BAD TRADE DEALS COULD KILL THE GREEN ENERGY TRANSITION

THE ANSWER IS A CLIMATE PEACE CLAUSE

Right now, the U.S. Inflation Reduction Act is being challenged as a violation of World Trade Organization rules for offering subsidies designed to make electric vehicles more affordable.

Similar cases are threatening green energy programs in eight U.S. states, the UK, and the EU.

Should these challenges prove successful – like those that gutted solar and wind-power programs in Canada, India and China before them – it will strike a major blow to the future of green energy – and life on the Earth.

2022 - Inflation Reduction Act

In June 2016, the TransCanada Corporation launched an ISDS case under NAFTA demanding $15 billion in compensation because the corporation’s bid to build a pipeline was rejected by the U.S. government.  The $15 billion claim was five times more than the $3.1 billion that TransCanada said it already had invested in the pipeline project because the compensation demand included the future expected profits that TransCanada claims it would have earned had the pipeline been allowed.

Inflation Reduction Act

Indiana-based Eli Lilly, the fifth-largest U.S. pharmaceutical corporation, challenged Canada’s patent standards after Canadian courts invalidated the company’s patents for Strattera and Zyprexa. (These drugs are used to treat attention deficit hyperactivity disorder (ADHD), schizophrenia and bipolar disorder.) Canadian federal courts applied Canada’s promise utility doctrine to rule that Eli Lilly had failed to demonstrate or soundly predict that the drugs would provide the benefits that the company promised when applying for the patents’ monopoly protection rights. The resulting patent invalidations paved the way for the production of less expensive, generic versions of the drugs. Eli Lilly’s notice argued that Canada’s entire legal basis for determining a patent’s validity – that a pharmaceutical corporation should be required to verify its promises of a drug’s utility in order to obtain a patent – is “arbitrary, unfair, unjust, and discriminatory.” The company alleged that Canada’s legal standard violated the NAFTA guarantee of a “minimum standard of treatment” for foreign investors and resulted in a NAFTA-prohibited expropriation.

On March 16, 2017, after years of high-profile campaigning from access-to-medicines advocates, the tribunal dismissed the claim. However, the grounds on which it based its dismissal allowed the tribunal to refrain from commenting on many of the substantive issues raised in the case, meaning it avoided ruling on the merits of using the specific ISDS claims alleged in this case to attack a country’s patent regime.

Instead, the tribunal focused on procedural matters unique to this filing. Namely, the tribunal noted that under NAFTA, cases must be filed within three years of an alleged “government action” that an investor claims violated its NAFTA rights. Thus, the “alleged breach” in this case was not the previous change in Canadian patent law itself, but the Canadian courts’ enforcement of the law that resulted in Eli Lilly’s patents being invalidated. The tribunal then concluded that such court enforcement did not constitute a “dramatic change” of the law. This fancy legal footwork allowed the tribunal to avoid having to weigh in on whether Canada’s patent law violated its intellectual property obligations and whether that would have constituted a violation of the NAFTA-guaranteed minimum standard of treatment for investors or also whether the law change would constitute an expropriation of Eli Lilly’s investment.

The tribunal ordered Eli Lilly to bear the US$750,000 cost of the arbitration (the hourly fees of the three tribunalists, venue, travel costs, etc.) as well as 75 percent of Canada’s legal fees. This means that this case that it “won” will cost Canada US$1.2 million in tax dollars to pay its lawyers as well as the opportunity costs of those lawyers not being able to do other work for almost four years.

2022 - Case pending

2022

The European Union and South Korea are threatening to launch a WTO case that could gut the Inflation Reduction Act of its Made in North America electric vehicle subsidies – a cornerstone of what allowed the legislation to pass the Senate.

2009

US-initiated WTO challenge rules against China subsidizing wind-power development and production. Program canceled.

2022

Subsidies promoting low-carbon energy production in the UK challenged by EU at WTO.

2016

Programs offering tax-incentives for locally-produced solar technology killed by US-initiated WTO ruling.