International Investment

The Bilcon Award

On April 7, 2015

In Environmental, International Investment, International Trade

By: Nigel Bankes

Award Commented On: The Claytons and Bilcon v Canada, NAFTA, UNCITRAL Rules, 17 March 2015

Once again Canada has lost an important investor/state arbitration under Chapter 11 of NAFTA (for a post on Canada’s last reversal (Mobil and Murphy), also characterized by a strong dissent, see Regulatory Concussion). The Clayton family and Bilcon Inc (US investors, the claimants) were hoping to develop a quarry in Digby Neck, Nova Scotia. The project was sent to a joint federal/provincial environmental review panel (JRP) by both levels of government. The JRP recommended rejection and both governments accepted that recommendation, and thus the project died. The claimants took the view that the JRP process was badly flawed. They were of the opinion that the panel had recommended rejection on the basis that the project would be inconsistent with “community core values” and furthermore that the panel had deliberately failed to identify any mitigation measures that might make the project acceptable. However, instead of seeking judicial review of the JRP in the Federal Court the claimants commenced this NAFTA arbitration. They have been rewarded with a majority decision in their favour. The majority (Judge Bruno Simma and Professor Bryan Schwartz) found that Canada had breached both Article 1105 (minimum standard of treatment (MST) – even as constrained by the Interpretation Note (2001) issued by NAFTA contracting parties here) and Article 1102 (national treatment standard). The matter will now go back to the tribunal for it to assess damages. Professor Donald McRae delivered a strong dissent contending that the majority had turned what was nothing more than a possible breach of domestic law into an international wrong. I have nothing to add to McRae’s excellent critique (and see also Meinhard Doelle’s post on the decision); my purpose here is to review some of the implications of the Award from a number of different perspectives.

Canada Ratifies ICSID and Alberta Introduces the Necessary Implementing Legislation

By Elizabeth Whitsitt

On November 13, 2013

In International Investment

PDF Version: Canada Ratifies ICSID and Alberta Introduces the Necessary Implementing Legislation

Matters commented on: Canada’s ratification of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the Washington or ICSID Convention) and Bill 40: Settlement of International Investment Disputes Act

On November 1, 2013 Canada deposited its instrument of ratification of the Washington Convention with the secretariat for the International Centre for the Settlement of Investment Disputes (ICSID). The Convention will enter into force for Canada on December 1, 2013. The ICSID Convention, as its name implies, is designed to provide for dispute settlement (binding arbitration or conciliation) of investment disputes between states and investors from other states. The Centre may take jurisdiction over any such dispute by the written consent of both parties. That consent may be given in a specific case or it may be given generally. General consent is frequently given by the terms of a bilateral investment treaty such as the recent agreement that Canada has concluded with China. Article 22 of that agreement (which has yet to enter into force) provides as follows:

From Regulatory Chill to Regulatory Concussion: NAFTA’s Prohibition on Domestic Performance Requirements and an Absurdly Narrow Interpretation of Country Specific Reservations

By Nigel Bankes

On May 6, 2013

In International Investment, International Law, Oil & Gas

PDF version: From Regulatory Chill to Regulatory Concussion: NAFTA’s Prohibition on Domestic Performance Requirements and an Absurdly Narrow Interpretation of Country Specific Reservations

Award commented on: Mobil Investments Canada Inc. and Murphy Oil Corporation v Canada, ICSID Case No ARB(AF)/07/4. Decision on Liability and Principles of Quantum, dispatched to the parties, May 22, 2012, redacted version released in the fall of 2012. Both the majority award (206pp) and a partial dissenting award (Professor Philippe Sands QC) are available here.

Case commented on: Hibernia Management and Development Company Ltd. v Canada-Newfoundland and Labrador Offshore Petroleum Board, 2008 NLCA 46 (CanLII)

In this Award a NAFTA Tribunal (by a Majority) found that Canada was in breach of the prohibition on domestic performance requirements of Article 1106 of NAFTA when the Canada Newfoundland Offshore Petroleum Board (CNOPB or Board) established and imposed a research investment target (the 2004 Guidelines) on operators working on the Newfoundland continental shelf. In doing so the Majority of the Tribunal ruled that Canada could not rely upon its country specific reservation. While Canada’s reservation protected the performance requirements that were in place at the time that NAFTA was entered into it did not protect the 2004 Guidelines. In reaching this conclusion the Majority severely constrains the ability of the host state to adopt new subordinate measures (e.g. regulations, guidelines and policies) to give effect to a reserved power. In effect, the Majority has adopted a one-way ratchet in which any subordinate measure adopted by a state that does not fully exploit the entire space offered by the text of a reservation may make it impossible for the host state to recover the lost ground. This, as the Dissent lucidly demonstrates, is an unreasonably narrow construction of the power of each NAFTA state to take a reservation to its general commitment not to impose domestic performance requirements on investors.