Major Water Privatization Defeated in Vancouver

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Local government cites threat from free trade deals.

In a move opponents of free trade describe as full of "delicious irony," the board of the Greater Vancouver Regional District (GVRD) has reversed itself on a plan to privatize the operation of a water filtration plant in development for the region. The board - which represents a population of 2 million  made the decision June 29 because of "uncertainties" about the impact of free trade agreements.

Beforehand, a groundswell of popular opposition to the privatization plan had been building, with opponents citing the threat of corporate lawsuits using the North American Free Trade Agreement (NAFTA) and, potentially, the World Trade Organization's (WTO) services agreement. Opponents of the project pointed out that free-trade agreements, designed to make privatization easier; this time resulted in a cancellation. "It's a sweet victory," said Betty Griffin of North Vancouver, one of the opposition organizers.

The plan was known as a "DBO" - Design, Build, Operate - and had advanced far enough to have short-listed four transnational corporations. Included in the four were consortia led by U.S.-giant Bechtel and the equally large, French-based Vivendi. The winning company would have designed and built the plant, which the GVRD would own, and then operate it for twenty years. The total cost of the project would have approached $500-million.

The choice now is between continuing with the design/build part of the project or pursuing a conventional approach. Either way, the GVRD will operate the plant.

From the beginning, proponents within the region had a hard time justifying privatization. Their own study, conducted by Dominion Securities, concluded that cost savings would be "minimal." Judged against the risks from trade agreements identified by opponents, the benefits were ultimately deemed by the GVRD's water committee to be marginal.

Don Bell, mayor of the North Vancouver District, said: "I think the public had some valid concerns and we were not able to get clear answers [from Ottawa] that made us feel comfortable."

While in the planning stages for three years, much of the work was effectively hidden from the public. An Ipsos Reid poll done for the Canadian Union of Public Employees (CUPE) revealed that 91 per cent of the population had never heard of the project and, when told, 64 per cent opposed it. At an information meeting held June 14 in Burnaby, over 600 people voiced loud opposition to the scheme. A similar meeting in North Vancouver drew 450. Opponents - including the Society Promoting Environmental Conservation, the Council of Canadians and CUPE - were organizing to fill the 2,500-seat Plaza of Nations for another GVRD meeting July 11 when the project was suddenly cancelled.

The debate that raged around the issue for several weeks focussed largely on the trade aspects of the project. GVRD water committee chair Marvin Hunt maintained throughout that they had a legal opinion concluding the proposed contract was not vulnerable to trade agreement disciplines. But a detailed study done for CUPE by trade lawyer Steven Shrybman, provided strong arguments to the contrary.

Citing a US$300-million NAFTA-type dispute in Argentina, Shrybman's study pointed out that contract terms can be overruled by treaty provisions. The Argentine province of Tucuman signed a contract with Vivendi subsidiary CGE that "... explicitly assigned the resolution of disputes arising under the agreement to the exclusive jurisdiction of the provincial administrative tribunals."

Nonetheless, a tribunal set up under a bilateral investment agreement similar to NAFTA's well-known Chapter 11, ruled that it had jurisdiction notwithstanding the contract's terms. It further stated that "... the internal constitutional structure of a country can not alter these [treaty] obligations."

Another trade dispute played a role as well. During a Mexican NAFTA case, a tribunal's ruling stated that a municipality's environmental concerns and the will of its population were not relevant. The tribunal ruling would, said Shrybman, oblige the Mexican government "to interfere with the municipal government authority where a complaint is made that the local government was acting in breach of NAFTA provisions."

The WTO's General Agreement on Trade in Services (GATS) was also cited as a threat. The protection of government services is given only very qualified protection in this agreement, and any new regulations passed by a municipality would have to pass a rigorous WTO "test of necessity" before they could be implemented. Under the GATS, a privatization such as that planned by the GVRD would be virtually irreversible.

The Greater Vancouver Regional District eventually sought a second legal opinion, which apparently played a key role in its final decision.

Throughout the debate, the federal Department of Foreign Affairs and International Trade (DFAIT) dismissed concerns as unfounded. But in the end, even the strongest proponents of a private water filtration plant seemed frustrated by DFAIT's position. Marvin Hunt, the main spokesperson for the project, stated: "What we have is anecdotal and general comments by some [DFAIT] bureaucrat, which have no substance ...We want something passed through Parliament that sets out precisely what is not on the table."

The reversal of the privatization is a major new development in the growing tension between municipal governments and the trade deals signed by the Liberal government. The Federation of Canadian Municipalities recently passed a resolution at its AGM demanding that Ottawa exclude municipal authority from trade agreements.

But Tara Scurr, B.C. organizer for the Council of Canadians, says this decision is equally significant: "Corporations have been pushing for these [trade] deals in large part to facilitate the privatization of public services. But their terms are so Draconian, they strip governments of the authority to regulate the privatized facilities. The corporations may have out-smarted themselves."

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