Canadian Court ruling sparks renewed criticism of ISDS in NAFTA

May 9, 2018: A Federal Court ruling in favour of  US company Bilcon, which is seeking $500 million in damages from Canada, has prompted environmental groups to renew their calls for Canada to scrap ISDS in the NAFA renegotiation talks with the United States and Mexico.

Bilcon’s proposed quarry in an environmentally sensitive area in Nova Scotia was rejected in 2007 on the basis of a recommendation by a joint federal-provincial government environmental assessment panel. Bilcon then used ISDS provisions in NAFTA to sue the Canadian government, and in 2016 won its case before the ISDS tribunal, which has yet to determine the amount to be paid in compensation. Two of the three-person tribunal found that Canada violated its own federal and provincial environmental assessment laws and did not accord procedural fairness to Bilcon.

The then Canadian Conservative government asked Federal Court to set aside the tribunal’s decision, arguing that the tribunal made its decision on matters about Canadian environmental law beyond the scope of the original Bilcon claim and is in conflict with the public policy of Canada.

On May 2, 2018 the Judge stated “I accept that the majority’s Award raises significant policy concerns. These include its effect on the ability of NAFTA Parties to regulate environmental matters within their jurisdiction, the ability of NAFTA tribunals to properly assess whether foreign investors have been treated fairly under domestic environmental assessment processes, and the potential “chill” in the environmental assessment process that could result from the majority’s decision.” She then concluded that nothing could be done because the ability of courts to review arbitration awards is remarkably constrained under federal arbitration law.

The Lawyers’ Daily reported that University of Ottawa law professor Amir Attaran, co-counsel for the intervener Ecojustice, said “as environmentalists, our worst fears have been confirmed that NAFTA can override Canada’s right to protect its own environment… the NAFTA tribunal in this case went outside its realm of expertise to rule on a matter of Canadian law, and now Canadian taxpayers are on the hook for half a billion dollars to a single company.”

Lisa Mitchell, a lawyer and executive director of intervener East Coast Environmental Law, said the Bilcon case demonstrates why Canada should seek to throw out ISDS during current NAFTA negotiations.

John Babcock, spokesperson for the now Liberal Canadian government, told the Lawyer’s Daily that the government is reviewing the judge’s 70-page decision. “Canada is also awaiting the tribunal’s award on quantum of damages, which will likely not be issued before the end of 2018,” he said.

Canada has indicated it is seeking to reform ISDS in NAFTA so that it ensures governments have an “unassailable right to regulate in the public interest” without being successfully sued, while the US government is seeking to withdraw from ISDS altogether.