Calgary-based pipeline company TransCanada has filed a
Notice of Intent to Arbitrate ("Notice") under
article 11 of the North American Free Trade Agreement
("NAFTA"). It issued the Notice in response to US
president Barak Obama's November 6, 2015 refusal to grant
the necessary approval to complete construction
of Keystone XL, a proposed trans-national pipeline that would
deliver crude oil from Canada to the US.
As with other international trade and investment treaties
— including the proposed
Trans-pacific Partnership (TPP) and the
Comprehensive Economic Trade and Agreement (CETA), which was
recently signed between Canada and the European Union — NAFTA
contains a mechanism for investor state dispute settlement.
This provides a means through which an investor from one state
party can sue a state party in which it has an investment for
breach of certain standards relating to the host country's
treatment of the investor and its investment. Host states do
not generally enjoy reciprocal or comparable rights as against
foreign investors under such
agreements. Investor-state disputes, which often result in
large sums awarded against host states, are decided by a
tribunal of private arbitrators.
TransCanada's Notice outlines its claim for damages–in
the amount of US$15 billion– resulting in the US's breach
of its rights under articles 1102 (national treatment), most
favoured nation (1103), minimum standard of treatment (1105),
and 1110 (protection against uncompensated expropriations) of
The company claims that while approvals for the
Keystone XL project appeared initially to be on track, and several
permits had been provided, the process became politicized. It
claims that environmental activists succeeded ultimately
in turning "opposition to the Keystone XL Pipeline into a
litmus test for politicians—including U.S. President Barack
Obama—to prove their environmental credentials."
TransCanada claims that the US Administration
"dithered" for years in deciding whether or not to grant
approval and that
[t]he Administration concluded
that the denial [of the permit] was necessary to demonstrate U.S.
leadership on climate change, even though the Administration
concluded multiple times that the pipeline would have no
significant impact on climate change. The Administration sought to
explain this perverse decision by saying that the pipeline
was perceived to be bad for the
environment, and the Administration had to appease those in the
international community who held that (false) belief.
also filed suit in Texas, alleging that in denying
approval for Keystone XL Obama exceeded his power under
the US constitution.
Environmental decision making and regulation is
frequently the object of arbitration under NAFTA. Recently,
for example, a
NAFTA tribunal determined that Canada had breached its
NAFTA obligations to a set of US investors when, after an
unfavourable environmental assessment, the federal government
denied them the permits necessary to complete a planned quarry
and marine terminal near Digby Neck, Nova Scotia. Other examples
include US investor challenges to:
Quebec's moratorium on fracking (ongoing), a
federal prohibition on a fuel additive over health and
environmental concerns (settled), and a federal
ban of an agricultural pesticide deemed dangerous to human
health and the environment after lengthy study (ultimately
Whatever the ultimate outcome of such disputes, investor state
dispute settlement has been critiqued in the context of
environmental regulation for its "chilling" effect upon
regulators and its tendency to promote downward regulatory
harmonization between two or more jurisdictions with differing
standards of environmental protection, among other reasons.
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guide to the subject matter. Specialist advice should be sought
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Canada is a constitutional monarchy, a parliamentary democracy and a federation comprised of ten provinces and three territories. Canada's judiciary is independent of the legislative and executive branches of Government.
In Bank of Montreal v Bumper Development Corporation Ltd, 2016 ABQB 363, the Alberta Court of Queen's Bench enforced the "immediate replacement" provision in the Canadian Association of Petroleum Landmen 2007 Operating Procedure...
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