In a dramatic example of the powers assumed by the corporate world through trade deals, energy infrastructure corporation TransCanada has commenced legal actions against the US president for cancelling the Keystone XL pipeline project.

Keystone XL was designed to carry 800,000 barrels a day of tar sands oil from Hardisty in Alberta to Steele City in Nebraska, thus increasing outlets for the most carbon-intensive oil currently produced, and reinforcing the dependency that industrialised countries like the US have on fossil fuels.

President Obama turned the project down on 6th November 2015 ciring climate change as his reason for doing so. “America is now a global leader when it comes to taking serious action to fight climate change, and frankly approving this project would have undercut that leadership”, Obama stated.

“Today, we’re continuing to lead by example. Because ultimately, if we’re going to prevent large parts of this Earth from becoming not only inhospitable but uninhabitable in our lifetimes, we’re going to have to keep some fossil fuels in the ground rather than burn them and release more dangerous pollution into the sky.”

The legal case is being brought under the auspices of NAFTA, a predecessor of the current crop of free trade agreements such at TTIP, CETA and TPP.

If it succeeds it will set a truly dreadful precedent, by establishing that ‘free trade’ and investor rights take precedence over action to reduce carbon emissions and reduce the pace of climate change, indeed over the Climate Convention (UNFCCC) and the recently concluded Paris Agreement.

It also poses four alarming propositions for us in the UK and elsewhere in Europe.

1. Canadian companies can be nasty, too …

Firstly, the threat posed by CETA (Comprehensive Economic and Trade Agreement) between Canada and the EU. This is a prime example of the Canadian corporate world bearing its teeth. As they can no longer build a hugely profitable pipeline to the US, they want to claim compensation from the US taxpayer instead.

Never mind the environmental concerns of the project, the effects on our countryside and animal habitats, there’s money to be made. Politicians need to be very conscious of this when making their minds up whether to support CETA or not when it comes up from ratification later this year.

2. Under TTIP and CETA, all Europe would be at risk

Secondly, and following on from the first point is the potential environmental impact this could have in Europe. Firms involved in fracking, drilling, mining and other environmentally damaging practices also look to exploiting the provisions of various trade treaties to further their profit making at a cost to taxpayers across the world.

This opens up some nice possibilities from the likes of Cuadrilla, which has investment from US corporation Riverstone LLC, and similar fracking companies.

3. The thin end of wide and very dangerous wedge

Then there is the warning that despite politicians and the business world trying to allay concerns of the corporate court system that features in TTIP, CETA and the rest by saying “don’t worry, it won’t happen here.”

It is. It is happening where we were told it couldn’t. Most trade deals with ISDS (Investor State Dispute Settlement), the secretive corporate court system, are between developing countries and the industrialised west. Of course investment will flow in one direction in these partnerships, meaning the UK or the EU are relatively immune from resulting court actions.

Now with these mega deals between western trading blocks, it’s open season. The attractions of suing rich governments for our tax money are too much for many corporations to resist. Expect more of this kind of action.

4. The money’s so good – for the corporations and their lawyers

Finally, win or lose for TransCanada, the defending government in any ISDS case is in a lose-lose situation. It is impossible for compensation to be paid to a government in ISDS. Sixty percent of ISDS cases are won by the corporations, forty percent defended successfully by the government concerned.

That is an excellent success rate for the businesses concerned (legal law firms are set to make tens of millions from this kind of action). Then there is the question of the costs of defending such a case.

According to United Nations Conference Trade and Development legal costs for a government average at about US$8 million per suit and in complex cases that figure has been known to exceed US$30 million.

So we ask again: why is our government so determined to put future governments, the climate, and untold billions of taxpayers’ money at risk from corporate lawsuits of this type coming to our shores?

Guy Taylor is Trade Campaigner with Global Justice Now. 

This article was originally published by Global Justice Now. Some additional reporting by The Ecologist.