When private companies take over a public project, the focus shifts away from the public interest and meeting community needs, to ensuring a profit for the companies’ shareholders.
Quality goes down. Companies cut costs by paying workers less, not offering them benefits or permanent jobs, and reducing health and safety measures. High staff turnover means the quality of services goes down and risks to the community increase.
Higher costs. There are many examples of how P3s cost the public more since interest on loans to the private sector is higher than when the public sector borrows. Many P3s cost tens of millions of dollars before contracts are even signed, and deals are costly and difficult to get out of. Money that should have gone to community water treatment ends up in the hands of lawyers, consultants, and for-profit companies.
Secrecy. The interest of commercial confidentiality overrides policies to protect the public’s right to know about how their money is being spent. Commercial confidentiality means information on contracts and negotiations is often unavailable to the public.
Loss of accountability. Public control and accountability are both compromised because public standards are seen as obstacles to successful business ventures. Even municipal councillors have been kept in the dark about basic information regarding the financing and operation of community water facilities.
Why are governments so interested?
Many governments see P3s as a way to invest in infrastructure, without the full expense of the project appearing all at once. These deals allow governments to make announcements about new facilities, without showing the costs for several years.
Whistler's Sewage P3 & International Trade Agreements
The reason why private partnerships are promoted is that they are supposed to essentially "contract out" the problems associated with major new projects. Trade agreements however put those problems right back in the laps of local governments, along with the jeopardy of being sued under the ambiguous provisions of trade agreements.
Contracts like the one proposed for Whistler's wastewater systems are increasingly the subject of international suits through trade and investment agreements.
What can Whistler LEARN from different trade cases over contracted out services?
That the actions of municipalities are unequivocally covered by these agreements. No NAFTA party contests this. The federal government has said it will not cover any municipal losses from law suits.
That contracts like Whistler's proposed P3 are covered by certain provisions of Chapter 11, the NAFTA chapter that allows investors to sue governments directly. Governments are not safe if they act in good faith,without discriminating, and according to domestic law. As one NAFTA panel stated: "If there is a finding of expropriation, compensation is required, even if the taking is for a public purpose, non-discriminatory and in accordance with due process of law ...."
That corporations active in bidding for municipal P3s actually use international trade treaties to threaten municipalities.. While local government officials may not be familiar with international trade agreements, transnational corporations seeking P3s are very aware of the opportunities provided them to sue for compensation under these agreements. Bechtel Corporation for example is one member of the Canadian Council for Public Private Partnerships that threatened to sue a Bolivian municipality under a bilateral trade agreement like NAFTA due to cancellation of a water contract.
That you can't write your way out of Canada's obligations under international trade agreements. A case involving Argentina has already resolved this question. The contractor agreed to a clause saying all disputes would be dealt with by domestic courts, but then turned around and sued through an investment agreement, and the international court upheld their right to do this.
That a government does not need to be the one to cancel the contract to be eligible to be sued. The contractor can rescind the contract and take a government directly to international arbitration to get compensation, bypassing domestic courts. Over the course of a P3 contract, many disputes could arise that would prompt a contractor to try get compensation this way.
That a government does not need to be the one to cancel the contract to be eligible to be sued. US shareholders in a Canadian company could sue; US subcontractors of a Canadian company could sue; in fact anyone who is a resident or a citizen of the US or Mexico could sue if they could claim they had an investment in the project.
Trade Agreements Undermine Regulatory Control
The argument is sometimes made that governments can privatize but ensure the public interest through tight regulatory control. This too, however, is being attacked at the trade negotiating table. Under the WTO's services agreement, the General Agreement on Trade in Services(GATS), Canada has already committed sewage services, which means among other things that a foreign contractor would have to be given the same consideration as a Canadian one. Canada denies that P3s are covered by this commitment, but that is not the opinion of the European Union, so it could be left to a WTO panel to decide who is right. As well, in the negotiations on the WTO's General Agreement on Trade in Services, negotiators will soon (by this July) have a draft of "disciplines" (restrictions) on "non-discriminatory" domestic regulations – regulations that are applied evenhandedly to domestic and foreign firms. Any regulation that is "more burdensome than necessary" will be challengeable at the WTO. These disciplines on domestic regulation will be in place by the end of this year. The European Union, advocating the interests of European utility corporations like Veolia, has stated unequivocally that these new restrictions will apply to government procurement and P3 contracts. Any qualifications required of contracts or standards imposed on them in terms of environmental or other impacts will be challengeable at the WTO if they can be deemed to be "overly restrictive", "unreasonable", or "not relevant" – and these would all be determined by a WTO panel with no representation permitted from the municipality affected. The ability of the GATS negotiations to undermine regulatory control has been recognized by municipal officials in BC. For example, an article in Business in Vancouver, NPA Councillor Jennifer Clarke stated that the restrictions proposed would throw out the ability of local communities to maintain land-use control."
Implications for future contracts
Under the GATS, once a service has been offered on a commercial basis, as Whistler's sewage system P3 would be, it no longer qualifies for the exemption in the agreement for governmental services. In the event that Whistler's P3 experiment fails, and Whistler wants to re-establish the service as a public one at the end of the contract, Canada could be challenged under the GATS because it was essentially setting up a public monopoly service. This is a violation of GATS requirements where governments have committed a service.
