. As Corbett J. points out, there is no treaty which "purports to extinguish their aboriginal title" (Daishowa, 218). The Lubicon have an outstanding claim to 10,000 sq.km. in the Peace River district of Alberta. Negotiations with the Alberta and Federal governments have been a long, drawn-out affair, and the Federal government continues to refuse to negotiate in good faith (see Goddard, 1991, for a history of the affair). Friends of the Lubicon (FOL) formed in 1988 as a non-incorporated organization to educate the public about the plight of the Lubicon (Daishowa, 218).

Daishowa Inc. is a Canadian company that is part of a Japanese-owned group of companies called Daishowa (217). The Alberta government has granted logging rights to Daishowa for areas over which the Lubicon claim hunting and fishing rights. Chief Ominayak of the Lubicon met with a representative of Daishowa in 1988, and Ominayak claims that Daishowa agreed not to log in the disputed area. Daishowa denies this claim, and its subsidiary Brewster Corporation planned to log the area (218).

The corporate harm in this case is the further erosion of the Lubicon way of life, involving hunting and trapping, as well as the harvesting of timber which may be Lubicon property. The proposed logging would not benefit the Lubicon people; it could only harm them.

When Daishowa announced its intentions to log the area, the Friends of Lubicon engaged in a letter writing campaign, where Daishowa customers were contacted and encouraged to end contractual relations with Daishowa. As Corbett J. (Daishowa, 219) notes,

the boycott campaign was enormously successful. At least 43 companies representing 4300 retail outlets joined the boycott ... and Daishowa lost a significant portion of its business, estimated at about $5 million worth of sales since 1991.

What is interesting about this case, is that an interlocutory injunction had been granted against Friends of the Lubicon which ended the boycott before the case had even made it to court. The trial started on 2 September 1997, yet Friends of the Lubicon were given orders that essentially prevented their boycotts at a hearing on 6 February 1995, at the Interim Injunction Hearing in April 1995 (FOL, 1997a), and then again at the appeal to the Ontario Divisional Court on 23 January 1996 (Daishowa). It is the appeal decision, delivered by Corbett J., that is of interest here.

Peaceful secondary picketing was ruled by Corbett J. (Daishowa, 223) to be illegal where economic interference was done by illegal means. Secondary picketing is taking action against the customers of the primary target company, in this case Daishowa. The illegal means alleged in this case were misrepresentation and intimidation (231).

Two questions must then be asked: how did FOL engage in misrepresentation, and how did FOL engage in intimidation? First, misrepresentation. Daishowa claimed misrepresentation on the part of FOL regarding "the status of logging operations" (231), the oral agreement between the Daishowa representative and Lubicon Chief Ominayak, and the claim of genocide (231). The court found in favour of FOL in regards to the status of logging operations (231), but in favour of Daishowa in regards to genocide and the agreement (232). The following should be pointed out: where there was solid evidence to support FOL's case, such as in the status of logging, the court decided in their favour. Where it was Daishowa's word versus that of the Lubicon's, the court sided in favour of Daishowa. Since there was no evidence of the oral agreement (which the Lubicon had considered a sufficient guarantee at the time), the court decided in favour of Daishowa. The court also ruled that the word "genocide" could not be used by FOL. As for intimidation, Corbett J. (237) cited evidence that the FOL threatened to picket those companies that continued to do business with Daishowa.

The actions of FOL caused irreparable harm to Daishowa, and FOL were not in a position to compensate Daishowa financially. Therefore, Corbett J. (239) granted

an interlocutory injunction enjoining the Friends [of the Lubicon] from intentionally interfering with Daishowa's contractual and economic relations by unlawful means, including picketing and threats of picketing aimed at Daishowa's customers. (emphasis added)

Corbett J. (233-236) presented evidence that FOL tried to induce, and succeeded in doing so in many cases, a breach of contract. FOL engaged in such activities using the unlawful means of misrepresentation and intimidation. Therefore, the actions of FOL were illegal (237).

Charter rights were ruled not to apply since there was no governmental action involved; the matter before the bar was a private one (238).

According to Corbett J. (239), lawful boycott activities are not forbidden by his decision. Essentially, this means that FOL can only make statements that Daishowa or the courts agree with. As for boycotts, primary picketing is apparently still permitted. However, since Daishowa's customers are corporations, and the picketing of those corporate customers is now illegal, a more effective hamstrung of boycott activities against Daishowa is difficult to imagine. In fairness, Corbett J. did rule that Daishowa must not log on lands claimed by the Lubicon pending the trial (239).

Prior to the trial, FOL were denied leave to appeal by the Ontario Court of Appeal on 26 April 1996, and by the Supreme Court of Canada on 19 June 1997. No reasons were given in either case (FOL, 1997a).

The trial began 2 September 1997 (FOL, 1997b:Day 1), adjourned on 2 October 1997, and has continued since 24 November 1997 (FOL, 1997b:Day 18). However, some evidence relevant to the discussion here has been presented in court.

On 8 September 1997, Koichi Kitigawa, president of Daishowa sales, gave evidence that Daishowa had initially admitted that some sort of agreement had been reached on 7 March 1988, and that Ominayak subjectively believed that an understanding over Lubicon lands had been reached (FOL, 1997b:Day 4). Tom Cochran, Director for Corporate Development at Daishowa, admitted to sending information to Daishowa customers that misrepresented the size of the Lubicon claim - misinformation, incidentally, that originated with the Canadian government (FOL, 1997b:Day 10). This is a clear sign of hypocrisy: claiming that FOL is misrepresenting Daishowa's situation, while Daishowa misrepresents FOL's position.

At trial, the FOL have brought forward evidence showing that FOL honestly believes that the Lubicon are victims of genocide, though Daishowa was only a part of the process (FOL, 1997b:Day 12).

At the time of writing, the law in Ontario regarding consumer boycotts is as follows: secondary picketing, threats of secondary picketing, when either involve the dissemination of information that the target or courts disagree with, are illegal. Considering the effectiveness of threats of pickets to business people, as indicated by testimony throughout this case (for examples see FOL, 1997b:Day 7; Daishowa Inc. v. Friends of the Lubicon), this is a very important limitation. If the current trial follows the Daishowa decision by Corbett J., it will be a serious blow to activists.

Cambior v. Recherches Internationales Quebec

A similar case is occurring in Quebec, involving Cambior Inc, and Recherches Internationales Quebec (RIQ).

Cambior Inc. is a Canadian company, headquartered in Quebec, which owns 65% of Omai Gold Mines Ltd. in Guyana (The Gazette, 1995b:C3). This mine is the second largest gold mine in South America (Shalom, 1996).

In March, 1995, Omai announced that it had to dispose of wastewater containing cyanide, or it would be forced to shut down (Associated Press, 1995, April 2). This was a serious threat, considering that over a thousand worker jobs, private contracts for supplying the mine, and millions of dollars in royalties and taxes for the government would all be lost if Omai ceased operations (Wilkinson, 1995:para. 20). A government panel was to determine the viability of releasing some of the wastewater (Associated Press, 1995, April 4).

In May, 1995, Omai spilled some of the wastewater into the Omai River, and did not report it to the government until five days later. Omai blamed the spill on a power outage and human error (The Gazette, 1995a:C3). The following August there was a second spill, with Omai reporting that another 838 million gallons of wastewater was released. The President of Guyana, Cheddi Jaggan, declared the area an environmental disaster zone (Associated Press, 1995, Aug. 24). A government delay in notifying scientists resulted in the loss of information regarding the true extent of the spill. Accusations of a deliberate spill or a cover-up have been denied by Omai (Wilkinson, 1995:para.11).

The Omai River, prior to the spills, had been used for drinking, bathing, household chores, fishing, and other activities (Associated Press, 1995, Aug. 24). It was an important aspect of the daily lives of the people who lived near it. Following the spill, dead pigs and livestock were reported floating down the river, and the Guyana government ordered that the river not be used for any activity except washing clothes (Roberts, 1995:para.8). In compensation, Cambior supplied uncontaminated water for 10 days following announcement of the spill, and granted a settlement of $CAN150 to some of the local residents (Preville, 1997:para. 6).

Cambior denied that the spills constituted a major environmental disaster. To support this claim, Geoffrey King, a spokesperson for Cambior, argued that sunlight and oxygen causes Cyanide to break down and become harmless. However, this does not take into account the cyanide that seeps into the ground, and therefore is not broken down by sunlight. Further, lethal effects of cyanide are known to occur in fish from concentrations as low as 0.03 ppm, and tiny amounts are known to cause numerous problems for humans when ingested. While Omai claimed that the concentration of cyanide during the spill was 1.5 to 2.5 ppm, the government of Guyana put the range at 25 to 30 ppm, although the cyanide was quickly diluted. This debate does not take into account other heavy metals found in the waste known to have serious negative effects and which are not broken down by sunlight or oxygen (Chatterjee, 1997b:paras.14-17).

On 26 March 1997, a Motion for Authorization to Institute a Class Action was filed on behalf of Recherches Internationales Quebec (RIQ) in Quebec Superior Court. The suit will try to persuade "the Court to order the reparation of all environmental damage resulting from the spill and on-going mining operations at the Omai Mine, as well as $3 000 in damages for each of the class members for a total of $69 million" (Michelin, 1997). According to the lawyer who filed the suit, Steve Michelin, it is the first time that a Canadian corporation was being taken to a Canadian court over something it did in a developing nation (Preville, 1997:para.11).

RIQ was created to represent Guyana citizens in Canada by the National Committee for Defence Against Omai (NCDAO), a grassroots organization in Guyana. Before the case can actually go through, the court must first recognize the 23 000 Guyanan people, whom RIQ was formed to represent, as a class in a Quebec court. The legal team believes this can be done since nothing in the Civil Code says that a complainant must be from, or reside in, Quebec or Canada in order to sue (Preville, 1997:para.9). Steve Michelin justifies the filing of the suit in Canada since the decisions that resulted in the spill were made in Canada, where Cambior is located (Chatterjee, 1997a:para.7). Another rationale is that most of Cambior's assets are in Canada, which "means there's much more money at stake" (Preville, 1997:para.15).

According to a Cambior press release, it views this motion as unfounded, and quotes a Government of Guyana report stating that at "no time was the contaminated water a serious threat to life" (Cambior, 1997). Cambior is expected to argue "that the case should be heard before courts in Guyana where the spill occurred" (Chatterjee, 1997a:para.17).

The corporate harm in this case is the environmental damage in Guyana from the wastewater spills, which has still not been cleaned up by Omai, the poor compensation for the people affected, and the possibility of Cambior doing environmental damage elsewhere.

In fighting to rectify this corporate harm, Dermod Travis of RIQ has taken actions that go beyond the class-action law suit filed in Quebec Superior Court.

Travis sent letters to a variety of banks, including "Chase Manhattan, Bank of Nova Scotia, Royal Bank of Canada, and Nesbitt Burns, who were considering loans to Cambior to develop the La Granja gold mine in northern Peru" (Chatterjee, 1997b:para.4), using RIQ letterhead. In these letters Travis criticized Cambior's environmental record, citing that Cambior had received twelve environmental violations at Valdez Creek Gold Mine in Alaska, that it was given the lowest possible rating by the US Environmental Protection Agency for its proposed mine in Arizona, and its violations of Quebec's environmental laws, in addition to the situation in Guyana (Travis, 1997:para.10). Travis also refers to Cambior's hiring of Carol Mathieu as Director of International Security for Cambior. Mathieu was in command of the Canadian soldiers who tortured civilians while peacekeeping in Somalia (Travis, 1997:paras.16-17). Travis threatened a boycott of any financial institution that provided financing to Cambior, unless the situation in Guyana was rectified (Chaterjee, 1997:para.8).

Travis (1997) also sent letters to the shareholders, criticizing Cambior's financial performance, environmental record, management, and the hiring of Carol Mathieu.

In response to this campaign, Cambior has filed an interlocutory injunction against Dermod Travis. Cambior wants to prevent Travis from speaking with financial institutions "in an attempt to persuade any or all of them not to conduct business with Cambior" (Travis, 1997), which it calls "unlawful interference in [Cambior's] economic activities" (Chatterjee, 1997b:para.9). Ironically, it filed for this injunction two years to the day after the Omai spill. The suit has been termed a SLAPP suit - a Strategic Lawsuit Against Public Participation (Travis, 1997). Travis' argument against the injunction is that "if Cambior can communicate with its bankers, shareholders and the media, then concerned citizens also have a right to communicate with these same groups to express their valid concerns" (Travis, 1997).

The trial has not yet occurred. If the injunction is successful, it will set a precedent for limiting the scope of activities that citizens can engage in while trying to prevent corporate harm. This is a deliberate attempt by a corporation to keep activists away from its access to capital, probably its most important link.

Greenpeace Canada et al. v. MacMillan Bloedel Ltd.

The injunctions in the two cases above are of even greater relevance to concerned citizens and citizen organizations due to a Supreme Court of Canada ruling on who is affected by injunctions. The Supreme Court of Canada has ruled that injunctions are binding on persons who are not a party to the action. People who are not parties to the action, but violate an order of the court, may be found guilty of contempt for interfering with justice (MacMillan Bloedel Ltd. v. Simpson (1996), 109 C.C.C.(3d) 259 (S.C.C.)).

In 1991, MacMillan Bloedel (MacBlo) was given a permit by the government of British Columbia to log in Clayoquot Sound on Vancouver Island. This decision was opposed by some members of the public, many of whom choose to protest this action. One of the more potent forms of protesting was to blockade the logging roads, preventing MacBlo from being able to harvest timber. MacBlo took action against the protesters, including the obtaining of interlocutory injunctions to prevent the protestors from blocking the logging roads. The injunction in this case named five individuals, and also included "John Doe, Jane Doe, and Persons Unknown" (MacMillan Bloedel Ltd., 261). The injunctions prohibited the blocking of logging roads by the public, and authorized police to arrest offenders (262).

In the summer of 1993, over 800 individuals were arrested for violating the interlocutory orders. Six hundred and twenty-six protesters were convicted, fined up to $3000, and incarcerated for no more than 60 days. Clearly, most of the protesters were not named in the orders. The protesters were comprised of both Canadians and foreigners. Before arresting a protester, the police gave the protester a copy of the injunction and also read the injunction to the protester (262-3)

The issue in this case was whether or not the courts had the "jurisdiction to make orders binding on non-parties and that the use of such power was justified to preserve the respondent's property rights in the face of mass obstruction" (263). The opinion of the British Columbia Supreme Court, the British Columbia Court of Appeal, and the Supreme Court of Canada was that the courts did (263). The judgement of the Supreme Court of Canada was delivered by McLachlin J.

At the Supreme Court of Canada, the appellants argued that the interlocutory injunction was "nothing more than 'government by injunction' aimed at suppressing public dissent" (264), while MacBlo argued that expression of public dissent was not at issue, only property rights were. McLachlin J., rightly so, disagreed in part with both, and said that the conflict between the two rights was the issue, and the courts must strike a balance between the two and maintain the rule of law (264-5). McLachlin J. then turned her attention to the issue of jurisdiction over non-parties.

McLachlin J. reviewed Canadian and English authorities and decided that non-parties are in practice bound by injunctions. Non-parties are not technically bound by the order, but can be found to be in contempt for obstructing the course of justice if the order is disobeyed (268).

The last issue to be examined was whether or not it was appropriate "to use private litigation for the sole purpose of obtaining an injunction to constrain public action" (270). Although McLachlin notes that she does not need to proceed on this issue to decide this particular case, she lists a series of cases that show that the courts can use injunctions to restrain large- scale public action that violates the private rights of others (271). This part of the decision is obiter dicta, but since it was from the Supreme Court of Canada it is binding on the lower courts.

The order granted in the previous two cases affect the public at large as well as the named parties, since the courts have ruled that non-parties can not violate a court injunction. The courts are not stopping a small group of people from acting, but rather are stopping everyone from acting. The Supreme Court of Canada has decided that the courts are allowed to do so in order to protect private property rights.


Corporations have used the legal system not only against activist groups in Canada, but also governments of Canada. Two cases will be examined here. The first involves Shell Products Inc. and the City of Vancouver, the other involves Ethyl Corp. and the Government of Canada. The first is a decided Supreme Court of Canada decision, the second case has not yet been heard and is proceeding under provisions of the North American Free Trade Agreement (NAFTA).

Shell Products Ltd. v. City of Vancouver

On 12 September 1989, the Vancouver City Council passed resolutions which declared that the City of Vancouver would no longer do business with Royal Dutch/Shell or its subsidiary Shell Canada until the parent company ended its economic relationship with South Africa (Shell Canada Products Ltd. v. Vancouver (City) (1994), 110 D.L.R.(4th) 3). At the time, South Africa had a system of apartheid. Involved in this economic relationship was the exporting of sulphur to South Africa through Vancouver's ports, which many Vancouverites found offensive (20). Shell Canada opposed these resolutions by taking legal action, claiming that the resolutions were ultra vires (5).

The B.C. Supreme Court made an order quashing the resolutions. The court made the decision on the basis that the City Council can only make decisions affecting the running of business in the City of Vancouver, and not in South Africa (9). Vancouver City Council appealed this decision to the B.C. Court of Appeal.

The B.C. Court of Appeal allowed the appeal, thereby allowing the resolutions. This decision was made on the basis that the Legislature of British Columbia did not expressly prevent such actions by the City Council. Shell Canada further appealed this decision to the Supreme Court of Canada (10).

The majority decision (5:4) of the Supreme Court of Canada was delivered by Sopinka J. Sopinka J. first justified the review of the resolutions of the court by arguing that municipalities "must stay within the powers conferred on them by the provincial legislature" (11), and therefore municipal resolutions must be reviewable in order to ensure that the council had the authority to pass the resolutions (12). Sopinka J. ruled that the City Council only had the power to act for "the good government, health or welfare of the city or its citizens" (14), and since the resolutions did not act for such purposes, there did not need to be an express limitation as suggested by the B.C. Court of Appeal. Sopinka J. also agreed with the trial judge that the resolutions were aimed at affecting "matters outside the territorial limits of the city" (14), and such actions are neither explicitly or implicitly allowed by the Vancouver Charter. Sopinka J. then continued in ratio on the matter of discrimination.

Sopinka J. considered the discrimination to be unauthorized (16), since the resolution did not apply to Shell's competitors doing business in South Africa as well. Municipal bylaws must affect everyone equally. As well, discrimination can occur only incidental to the activity of doing business, and this clearly was not the case (17).

McLachlin J. wrote the dissenting arguments. In regards to discrimination, McLachlin J. stated that "the city undoubtedly possesses a general power to buy its fuel from whomever it chooses"(20). Accordingly, the issue was whether the City could make the choice based on matters occurring outside of Vancouver's territorial limits (20). In formulating her decision, McLachlin J. took a broader view of municipal powers than Sopinka J.(21), which leads to a different conclusion regarding the appeal.

For McLachlin J., the matter is whether the purpose for the discrimination is within the municipality's powers, since discriminating between competitors is incidental to engaging in business (29). McLachlin J. disagreed with Sopinka J. as to what the provision "for the good rule and government of the city ... for the benefit or welfare of the inhabitants of the city" (31) includes. McLachlin J. feels that the citizens of Vancouver, collectively through the City Council, should not have to do business with a corporation whose conduct they find "objectionable" (31). Further, the courts should not decide "what will best serve the welfare of the city's citizens" (32) contrary to what the Council decided. As far as she is concerned, "the good rule and government of the city" (32) includes the expression of community concerns. Territorial limits can not be placed on the factors involved in City Council decisions regarding the good governance of the city (33).

Although the case was narrowly decided, it does have implications for what governments, at least at the municipal level, can do to try and prevent corporate harm. The decision suggests that when the harm takes place outside the city's territorial limits, the municipality will be unable to express the moral outrage of the community or openly contribute to trying to stop the harm. The close split in court opinion, however, may be viewed as a reassuring sign that a tendency towards these types of decisions might not be very strong.

Ethyl Corp. v. Government of Canada

This case is different from the one involving Shell Products Ltd. and the City of Vancouver. In that case, the legal system involved was the domestic Canadian court system. In this case, the legal system is an international one created by the North American Free Trade Agreement, which involves Canada, the United States, and Mexico.

Ethyl Corp. is a multinational corporation that invented leaded gasoline and now produces (and is the only producer of) MMT, a manganese-based fuel additive that enhances octane (Sforza & Valliantos, 1997:para.3) and reduces nitrogen emissions (Appleton,

1996a:para.2). According to Ethyl Corp., these emissions are reduced by as much as 20% (Ethyl, 1997:para.2). There have been public health concerns over the use of MMT, and the automobile industry has "long argued that MMT damages emissions diagnostics and control equipment in cars, thus increasing fuel emissions in general" (Sforza & Valliantos, 1997:para.3).

Action has been taken by governments in the United States against the use of MMT. California has a total ban on MMT, and it has been banned from use in formulated gasoline by the United States Environmental Protection Agency (Sforza & Valliantos, 1997:para.4).

Since there is inadequate information regarding the public health risk from exposure to manganese emissions, Health Canada could not ban MMT under the Canadian Environmental Protection Act. Nor is the Canadian Environmental Protection Act capable of banning substances that damage emission control systems (Sforza & Valliantos, 1997:footnote 3). Due to this, the government tried another route.

Unable to institute a ban under environmental protection legislation, the government decided to pass a law prohibiting the import and interprovincial trade of MMT (Harvey, 1997:para.2). Ethyl Corp., seeing the threat to its profits, took action before the bill was even passed.

While Parliament debated a ban on MMT, on 10 September 1996 Ethyl filed a notice of intent to file a claim under NAFTA (Appleton, 1996a:para.1). A notice of intent is required to be made at least 90 days before the claim is submitted (Appleton, 1996a:para.9). Despite the threat, the Government of Canada passed the legislation (Sforza & Valliantos, 1997:para.2), and on 14 April 1997, Ethyl filed its claim (Reed, 1997). The compensation that Ethyl Corp. is pursuing with this claim is $US250 million (Ethyl, 1997:para.1).

The case between Ethyl Corp. and the Government of Canada is the largest of three suits "under NAFTA's 'investor-to-state' dispute resolution mechanism" (Harvey, 1997:para.5). It is the first one against Canada (Sforza & Valliantos, 1997:para.1).

The Government of Canada, according to the claim filed by Ethyl, has breached its NAFTA obligations to investors three ways: under Articles 1102, 1106, and 1110 (Appleton, 1996a:para.3). These claims shall be dealt with in order.

Article 1102 refers to national treatment of investors. According to this Article, a foreign investor shall be treated "no less favourably" (NAFTA, Chap.11, Article 1102.1) than domestic investors. This makes the legislation banning the import and interprovincial trade of MMT in violation of NAFTA, according to Chris Hicks, Ethyl's Vice President for Government Relations. It is a violation because the legislation singles out Ethyl Corp., the only producer of MMT (Appleton, 1996:para.7). The Government of Canada may argue that the ban is general, and that the fact that Ethyl Canada is the only current producer is irrelevant.

Article 1106 refers to performance requirements. Under NAFTA, performance requirements can not be placed on investors without a "receipt or continued receipt of an advantage" (NAFTA, Chap.11, Article 1106.4). David Wilson, President of Ethyl Canada, argues that the ban is a violation of Article 1106 this way:

The government is not proposing to ban MMT - it is proposing to prevent its importation and interprovincial trade. Theoretically, in order to continue operating as a business, Ethyl is being required to build manufacturing and blending facilities in each of the provinces and territories in Canada. This is a local content preference that violates Canada's NAFTA obligations.

The final NAFTA Article that Ethyl claims is being violated is 1110, which deals with expropriation and compensation. It is under this Article that Ethyl is claiming $US250 million in compensation. According to NAFTA, if expropriation has occurred, compensation must be made immediately (NAFTA, Chap.11, Article 1110.3) and "shall be the equivalent to the fair market value of the expropriated investment" (1110.2). The question here is whether or not the interprovincial and importing ban of MMT is expropriation. Chris Hicks argues that it is, since "the sale of MMT represents almost half of Ethyl Canada's total sale revenues" (Appleton, 1996:para.4), and such a loss of revenues would cause Ethyl Canada to go out of business (Appleton, 1996:para.4).

These claims will be heard in secret before an international tribunal. The decision will be legally binding, with no appeal. Under NAFTA, the tribunal is formed by three people: one chosen by the investor (Ethyl Corp.), another chosen by the state (Government of Canada), and the third to be chosen jointly by the first two and will preside over the tribunal (Sforza & Valliantos, 1997:para.13). Ethyl Corp. named a lawyer from Washington, Charles Brower, while Canada named an arbitration lawyer from Montreal, Marc Lalond. The presiding arbitrator chosen was Karl-Heinz Bockstiegel, from Germany (Reed, 1997). The tribunal first met with the parties in October, 1997, and 24-25 February is slated for the first oral hearing (Reed, 1997).

If Ethyl Corp. wins this case, there will be serious implications. Janice Harvey, as well as Michelle Sforza & Mark Valliantos (1997:para.8), argue that "such a precedent would have the effect of giving a corporation's right to make profits the same weight as the public's right to be protected from industrial contaminants" (Harvey, 1997:para.5).

Harvey (1997:para.8) also observes the potential for democracy to be erode by such cases, since Parliament may become reluctant to legislate in protection of the public interest. Sforza and Valliantos (1997:para.8) suggest that such a win would set a precedent, requiring the Government of Canada to "compensate investors when it wishes to regulate them or their products for public health or environmental reasons." Governments would be forced to take into consideration the costs of compensation when regulating the industry (Sforza & Valliantos, 1997:para.11). As well, a precedent would be set for other corporations to challenge Canadian laws restricting business (Speirs, 1997).

This case is also relevant to the debate over the Multilateral Agreement on Investment (MAI) as well, which would include an investor-to-state dispute resolution mechanism very similar to the one found in NAFTA. Under NAFTA, there are a potential 350 million individuals and corporations in the United States and Mexico who could file claims under this process. With the MAI, investors from 29 industrial nations would have the potential option of using this clause (Sforza & Valliantos, 1997:para.14). As Harvey (1997:para.9) points out, this year it was American Ethyl Corp., next year "it could be a company from Japan or Germany."

Ethyl has also filed a constitutional challenge against the bill in Ontario's courts, and will ask for an injunction to suspend the ban on MMT on 19 January 1998 (Speirs, 1997). Conclusion

The cases described above have serious ramifications for concerned citizens and governments who want to try and stop corporate harm from occurring or continuing to occur.

In Ontario, the use of the extremely effective boycott tool of secondary picketing has been severely restricted (Daishowa). Secondary picketing, and threats of secondary picketing, prior to actually engaging in it, are seen as intimidation and are therefore illegal. As well, the dissemination of controversial information, regardless of subjective belief in it, can be sued in court as misrepresentation. If Cambior's attempt to obtain an injunction is successful, access to a corporations most vital link, its access to capital, would not be permitted as it would constitute unlawful interference in the company's economic activity. These decisions do not just limit the activities of those named in the court action, but prevent all Canadians from engaging in those activities against the named corporation (MacMillan Bloedel Ltd.).

Already, one level of government has been restricted from taking symbolic or moral action on behalf of an outraged citizenry (Shell). If the NAFTA tribunal decides in Ethyl's favour, the ruling would have serious ramifications upon government decision making. Regulation involving foreign investors might require costly compensation thereby deterring government from engaging in such actions.

Fortunately, these cases are not yet written in stone. The case between Daishowa and Friends of the Lubicon is still being heard at the time of writing, and the case of Cambior and Travis of Recherches Internationales Quebec has not yet started. Shell's victory over the City of Vancouver was a narrow one, and the judge who wrote the majority decision is no longer in the Supreme Court of Canada. As well, the Ethyl case has not yet been heard, let alone decided, by the NAFTA tribunal.

Corporations have been relatively successful at using the legal system to their advantage to stop citizens and governments from trying to prevent corporate harm. However, the corporations have not been entirely successful and their future successes are by no means guaranteed. It is an area that is worthy of continued attention.


Daishowa Inc. v. Friends of the Lubicon (1996), 27 O.R.(3d) 215 (Ont.Gen.Div.)

MacMillan Bloedel Limited v. Mullin et. al. (1985), 61 B.C.L.R. 145 (B.C.C.A.).

MacMillan Bloedel Ltd. v. Simpson (1996), 109 C.C.C.(3d) 259 (S.C.C.).

Shell Canada Products Ltd. v. Vancouver (City) (1994), 110 D.L.R.(4th) 3 (S.C.C.)


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Bob Olsen Toronto bobolsen@arcos.org (:-)

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