Whatever the value of having the Trans Mountain pipeline expansion take place or not, the decision of the governments of Canada and Alberta to negotiate a special arrangement with Houston based energy company Kinder Morgan is one that should concern all Canadians. With this decision, Canada is moving from a rule of law approach to natural resource governance to a behind-closed-doors, let’s make a deal, approach.

Let’s consider carefully this shift in governance. In response to legal and political efforts by a legitimately elected government (British Columbia), Indigenous Peoples with constitutionally protected legal rights, and other stakeholders exercising rights to protest and undertake legal action, the Government of Canada is teaming up with another provincial government and a foreign investor to circumvent the legal process applicable across the country by creating a private contractual basis for resource infrastructure development. This is a model frequently seen in developing countries, but that was long ago abandoned in developed ones.

First, these two governments are trying to replace the rule of law with the rule of negotiation. By sending Finance Minister Morneau to negotiate with Kinder Morgan on a new deal that gives this company special financial benefits, the governments are moving from a consistent permit process that is known to all actors, to a privately negotiated deal.

Second, in replacing standardized permitting processes with privately negotiated deals, the governments risk creating a demand for this from all major investors. The lesson is easily learned: just threaten to pull out and the government will negotiate a special deal with you, on the law and the economic risks. This, in turn, puts at risk the very stability and consistency a rule of law process is meant to provide.

Third, the governments are promising to alter existing legal rights of other stakeholders in order to do the deal. Teaming up in order to tilt the legal field towards one side in any debate is a high-risk venture. Tilting it towards foreign investors on one side of the debate at the expense of domestic stakeholders is simply a recipe for ongoing disturbance.

Fourth, changing the law to make natural resource investments easier is a policy followed by the Harper government, to the decry of the then Liberal opposition. That policy has failed, as the current legal battles clearly demonstrate. Trying to do it again will generate the same result: many years of legal battles over any newly enacted laws. The only way to avoid this is to bar any legal challenges to a new law, something that would have broader implications for any notion of democracy in Canada.

Fifth, the government and Kinder Morgan are setting aside the very need of a project proponent in the natural resource sector to achieve a social license to operate from key stakeholders. In doing so, the government is overriding the very training it promotes for even the most undeveloped economies to ensure proponents obtain their social licence to operate. It is doing this by creating an investor-government coalition in which the government will make its economic interests synonymous with those of the investor it is supposed to regulate. These types of coalitions rarely succeed. Knowing this, the government still seems intent on taking onto itself, or rather onto Canadian taxpayers, the financial risk of future failure.

Sixth, and finally, we see the impact of the myriad of investment treaties signed by Canada over the last three decades. These all contain a provision called the ‘most-favoured nation rule’. This means that the government cannot treat an investor from any given country any less favourably than it treats an investor from the most favoured country. In short, by negotiating a special deal with Kinder Morgan because their project faces hurdles, the government may well be creating a right under these treaties for any other foreign investors to have the same functional relief from their legal and financial challenges. “You changed the law and economics for them, now do it for us too” is the simple legal formula here. This will be heard by investors from Europe, China and elsewhere going forward.

All of this will have a major impact on future natural resource project decision-making. Where other countries have moved away, and continue to move away, from a contract model in favour of a transparent permit-based rule of law model, Canada is now moving away from the rule of law and back to developing country status in how it manages these projects. No doubt the government will argue that national economic security justifies this change in governance. The end justifies the means. Canadians will have to judge that for themselves.

But the government is also trading basic sovereign rights, and the rights of Canadians, in favour of the interests of one foreign company seeking to make one investment. If this investment is truly financially viable, another form of it will arise. If it is not, government should not be surreptitiously propping it up in a secret negotiating process that overrides the legal rights of others in the process. And if the government is going to prop up a pipeline, it should open up the process to get the best bid for doing so, not simply fall sway to the threats of a single proponent. Then Canadians can have a proper debate on the role of government in propping up pipelines.

Canada works around the world to help train developing countries to avoid these practices. It seems it is time to retrain the trainer, lest the implications of this moment be with us for decades to come.

Howard Mann is an international lawyer who specializes in international investment law, and is a former Canadian government climate change negotiator.

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