Canada: Ontario Court Confirms Narrow Grounds For Setting Aside NAFTA Award

Last Updated: September 21 2016
Article by Craig Chiasson and Kalie N. McCrystal

Most Read Contributor in Canada, October 2017


In a recent decision1 the Ontario Superior Court of Justice affirmed Canada's commitment to the arbitral process as a final, binding method of dispute resolution, and reiterated the limited ability of arbitral debtors to set aside an award under Section 34(2) of the Commercial Arbitration Code, which is incorporated into the federal Commercial Arbitration Act.

In dismissing the petition to set aside the award, the court relied on previous investor-state jurisprudence and confirmed that jurisdictional challenges to arbitral awards should be viewed with caution to prevent arbitral debtors from re-litigating the merits of their cases.


Mobil Investments Canada Inc and Murphy Oil Corporation are investors in two offshore petroleum drilling projects near Newfoundland, Canada.

Petroleum extraction in Newfoundland is governed by the Canada-Newfoundland Atlantic Accord Implementation Act, which requires all offshore projects to put in place a benefits plan before work proceeds. The benefit plan must provide for expenditures in research and development and education and training in Newfoundland ('benefit expenditures').

The act is an exception to Article 1106 of the North America Free Trade Agreement (NAFTA), by virtue of a reservation made by Canada when NAFTA was negotiated. Article 1106 prohibits a state from imposing "performance requirements" on an investor from a trading partner, including by requiring an investor to purchase goods or services provided in the state.

The benefit plan that applies to Mobil and Murphy Oil's projects provides generally for benefit expenditures, but requires any particular level of funding.

In 2004 the Canada-Newfoundland Offshore Petroleum Board issued guidelines under the act which established a fixed minimum threshold for benefit expenditures.

After unsuccessfully challenging the authority of the board to issue the guidelines in court, the investors commenced arbitration against Canada under Chapter 11 of NAFTA, alleging that the guidelines violated Articles 1105(1) and 1106(1)(c) of NAFTA.

The majority of the tribunal found that the guidelines violated Article 1106 of NAFTA and did not fall within the scope of Canada's reservation. An award on liability was issued on May 22, 2012, and an award of approximately $19 million in damages was issued on February 20, 2015.


Canada applied to set aside the award pursuant to Article 34(2)(a)(ii) of the Commercial Arbitration Code, which permits the court to set aside an award if, among other things, the award deals with a dispute not falling within the terms of the submission to arbitration or contains decisions on matters beyond the scope of the submission to arbitration.

The nub of Canada's argument was that the tribunal had used the wrong criteria for determining whether the guidelines fell within the scope of the reservation. Specifically, Canada argued that the 'measure' being reserved was the act, and the guidelines were a "subordinate measure adopted or maintained under the authority of and consistent with the measure". Pursuant to Article 1108(1)(c) of NAFTA, this would bring the guidelines within Canada's reservation. Conversely, the tribunal had viewed the 'measure' as both the act and the existing benefit plans, which led to its decision that the guidelines were not consistent with the measure and therefore not within the scope of the reservation.

Canada argued that that this amounted to a jurisdictional error under Article 34(2)(a)(ii), because if a measure is reserved, Article 1106 does not apply, there can be no breach and any award of damages exceeds the tribunal's jurisdiction.

After reviewing the principles enunciated in United Mexican States v Cargill, Inc, the court held that there was no true jurisdictional question at issue. Instead, it viewed Canada's application as an attempt to challenge the merits of the decision.

In explaining why the tribunal's conclusion regarding the breach and scope of the reservation did not fall within Article 34(2)(a)(ii), the court noted as follows:

  • These were the exact issues that the tribunal was called upon to decide and that the parties argued in their submissions, so they were clearly within the terms of the submission;
  • The tribunal had to interpret the words 'the measure' in order to determine whether the guidelines were a reserved subordinate measure;
  • Canada did not dispute that the tribunal had applied the correct test in determining whether the guidelines fell within the reservation - only the manner in which the majority applied the test; and
  • Jurisdictional issues should be narrowly cast, particularly in the determination of damages.

In dismissing Canada's application, the court held that "casting this interpretive exercise as a jurisdictional issue goes far beyond the 'narrow view of what constitutes a question of jurisdiction' as required by Cargill", and concluded that:

"I do not regard this as one of the 'rare circumstances' where there is a true question of jurisdiction. The majority decided that the Guidelines breached Article 1106(1)(c) and did not fall within the scope of Canada's reservation. Those were merits issues. In my view, Canada is seeking to re-litigate the merits of the case."


Attorney General of Canada v Mobil  provides a good example of Canadian courts' deference to the jurisdiction of arbitrators and the finality of the arbitral process. Consistent with previous decisions, the court confirmed the need for vigilance in applications to set aside arbitral awards to ensure that the court's supervisory role, limited to jurisdictional questions, does not transform into an appeal on the merits. 


Attorney General of Canada v Mobil, 2016 ONSC 790.

The above was originally published by BLG on  International Law Office.

About BLG

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.