ethyl corporation v. canadaappleton/files/cases_ethyl.pdf · ethyl corporation claim is the first...
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ETHYL CORPORATION v. CANADA
The Ethyl Corporation claim was launched in 1996 and settled in 1998 after the Tribunal made three awards.
As part of the settlement, the Government of Canada removed the measure which unfairly banned the
Investor's product, issued a statement (signed by two government ministers) clarifying that it had no
evidence of harm caused by the product and paid the company approximately $20 million (Canadian). The
Ethyl Corporation claim is the first NAFTA investor-state decision rendered by a tribunal.
AWARDS – See attached
Award on Jurisdiction
Award on Confidentiality
Award on Place of Arbitration
NEWS – See attached
A compilation of related press articles for Ethyl Corporation v. Canada.
Decision
Regarding the Place of Arbitration
in the
NAFTA / UNCITRAL Case
between
Ethyl Corporation (CIaimant)
and
The Government of Canada (Respondent)
before
the Tribunal consisting of
Prof. Dr. Karl-Hein2 Bockstiegel (Chairman)
Mr. Charles N. Brower (Arbitrator)
Mr. Marc Lalonde (Arbitrator)
Date of Decision: November 28, 1997
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Both parties have presented extensive written submissions, as well as oral
arguments during the Procedural Meeting in New York City on October 2, 1997,
regarding what should be the place of arbitration in this case. In these submis-
sions and arguments the parties have been ably represented as follows:
Ethyl Corporation (“Ethyl”) by:
Mr. Barry Appleton Prof. Andreas Lowenfeld Mr. Steve Mayer Mr. Anthony Macri
The Government of Canada (“Canada”) by:
Ms. Valerie Hughes Mr. Brian Evernden Mr. David Haigh Ms. Ann Ewasechko
Ethyl urges that the place of arbitration be New York City,’ whereas Cana-
da (at page 26 of its Memorandum of October 2, 1997) requests the Tribunal “to
determine that the place of arbitration should be Ottawa, or alternatively, could be
Toronto...“.
Our decision on this point, Ethyl suggests (at page 2 of its Submission of
October 16, 19971, has “importance... not only for this arbitration but is a per-
suasive precedent for future NAFTA investor-state arbitrations held under the
auspices of the UNCITRAL Arbitration Rules.” Doubtless this view arises from the
fact, as the Tribunal is informed, that the present arbitration is the first NAFTA
dispute between Canada and an alien investor.
Our decision is governed by NAFTA Article 1130(b), which provides that
absent “the disputing parties agree[ing] otherwise, a Tribunal shall hold an arbitra-
1 Ethyl has abandoned its alternative proposal, made in its Notice of Arbitration, that the place of arbitration be Washington, DC.
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tion in the territory of a Party [to NAFTAI that is a party to the New York Conven-
tion, selected in accordance with...the UNCITRAL Arbitration Rules if the arbitra-
tion is under those Rules.” All three NAFTA Parties, i.e., Canada, Mexico and the
United States, are parties to the New York Convention. Therefore our selection is
to be made from among sites in those three countries.
The UNCITRAL Rules themselves provide only, in Article 16(l), that “the
place where the arbitration is to be held...shall be determined by the arbitral tribu-
nal, havina reaard to the circumstances of the arbitration.” (Emphasis added.)
The Tribunal also has been referred by both parties to UNCITRAL’s Notes
on Organizing Arbitral Proceedings. These Notes, which are not binding,’ state (in
paragraph 22):
Various factual and legal factors influence the choice of the place of arbi- tration, and their relative importance varies from case to case. Among the more prominent factors are: (a) suitability of the law on arbitral procedure of the place of arbitration; (b) whether there is a multilateral or bilateral treaty on enforcement of arbitral awards between the State where the arbitration takes place and the State or States where the award may have to be enforced; (c) convenience of the parties and the arbitrators, including the travel distances; (d) availability and cost of support services needed; and (e) location of the subject-matter in dispute and proximity of evi- dence.3s 4
Canada makes two threshold arguments that must be addressed at the out-
2 &g Introduction to the Notes, paragraph 2:
No legal requirement binding on the arbitrators or the parties is imposed by the Notes. The arbitral tribunal remains free to use the Notes as it sees fit and is not required to give reasons for disregarding them.
3 Consideration (b) would appear not to be relevant here, given that all potential places of arbitra- tion are in States Parties to the New York Convention.
4 Canada correctly points out that a sixth consideration, namely, “perception of a place as being neutral,” was eliminated from an earlier draft of the Notes as being “unclear, potentially confu- sing” although something that a tribunal “might wish to discuss...with the parties.” Report of the United Nations Commission on International Trade Law on the work at its twenty-eighth session Wienna, 2-26 May 19951, U.N. Dot. A/50/17, paragraph 337, reprinted in Vol. XXVI UNCITRAL Yearbook (1995).
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set. It urges (at page 5 of its Memorandum of October 2, 19971, first, that Article
16(l) of the UNCITRAL Rules “permits the Tribunal to take into account certain
general, universally applied considerations which usually are found in the doctrine
of forum conveniens,” which “provides that the forum in which to try a matter
should be the jurisdiction that has the closest connection with the action and the
parties.” Canada then proceeds (at page 7 of its Memorandum of October 2,
1997) to list factors “which most directly connect [this arbitrationl to Ottawa.”
Leaving aside the issue as to whether that municipal law doctrine has a place in
international arbitration, the Tribunal is constrained to say that in its view its deci-
sion regarding the place of arbitration in this case must be made, as Article 16(l)
prescribes, “having regard to the circumstances of the arbitration,” meaning a
such circumstances, including those elements offered for consideration in para-
graph 22 of the Notes, and without any individual circumstance being accorded
paramount weight irrespective of its comparative merits. In the end, Canada ap-
pears to agree, having stated (at paragraph 3 of its Reply Memorandum of Oc-
tober 22, 1997) that it cited the doctrine “only to demonstrate that the criteria
which provide guidance in determining the appropriate forum appear to be practi-
cally the same criteria which are cited in the UNCITRAL Notes....”
Canada then argues (at pages 8-9 of its Memorandum of October 2,
19971, second, that since under NAFTA Chapter 20 (Rule 22 of the Mode1 Rules
of Procedure for NAFTA) the place of arbitration of a State-to-State NAFTA arbi-
tration is the capital of the respondent State, “I@ fortiori, where a private com-
mercial party brings a complaint under Chapter II, it should follow that the cir-
cumstances of the case lend themselves to the government of a sovereign coun-
try responding in its own capital.” The Tribunal does not share this view. The fact
that the respondent State’s capital has been expressly designated by rule adopted
pursuant to Chapter 20 would suggest, to the contrary, that the omission to do SO
in connection with Chapter 1 1 was, if anything, deliberate. In any event, NAFTA’s
Chapter 1 1 clearly contemplates the possibility of disputes under it against any
NAFTA Party being arbitrated in Washington, DC, since Article 1 120 allows a
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disputing investor to choose arbitration (if and when it becomes available5) under
the ICSID Convention, Article 62 of which provides that in the absence of agree-
ment of the arbitrating parties “arbitration proceedings shall be held at the seat of
the Centre” i.e., Washington, DC.6
Having disposed of these threshold issues, the Tribunal now turns its atten-
tion to the four factors relevant under the UNCITRAL Notes, considering each of
them in relation to the respective proposed places of arbitration: Ottawa (or, alter-
natively, Toronto) and New York City.’
As to criterion (a) of the Notes - “suitability of the law on arbitral proce-
dure” - the Tribunal concludes that all proposed fora are equally suitable. It ap-
pears undisputed that Canada’s Commercial Arbitration Act is based on the
UNCITRAL Mode1 Law on International Commercial Arbitration and by its terms
would apply to this arbitration under NAFTA Chapter 1 1. It appears to be equally
undisputed that the relevant laws of the United States, and, to the extent rele-
vant, the State of Ne.w York, are no less suitable. The fact that the laws applica-
ble to this arbitration, were it situated in New York City, have been in place longer
than Canada’s Commercial Arbitration Act, and therefore are judicially more elabo-
rated, does not, in the view of the Tribunal, significantly affect their comparative
5 TO date neither Canada nor Mexico is a party to the ICSID Convention. Thus although the United States is a party to that Convention no present prospect of such an arbitration exists. Under Arti- cles 20 and 21 of the ICSID Additionai Facility Arbitration Rules, to which Article 1120 also al- lows resort, “the place of arbitration shall be determined by the Arbitral Tribunal after consultation with the parties and the Secretariat” and must be in a State Party to the New York Convention.
5 ICSID Convention Article 2 fixes the seat of the Centre at “the principal office” of the World Bank, i.e.. Washington, DC. While it is true, as Canada has noted (at paragraph 6 of its Reply Memoran- dum of October 22, 19971, that Washington, DC is not thereby the “place of arbitration,” that concept itself is not relevant to the self-contained ICSID system.
The Tribunal, as previously noted, has the power, under NAFTA Article 1130(b), to Select as the place of arbitration any situs in Canada, Mexico or the United States. The Tribunal notes that Ethyl fat page 5 of its Submission of October 16, 1997) has “submitted that if this Tribunal finds that it is inappropriate to have the place of arbitration in either Canada or the United States, the Claimant suggests that the place of arbitration be in Mexico.” The Tribunal limits itself in this case, however, to the sites recommended by the parties. In doing SO it emphasizes that it is in no way precluded by the parties’ respective proposals from considering other locations. It proceeds as it does because it believes the parties objectively have searched out those places that are most likely in fact to be most appropriate, “having regard to the cirumstances of the arbitration.”
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suitability.
Criterion (c) of the Notes8 - “the convenience of the parties and the arbitra-
tors, including the travel distances” - likewise seems not to be significantly better
served by one proposed alternative as opposed to any other. As to the Tribunal,
the President, who normally is resident in Cologne, Germany, cari travel with more
or less equal ease to New York City, Ottawa and Toronto. Mr. Lalonde, a resident
of Montreal, cari travel to Ottawa or Toronto just as well as Judge Brower cari
from his Washington, DC residence to New York City. By the same token, Judge
Brower would be no more and no less inconvenienced by travel to Ottawa or
Toronto than would Mr. Lalonde be by the need to appear in New York City.’
The situation of the parties is substantially similar. Canada has noted (at
page 12 of its Memorandum of October 2, 1997) that:
The investment which Ethyl Corporation alleges has been damaged is the wholly owned’subsidiary, Ethyl Canada, which has its head office in Mississauga, adjoining the City of Toronto, in the Province of Ontario. Its blending facility, where it processes MMT, is in Corunna, in the Province of Ontario.
In response to this Ethyl simply contends tat page 4 of its Submission of October
16, 1997) that it has “its head office in [the Commonwealth of] Virginia” and that
the “location of subsidiary offices is not a relevant factor for this arbitration.” For
purposes of criterion (c) alone this may well be correct. If it is, there is no signifi-
tant difference in the convenience factor between Canada having to travel to New
York City and Ethyl having to be present in Ottawa or Toronto. If it is not, then a
degree of preference would be indicated for a Canadian venue.
8 The Tribunal already has determined that criterion (b) - “whether there is a multilateral or bilaterai treaty on enforcement of arbitral awards between the State where the arbitration takes place and the State or States where the award may have to be enforced” - is not “relevant here.” &g note 3, ggg&
3 The Tribunal does not believe, as Ethyl has suggested (at page 4 of its Submission of October 16, 1997), that in determining the “convenience of the...arbitrators ” it is relevant that “local offices of the law firms of both Messrs. Lalonde and Brower” exist in New York City.
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Canada has introduced as a consideration the location of counsel to the
parties, emphasizing that Ethyl’s counsel has an office in Toronto as well as in
New York City. Ethyl disputes the relevance of counsel’s convenience, while
nonetheless pointing out (at page 3 of its Submission of October 16, 1997) that
“The Government of Canada also maintains a large consulate in New York City as
well .as a Permanent Mission to the United Nations which cari support the needs
of the Government of Canada’s legal team....” Canada terms this latter assertion
“incorrect,” as “[tlhese are diplomatie offices and are not set up to act as alterna-
tive legal offices, such as [Claimant’s counsell apparantly has available to
him.“”
The Tribunal is inclined to the view that the convenience of counsel is a
relevant consideration, subsumed under the “convenience of the parties.” Certain-
ly the convenience of attorneys appointed by the parties, which translates into
cost factors, affects their clients. The Tribunal also believes that the availability
for temporary use by,government lawyers of facilities at a consular post or diplo-
matic mission is not comparable to a dedicated office of counsel. Accordingly, the
Tribunal concludes that it is relevant to consider that fixing the place of arbitration
in either Ottawa or Toronto Will serve the convenience of counsel collectively
better than New York City.
We now turn to criterion (d), “availability and cost of support services
needed.” It is clear that all necessary support services for this arbitration are avail-
able in all three of the cities that have been proposed. The Tribunal believes it
appropriate to take judicial notice of the fact that such services inevitably Will be
more costly in New York City than in either Ottawa or Toronto. This includes
transportation, hotels, meal service, hearing rooms and counsel rooms, and certi-
fied stenographic reporting services. Therefore application of criterion (d) favors
Ottawa or Toronto over New York City, but does not discriminate between them.
The Tribunal does not, however, take into consideration in this regard, as
10 As regards Ethyl’s counsel this point would appear to apply equally to New York City and Toronto.
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Canada has proposed, the presence and availability in Ottawa of NAFTA Secretari-
at facilities. As Canada itself records (at page 7 of its Reply Memorandum of
October 22, 1997), “The NAFTA Secretariat operates in all three NAFTA coun-
tries, each of which funds the local office.” (Emphasis added.) While the Tribunal
accepts fully, as Canada itself has stressed (at page 7 of its Reply Memorandum
of October 22, 1997), that “those offices operate independently of their host
country and are viewed by the NAFTA Parties as neutral centres,” the Tribunal
nonetheless is concerned that to avail itself of such facilities could be viewed as
inconsistent with at least the spirit of the requirement of the UNCITRAL Rules
(Articles 9-l 0) that it act SO as to leave no doubt whatsoever as to its complete
independence of any party. This is ail the more SO where, as here, Ethyl has regis-
tered its objection (at page 5 of its Submission of October 16, 1997) that the use
of such facilities “would be inappropriate.”
The last criterion of the Notes - “(e) location of the subject-matter in dis-
pute and proximity of evidence” - finally turns the Tribunal definitely to selection
of a place of arbitration in Canada. Clearly the subject-matter in dispute is fixed in
Canada. Ethyl charges (m page 4 of its Notice of Arbitration) that certain legisla-
tive and other acts of Canada “removlingl MMT [methylcyclopentadienyl manga-
nese tricarbonyl] from Canadian gasoline” have resulted in breaches by Canada of
Articles 1102, 1106 and Il 10 of NAFTA, thereby “harmlingl Ethyl Corporation
and the value of its Canadian investment, Ethyl Canada.” The “location of the
subject-matter in dispute” is not subject to serious debate.
The parties have little to say as regards “the proximity of evidence.” Per-
haps the nature of the case and the early stage in which it now is make it difficult
to be explicit on this subject. For its part, Canada has said (at page 7 of its Memo-
randum of October 2, 1997) only that “virtually the whole of the cause of action
in this case relates to Canadian laws, the Canadian law-making process, the ac-
tions of the Canadian Parliament and certain ministers,” and that it “should be evi-
dent...that the witnesses to this process of law-making and policy-making are for
the most part located in Ottawa.“” In response Ethyl effectively asserts (at page
5 of its Submission of October 16, 1997) that no such witnesses Will be required,
as it “intends to provide proof of statements made by Canadian officiais through
the introduction of authoritative writings, such as Hansard,” which the Tribunal
understands to be the officia1 record of debates in the Canadian Parliament. In
reply, Canada argues (at page 6 of its Reply Memorandum of October 22, 1997 ‘1
that “it is potentially the whole process of law making and parliamentary proce-
dure and practice which is to be examined through the evidence of witnesses”. In
affirmative support of New York City as the place of arbitration Ethyl states only
that, “[ais an example, all important documents on the issue of damages are
located in Richmond, Virginia,” where its headquarters are situated. Thus the
Tribunal is afforded little insight into just how any considerations of the proximity
of evidence should affect its decision.
Traditionally arbitrating parties, desiring both the reality and the appearance
of a neutral forum, incline to agree on a place of arbitration outside their respec-
tive national jurisdictions. This is especially the case where a sovereign party is
involved. Where an arbitral institution or a tribunal must make the selection, this
tendency is, if anything, even greater, and for the same reasons. Article 1611) of
the UNCITRAL Rules easily accommodates this consideration as one of the “cir-
cumstances of the arbitration.”
Here, however, NAFTA Article 7 130(b) circumscribes our powers, limiting
possible places of arbitration to either of the two States here involved or Mexico.
A Mexican venue surely would represent neutrality in this case, and in all such
cases. The Tribunal concludes, however, that had the NAFTA Parties felt that
every arbitration under Chapter 11 of NAFTA must be sited in the NAFTA Party
11 Canada argues fat pages 3-l 1 of its Memorandum of October 2, 1997) also that certain “related proceedings” are “additionai factors that point to Canada as the appropriate place of ar- bitration....” Those proceedings are (1) a suit by Ethyl’s Canadian subsidiary seeking “a declara- tion...that [the relevant legislation] is of no legal force and effect” as well as injunctive relief, and (2) a formal complaint by the Province of Alberta against Canada which Will be subject to dispute resolution proceedings. The Tribunal does not believe that the pendency of those proceedings has any bearing on its determination of the place of arbitration.
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not involved in the dispute they would have said SO and would not have remitted
us to Article 16(l) of the UNCITRAL Rules. The Tribunal has readily concluded
that a Mexican venue would not serve other important “circumstances” of this
arbitration.12
The Tribunal concludes on the basis of ail of the foregoing that, on bal-
ance, the place of arbitration should be in Canada. Although as to a number of the
“circumstances of the arbitration,” notably the respective suitability of the law on
arbitral procedure and the convenience of the arbitrators, all three cities in conten-
tion are equally appropriate, other circumstances weigh in favor of Canada and
none point toward New York City. Most significantly, Canada indisputably is the
location of the subject-matter in dispute. In addition, a Canadian venue offers less
costly support services and overall would better suit the convenience of counsel
for the parties. It is far less certain, but likely, that Canada overall is more conven-
ient for the parties themselves and as regards the proximity of evidence. In the
end, therefore, the Tribunal finds a Canadian venue more appropriate as the place
of arbitration in this case than New York City.
Once the Tribunal has determined to Select a Canadian venue, none of the
specific factors considered weighs strongly in favor of Toronto, Canada’s alterna-
tive proposal, rather than Ottawa. The Tribunal has some reluctance, however, to
choose Ottawa. This is due to the fact that it is the capital of Canada.
The Tribunal therefore has determined to designate Toronto as the place of
arbitration, for the reason that while it is no more, and no less, appropriate than
Ottawa when measured by the other applicable criteria, it is likely to be perceived
as a more “neutral” forum.
12 The fact that the UNCITRAL Notes omitted (sec note 4, _u~ra) “perception of a place as being neutral” from its Ii.9 of criteria for selection of a place of arbitration because it was “unclear, potentially confusing” does not mean that such criterion cannot be considered. UNCITRAL, in taking this step, itself indicated “that the arbitrai tribunal, before deciding on the place of arbitra- tion, might wish to discuss that with the parties.”
.
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,
.
Signed by the members of the Tribunal:
Charles N. Brower: ***..~***........*.............****.......*....
Marc Lalonde:
Karl-Heinz Bockstiegel
Date of last signature:
Award
0x1 Jurisdiction
between
Ethyl Corporation (Clainiatit)
and
The Government of Canada (Respondent)
before
the Tribunal consisting of
Prof. Dr. ICat-I-fjeinz Bockstiegel (Cttairmarr)
Mr. Charles Iv. Urower (Arbitrator)
Mr. Marc Laloride (Arbitrator)
7 ._
I l
III
IV .
v .
VI .
vi I
‘rhe Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ._. ............................... 1
1 . The Claininnt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Rcspo:irte!it . . . . . . . . . . . . . . . . . . . . . . . . . . . _ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . _ . . . . . . . . . 2
Sunimary Description of the Dispute and the Proceedings 7 ............................................... -
Relief Sought . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1 . 2 .
As Regards the Dispute Over Jurisdiction ......................................................... 7 A s Reyards the Dispute on the Merits ............................................................. 8
Chr-onoloyy of t i le Dispute and of the Arbitral Proceedings ............................................. 8
hlajar Facts and Contcrltions Regarding Jurisdiction ..................................................... 15
Major L e g 1 Xrguruents of the Panics arid Mexico on Jurisdictio:l ............................... 15
1 . Argumenis of Canada Objecting to Jurisdiction ........................................... 15 2 . ? . 4 .
Arguiticrtts of Ethyl Regarding Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Points Raised by Mexico Itcgarding Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Points hlade by Ethyl in Response to Mexico’s Submission . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Conclusions of the Tribunal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Cencral Considerations for the Interpretation of the Relevant IVAFTA f Prnvlslons ......................................................... ....................................... 25 (a) Applicable I.aw .......................................... ...................................... 25 (b) Uetcrniination of Jurisdiction as a Preliminary Question ........................ 27 (c) Parzicular Considerations Relevant to the Detcrmination of
Jurisdictiori . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 The i3istiiictiuri Between Jurisdicriurial Provisions and Procedural Rules . . . . . . . . . . . . 30 Llocs Ethyl Claim a Breach Chder Chapter1 I ? .............................................. 31 (a) Claim for Breach of Section A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 (b) Relation to Investment or Trade in Goads . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 (c) licquiremcnt of a “Slcasure“ ....................... ((1) Limitation of Clainls to ttic Territory of Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
I .
2 . .) . .l
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 . Does Ethyl Claim a Breach L'ridcr Chapter1 13
(a) (b) ( c ) (d)
38 Claim for Urcactt of Scctiori A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Relation to Investitleiit or Trade in Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Requirement of a "Measure" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Limitation of Clairrts to ttie Territory of Catiada .................................. 4 5
VI I I . Conclusions of' the Tribunal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
( i i )
I ‘The P a r k
I
The Clairtmt, Ethyl Corporcltiori, is a corporatior1 incorporated under thc laws of
the State of Virginia, one of thc United States of America, and has its head offce in Richmond,
Virijnki. tt manufmures and distributes, iwcr d i n , methylcyclopcntadicnyi mansanese
tricarboryl (WMT”), a fuel additive used at the refinery level to provide octane enhancement for
unleaded gasoline According to the Claimant, it is the sole shareholder of Ethyl Canada Inc.
(“Ethyl Canada”), a company incorporated under the laws of 0n:ario in Canada, having its head
In chcse proceedings, the Claimant is represented by:
Xlr. Harry Appleton Appleton LPC Associates Royal Trust Tower Suite 4400 Box 95 Toronto, Ontario M 5 K I G8 Canada
hlr Christopher R. Wall Wintkrop, Stimson, Putriam & Robens 1 13; Corincctictrt ttveriue, N.W. Vv’asliington, U . C 20038 G.S A.
’I’he Clainianr is rcferred to hcrcinafter as “Er hyl”.
GOVEI<Nh.IEM- OF C.4NXU.A Olfice of the Deputy Attorncy Gcncral of Canada Justicc Building 239 Wcllington Street Ottawa. Oritaria K 1 A 0146
In these proceedings \t ic Ilcspondcnr is represented by
bls. Valerie Hughes General Counsel Tradc Law Division Department of Foreiyn Affairs arid International Trade 125 Susscs Drive Ottawa, Ontario K 1 A OGZ Canada
The Ihponden t is referred to hcrcitiaftcr as "Canada".
11 Suniniary Description of tlje.D]spute arid the Proceedigg,,
, 2. This is an arbitration under Chapter 1 I of the North American Frec Tradc
Agrecn;cnt ("NAFTn") for thc sctilemcnt of a dispute betwccn Canada as a NAFlA Party and an
4. Ethyl claims that Canada has breached certain of i ts substantive obligations in
relation to investments sct forth in Section A of Chapter1 I and has submitted its claim to
arbitration as provided in Section B of Chapter 1 1 .
5. The substance of the dispute is briefly described:
Etli) I csscrttiitify complains of Canada's hlauyariese-based Fucl Additives Act,
S C 1997, C . t 1 (''&I?vll~ Act"), which n*as first introduced in Parliament 00 19 May 1995 as
Bill C-04, was reirttroduced or1 22 April 1996 as Bill C-29 (following prorogation of the previous
2
’I‘hc “contmilcd substance[s]” to which Section 4 refers are listed i n a schedule to the bfMT Act
Tim sclrctfule lists no substarice other tfian MiuIT. Section 5 of the MhlT Act espressfy prccludcs
ar7y authorization for additions to urilended gasoline. Ethyt avers that whereas prior to the hlMT
Act its MhtT was biended into more than 95 percent by volume ofunleaded gasoline sold in
Canada’, rhc Miv!T Act deprived ii of that business as of 24 June 1997.2
ti Erftyl nntcq that production and sale of iLMT in Canada is not itsdf banned Ethyl
coiitd contitiue inarkcting hlMT for use it\ unlcaded gasoline ~11roughout Canada, however, only
by establishing a manufacturing plant and distribution facility in each of Canada’s provinces.
... l . Ethyl ctainis that the h.I,LIT Act breaches three separate obligations of Canada
irnder Chapter I I of NAFTA.
(i} Article 1 102 --.. National Treatment,
I Ethyl Siatcs thai i r \\‘as thc soh irnponcr into Carrada of Eilhlf and also thc solc distributor of i t across Carrad;~.
\
Ethyl also produccs ;I scrond producl, knon n as “Grccnburn.” ;I fucl addiriit vhicli contains MMT but is dcsigncd for usc i n products ottrcr than unlcndcd Sasolinc. sucb as tionrc Iicaling. cornxrrcrcial & o h , and various diesel fucls. Ethyl assem in its Starcrncnt of Claim thal i t was dissuaded froiii iitwlemenl~ng carlicr plaits 10 markct \his product iit Canada starting rn 1996 b!, Itit intrduclrotr of thc draft legislalion tiwt bccali\c Ihc MMT Act.
( i i i ) Article I I10 - Expropriation arid Coinpensation
The relevant portions of SAFTA Artide 1106 provide:
. . . . . . . .
NAk'TA Article 1 1 10( I ) mandates
3. Ethyl asserfs (hi Paragraph S 1 o f its Statenient of Claim) that in conscqtierice of
the MMT Act i t tias sufTcrcd the followins losses:
9. In dcfcnse, Canada states that thc Tribunal i s ivithoui jurisdiction to entertain
Ethyl’s claim arid that, in any event, Canada has complied hliy with its obligations cinder
Chapter 1 1 of NciFTA as thc ;L.lhi‘IT Act is a law of general application and rcpresents legitimate
10. The proceedings to dare in this arbitration likewisc are briefly described:
Article 1 120 of NAFTA provides th ree altcrnatives for thc arbitration of
investment disputes: ( 1 ) the International Centre for Settlement of Invcstmerir Disputes (‘‘[CSID”
or “Centre”) pimuant to the Convention on the Settierncnt of Investirienr Disputes between
Stares and Vationals of Other States, done at Washington, >far. 18, 1965, 575 L.N.T.S. 159.
lCSIU Basic Documents 7 (Jan. 1985) (“ICSID Convention” or “Cortverition”); (2) the lCSID
Additional Facility Rules; or ( 3 ) the Arbitration Rules of the United Nations Commission on
Intcrnationat Tradc I,aw C“GKCt‘TRA1, tlrbitratioii I<ulcs”). In this case. Ethyl, by i t s Notice of
5
Arbitration dcliwxcd 14 Aprit 1997. has siibrnitted i t s clairn under thc UNCITRAL Arbitration
fLiles. which, therefore, govcrn this ar%tiration except to thc extent modified by Section f3 of
Chapter 1 I ( s w Article 1 120(2} at note 6, ~@n>
1 1 . 11s Arbitrators in th is case Ethyl appointed Thc Honorable Charles N. Brower and
Canada appointed 'I'he ttonorabk Marc Lalonde, P.C., 0 C , Q C The Secretary-General of
ICSID appointed as Presidirig Arbitrator of the Arbitral Tribunal in this case Prof. Dr. Karl-f-fcinr
Bocksticgel, after first asccrtaining that neither Pany would have any objection to such
appointrncnt,
12. Canada asserts that Ethyl's claim i s outside the scopc of Chapter 1 1 , and that in
any ewnt Ethyl has failed to fLttfill certain requirements of Section I3 of Chapter I I , sn rhar the
Tribunal is without jurisdiction over Ethyl's claim.
13. As to the scope of Chapter 1 I , Canada urges (paraphrasing Paragraphs G(a) of i ts
Memorial on Jurisdiction)
f i ) at the tinie the Claimant submitted its Notice of tlrbitratiori there was no measure adopted or maintained by Canada within the meanins of that phrase in NAFTX Article 1191( I ) ;
the alleyed measures of which Ethyl complains do not relate to an investment or an investor within the meaning of Article I 10 1 (\); and
the Claimant's claim in respect of expropriation and loss or damage oiitsidc Canada is not contemplated by Chapter 1 I
(ii)
( i i i )
14. As regards the rcquiremenrs of Section B of Chapter 1 1 , Canada asserts
(paraphrasins Parayraph G(b) of its Memorial on Jurisdiction):
(i} the Claimant failed to comply with thc six-month waiting period from the date of the alleged events giving rise to a claim before submitting a claim to arbimtion, as rcquircd by tlnicle I 120,
the Claimant did not deliver written consent and waivers required as conditiom precedent to submission of a ciaim to arbitration under Ariicle i 12 I ; and
( i i}
G
( i i i ) ttic Claiitrnnt iritrocluccd [iew claitns in i ts Statement o l Claim not contained iii its 6oticc of Arbitratioti {or ~ J I :tic Notice of lritent that prcccdcd i t under Articlc 1 t 19).
A s I<c g!arcfS .the Ui sou te Over J u tjsd ic t i on -. I
15 . A s regirds the dispiire over jurisdiction the Parties seek the tollowing refief,
respectively
Canada rcquests (in Paragraph IS of its Memorial on Jurisdiction) that:
16 Cariada ntso recjucsis:
17. Ethyl requests (in Paragraph 103 of i t s Countcr-hternorial on Jurisdiction) that:
7
I Y l i t the evcrit thc -I ribunal should deterniine !hat it has jucisdisiion in this caw, rhe
parties requcsr reiicfas io the merits of the caw as follows:
Ethyl dairns (at D of i t s Statement of Claim):
19. Camda rcquests (in Paragraph I04 of its Statement of Defence) that the claim:
i V Chronolow ofthe Diswte artd of the Arbitral Proceedincs
20. In this case, and particularly as resards thc dispute 011 jurisdiction, the chronology
of events must be understood in order to apprcciatc fully the factual arid legal arguments
presentcd Set fortti below, therefore, 111 a stn%?Je chronology, are all major events to which the
P a r k have referred, as rcspects both jurisdiction and thc merits, without prejudice as to whether
or not thc 'Tribunal considcrs them rclcvant to its considcration of the issues on jurisdiction o r as
10 whether the brief description ofany went is stiflicient in the context of the Tribunal's
deliberatior:~ OR jurisdiction. (The description c f each cvcnt is taken virtually verbatim from the
cllroncllogics submitted. rcspcctivcly. by Carlacla in Fisure 5 iii i ts Memorial on Jurisdiction and by
S
Eth,.I at pase 29 of its Uoui~tcr-~lc.rnori;il oil Jurisdiction. A s (0 each event. the source of the
-I_.
-. Datt: - . ... .. . . . ... . 11. Octobcr I994
- ..- 1 7 Febnrary 1995
-- -_ 24 February 1995
21 ' I'lic chronotngy of events ti>llows:
- Event
[Envirnntncnt] hIitiister Copps s t a m that MM?' must be rcmnvcd from Crttiadiati Snsotine before Augiist 1995. (Ethyl)
be taking action on MMT. (Ethyl)
Industry Canada advises Environment Canada that Ethyl Canada
.-- ----I
Environment Canada press rclcasc stating that the Government w i l l
-. . -. 5 April 1995
--.-.- 19 M a y 1995
19 hlay 1395 -..-
_ _ _
50% ofiidyi C..arincicl's iota! snles rmwiite '* - if it loses t he MMT br isinrss (F th yl)
Environment Canada issues a press release that the Government has approved plans to drafi legislatiori to prohibit the importation of and interprovincial trade in Mh47'. (Ethyl)
Rili C-94 introduced (First Reading) (House of Commons). (Canada)
Minister Copps holds a press conference derailing the Government's policy of bannins the importation of and interprovincial trade in MMT. (Ethyl)
.. -- -
-- ..--
-
9
2 October 1995
2 Febniary 1996
-. - --.
2; February 1996
-.--. .- -_ IS April 1996
32 :lprii 1'996
BiII C-94 given second reading and referred to committee (House of Commons). (Canada)
Parliament prorogued. (Ethyl) Bill C-94 dies on the order paper. (Canada)
The b l inker for International Trade warns the Minister of the Erivironnierit that "fafir h p o r ! prohihilimr otl MMl' wotrln' be iticotisismit wtd i ("nriada 's ohiigariotis wider die W ' O airti rhc iV.4 F7i1. " (Et hyf )
Environrncnt Canada issues a press release announcing that the hlinister ofthe Environment will reintroduce Bill C-94 at the third reading stage CErhyl)
Bill C-94 reinstated as Rill C-29 (Third Reading)( House o f Camnioits) (Canada)
--
.. 1 --
1 0 October t 996
2 Deccniber 1996
3 Ueccniber I996
16 - 17 Deccmbcr 1996 ...-
9 April 1997
I4 April 1997
25 April 1997
2 4 J u n e 1997 -. ~~
2 Octobcr 1997
Kcticc of [Etfyl's] intent to Subniit a Claim (Ar:icie 1 1 19 of i\; Af''Tr\) . (Canada)
The Ottawa Citizen publishes a letter o f the Minister ofthe Environment in which the Minister implies that MbIT endangers "oi i f
chilcireri *.s f i ~ t i l t f i , ' * "!hr nir we hirtrrhe a d ihc miter NT t h i d . ' I
The farliariientnry Secretary to the Minister of the Environmen: states that banning arid replacing bI1,lT will bcriefit Canadians, as opposed to "pt*iti,C all of ilie n t o r t q ia ntr r l t t~er i cn~~~r t r t . *' (Ethyl)
{Ethyl)
Bill C-39 passed by ttre kiousc [of Cornmot~s] (Third Reading). (Canada)
Bill C-29 inrrod;ccd {Scnate)(First Reading). (Canada)
Bill C-29 given second reading and referred to committee (Scnale)(Second Reading) (Canada)
I3ill C-29 passed by Scriate (Third Reading). (Canada)
[Ethyl's] Xotice of Arbitration (hnicles I120( I)(c) and 1137(l)(c) of NAFTA) (Canada)
Royal Asscnt - Enactment of Bill C-29 (Canada)
ComtnS into forceof [MMT] Act (Canada)
--
~~ - -
[Ethyl's] Statmetit of Claim (Articles 3 arid IS UNCITRAL Ruies) and purported Consent and Waivers (Article 1 LZ I of NAFTA). (Canada)
22. The major steps of the arbitral procecdiriys have been as follows
I n its Ncticc of Arbitration dated 14 April 1997 Ethyl appointed The Honorable
Charles N. Brower as Arbitrator
23. I r i n letter dated ill July ! [ N 7 to counscl for Ethyl, Canada confhied that i t had
appointed *I lc I-Ionorablc hlarc Lalondc as Arbit iaor .
24 AAcr Ethyl. by letter dated 30 JLJIIC 1997, and Canada, by letter dated 29 August
1997, had it$mrrwd ICSID that they had 110 objection to Prof Karl-I luinz 136ckstr~gel being
appointed as Presiding Arbitrator, and alter Prof Uockstiegcl had accepted such appointment. his
appoiiitmctit was confirmcd by ICSIO by letter dated 2 September 1997 to both Parties.
25. Having t hus been coristiiuted, the Tribunal issued a first Proccdural Order on
22 September I997 reyarding ccrtain details of t'fic arbitral procedure and suygesting, in
particular, that a Procudu;-a1 LIccting of ttic Parties and thc nicmbers of the Tribunal should bc
held as soon as possible.
26. W i t h the ayreemcnt of the Parties, and without prejudice to the selection of the
ofricial piace of arbitration, such a Proced~iral Meeting was held iri New York, N.Y., U.S.A.. on
2 October 1997. At that meeting, Ethyl submitted its Statement ofclaim.
27. Following that Proccdural Meeting, a further Procedural Order was issued by the
Tribunal or1 13 Uctobcr 1997. Since rhe Parties had not been able to agrce on the oflicial place of
arbitration, the Procedural Order of 1 j October 1997 set forth a timetable for the fiiins of funhcr
submissions regarding both the place of arbitration and jurisdiction. ?'hat Proccdural Order also
rFcorded the Panies' agrecriient that a !{caring oti jurisdiction be held on 24 arid 25 February
199s
28 On the basis of oral arguments presented at the 2 October 1997 Procedural
Meeting and of writtcii subrtiissions filed by the Panies either at that Mccting or thereafter
regarding thc official place of arbitration, the Tribunal, by a Decision Reyardin2 the Place of
Arbitration dated 28 Kovcniber I997 and setting out in detail the reasons for its conclusions,
cfcsigrlated Toronto. Canada, as thc placc of arbitration in this case.
29. In accoidance with the tinletable established in the Procedural Order of 12 October
1997, the following hnher principal submissions wcrc filed by the Parties on the dates indicated
Oii 27 NuvernScr 1997 Canada's Staremenr of Defence.
1 1
On 29 Dccernber I097 Catiada's >leniorinl on Jurisdiction togeiher with a volume of docun;ents
On 30 Jariuar). i 3'3s Ethyl's Counter-bIcmoriaI on Jurisdiction together with if
volunie of documents.
30. The Panics also filed a number ofshoner submissions regardiriy various aspects of
pocedurc arid the I-fearing OII jurisdiction a i d the l r ibuna l issued a nuntber of Yroccdural Orders.
I r i particular. i i i ordcr to c m b k the Pnrrics to y q m e as well 3s possible for ttic Hcaring 011
jurisdiction, ttic Tribunal issued a Procedural Order on 22 January 1998 regardics proceduraf and
3 1 . A Hcaring on all issues of jurisdiction was held in Toronto, Canada, on 24 and
25 February 1998. 7'hc Parties were represented at that Hearing 2s follows:
E!!x! hlr. Harry Appletori Applcton gC Associates
Counsel to Ethyl Corporation
M r Anthony Xlacri Appleton & Associates Counsel to Ethyl Corporation
M r Christopher K. W a l l Wirtt hrop, Stirnson, Puinam 22 Roberts Counsel to Ethyl Corporation
Winthrop, Stimson, Putriarn & Robens Counsel to Ethyl Corporation
Mr . Phitip Le B. Douglas
klr. S t e w Maycr Ethyl Corporation GcIicr a1 Couiisul
hl r f'res Rowe Ethyl Corporarim
General Coiinsd, Trade Law Divisiori Ilcpannient of Foreign AAffairs and
International Trade
12
hlr, Briar; Evcrndcti
hlr. ZL.1or-y Afshar
M r . Fulvio Fracassi
hli-. Ian Gray
Mi. David Haigh
hlr. Jon Johnson
bls. Lynn Pettit
kIr. John l'yhurst
51s. Dcnysc Mackenzic
Ms. Ann Ewasecftku
Gerieral Counsel, Civil Litigation Scction Departmetit of Justice
Counsel, Trade I.aw Division Depanrnent of Forcigri Affairs and
Intcrnationat Trade
Legal Counsel tns~~orintent Canada Legal Scwices
Counsel. Trade Law Division Depanrnent of Foreign Affairs and
Legal Adviser Burnet, Duckworth & Palmer, Calgary
Legal Adviser ( h o d r a n Phillips & Vineberg, Toronto
Secretary, Trade Law Division
International Trade
nepartrnmt of Foreign Affairs and
International Trade
Counscl, Civil LitiFation Scction Department of Justice
Director, investment Trade Policy Divisioii Departrnent of Toreign Affairs and
1 nternalional Trade
Policy Adviser. Investrrient Policy Division Dcpanrnerit of Foreign Affairs and
f n t crna t i o 11a I 7- rad e
32 A transcript was made ofthat Hearing, and copics thereof were provided to the
Pafiies and the menibcrs of the Tribunaf a few hours after the end of each session of the Hearing
On the sccond day of the Hearing, Canada informed Ethyl and the Tribunal that i t 3 3
had just rcccived a letter dated 24 February 19% fronl the Government of the United Mexican
States ("Mexico"), copies of which (in Spanish) were provided to Ethyl and the members of the
Tribunal, in which XIcxico informed Canada and the bnitcd States as the other NAFTA Pacies as
w l l as Ethyl and the 'I'ribunai that
jUr;o!Xci;tl translation provided by Canada )
3.1. 'fhc 'I'ributial requested Canada to inform Mcsico that. its submission should be
rcccived by the Tribunal within t 5 days anti in an English tcxt, inasmuch as Enyliqh is the
language of this aruitratiori.
3 5 . At the same time, in order to avoid any possibility of a later similar submission by
the Govcrnrnent of the United Stares causing a funher delay in the proceedinys, the Tritiuiial
rcqitcstcd Ethyl to c w t x t that Govcrni>ier
.39. *I'his concluded thc proceedings up to thc point at which the Tribunal now issues
this ilwrtr-d on Jurisdiction.
\/ h&ior Facts-and Contentioris Regardinr? Jurisdictiori
40. I n [tiis dispute over jurisdiction, the major facts are tindisputed. The Panics
dijngrcc, however, fundnrtie:itally arid in many details, regarding the fegal conclusions to be drawn
CtORI thOSC facts
41 The factual side of the dispute i s sccn in the events that have bccrl recounted in the
chronology in Paragraph 2 I above of this Award on Jurisdiction. Insofar as the Parties refer to
these evcnts and the factual side in their legal arguments, such references will be included in thc
surnmary ot ' thc major legal arguments presented by the Panes I n the toilowing Secriori VI Of this
Award on Jurisdicriori. Insofar as the Tribunal corisidcrs tticrii relevacrt lo i ts cordusions on
jurisdiction, the Tribunal tviil refer to them in Scctiori VII of this Award on Jurisdiction
VI bJajo_r L c r r a l i m g t s of the Panics and ; t . f~~~~o-~-Jur. isdiction
42. A brief sunitnary ofthe major legal arguments presented by the Parties on
jurisdiction is given below. Many further details are includcd in the various written submissions of
both Panics, in particular, by Canada in i t s Statement of Defence, its Memorial on Jurisdiction
2nd the voluriie of documents filed tcgethur with that Illemorial; and by Ethyl in i t s Counter-
Metnorial 011 JUriSciiCtioil and the V O ~ L I R X of docurr~cnts fitcd together with that Counter-
Xlernorial.
I
4 3
&yu.ujsnts of Canad& Obicctiricp to Jurisdictioc
Caiiada's objections to jtirisdic;ion set forth in i t s Statement of Defence, as
pr,c*vixisly :iotcd, fall iri:u two catcgorics (:anada firs[ is of the view that because Ethyl had not
mct certain requirernerits oT N.-\FTA's Ctinptcr I I at the tirile i t filed its Noticc of Arbitration. & ,
as of 14 April 1997, this 'l'ribunal Is absolutely barred from procedirig ln Canada's view,
Claimatit's only alternative would be to conmcnce it flew. separate arbitraticn addrcsscd to rhe
ilfhfT Act (for which, i t appears ihe f'anics agree", the requirements in issue have in the mcantinic
been met).
44. Canada argues, second, that in any event the claims set forth in Ethyl's h'otice of
Arbitration (and in i ts Statement of Claim) are outside the scope of Canada's consent to
ahitration set forth in Chapter 1 1 . Furthermore, Canada asser'ts, Ethyl's Srateinent of Claim, in
rclyiny on final enactment of the hl$IT Act, to which no reference was made in its Notkc of
Arbitration, introduces an inadmissible new claim. I t is apparent [hat the issucs in this second
catesory arise in good part out ofthe fact that at the time Ethyl submitted irs Kotke of
Arbitration, I .c . , 14 April 1997. the M M T Act, while passed by thc House of Commons and thc
Scnatc. had cot rccciscd Royal Asscnt nod had not C O R ~ C into force
45. In order to display fully and accurately Canada's jurisdictional contentions, t he
Tribunal quotes below virturtlly verbatim paragraphs 20-23 of Canada's Statement of Defcncc.
To facilitate understanding thereof, the Tribunal adds footnotes settins forth the portions of
Chapter 1 1 which Canada cites. The test follows:
* Pngc 22-1. iinc 1 i - pags' 227 , line 13, of rlic [ranscript of (ltc Hearing on jurisdictiort
.-
' Article 1 I IG: Claim b! an In\'estor of z Par-!!' on tir Own UchrtH
f . An invcslor of n Party may submit to arbitration undcr this Scctiori a clnini that anotltcr Parry has bmchcd a11 oblig:ilioii under.
( i t ) Scctioti A ur Xnrclc f if)>(?) ( S t m Entcrpriscs). or
(bt iiixiitcr irtcoiisislcril \I iifi tfic P;irty's obligarioris uiidcr Section A.
atbd 11i;ii ttic imcstor Ii:is iricurrcd loss or damagc by rcasoii of. or arising out of. t l in~ brcacli
Ait iiivcsior ma! [tot tiiskc a claiiri if marc itm thrcc years 1in.c clapscd froin thc dare 011 \vhicli tlic
Article 1502(>)(a) (Monopolics atid Statc Entcrpriscs) u.licrc k monopol!. has m c d in n
2 iin'cstor first acguircd. or should t ia~c first ncqtiiccd. bno\rlcdgc of ~ h c allcgcd brcrrch a d knosiicdgc that t k invcstor has incurred Loss or d a m g c .
Article 1121): Submission of ;L Claim tu Arhitrition
1. Esccpt ;is prosidcd in Annex 1 120.1. and provided that sis nionltis havc clapscd sincc thc cvcnls giving risc to a claim, a dispuliriy invcslor may submit ttic claim to arbitration undcr:
(a) tlic 1CSIL) Comcrition, provided that both thc disputing Fany arid lltc Party of the investor arc partics to tlic Comrntiori;
(b) tlic Additional Facility Kiilcs of ICS[D, pro\.idcd that cithcr Ihe disputiiig Party or thc Port! of tlic investor. but not both. IS 3 pan! to the ICSlD Conicntion; or
{ c ) llic UNCi'TiWL Arbitralion Rulcs.
6
2. The appliahlc arbitration rulcs shall p \ c r t i tttc xbiirntton cxcpt LO tlic cstcnt rnodificd b:, this Section.
ttnicic 1 1 19. Notice or Iiitcnl 10 Suiiniit a Claim to Arhitrtitian '
Thc dispuiing itiycstor sliall dcliscr 10 tltc disputing Pan: ivriltcn notice of its iii!crilioii to submit a claini
(3)
thc llillllc aitd addrcss of thc cntcrprisc;
to arbitratiori at 1c;ist 90 days bcforc tftc claitti is submitted n.hich notice shall spccif?:
the riariic 3116 addrcss of ttic disputing investor and. ~vlicrc n clam is madc iindcr Aniclc 1 117,
(continued . .)
P I ..- .. ( . con i i nu cd
( 5 ) provisiuris:
(c)
[lie pro\.isions or i t i i s Agrccincnr nilcgcd (0 Iinvc bccn brcaclicd :~nd any oilier rclcvnrit
I ~ C :SSWS ar;d t l ~ f'iictual bisis for I ~ C clniin; aitd
(d) ihc rclicf siiugtil niid [tic approsiiiinlc ;mount oTd;~iringcs c13irricd
9 Articlc 1 i21: Condifions Prccedcnt to Suhniissiori of a Claim 10 Arbittiltion
1. A dispuiiiig irncstor niny submit a claitit uridcr Anrclc I 1 16 Lo rtrbilratiori onl!. if:
(a) and
(b) Party t11:11 is n juridicat pcrson that tlic invcstor o\vns or controls dircctly or indirectly, thc cnlcrprisc. u n ~ v c their right lo initiatc or continuc bcforc any nditiinistintivc kribunnl or cotin urtdcr lhc law or ariy hrt!. or otlicr displ1ic sctllcinciit proccdurcs. ;III>' procctdiIigs \\ itli rcspccl lo Ihc rircnsurc of tlic dispitting Pan? I l i i t t is allcgcd to be a breach rcfcrrcd to i r i Articlc 1 1 16. csccpt for procccdings for injunctive. dccl;iratoq or odtcr cstr;iordianry rclicr. 1101. in\.oiving tltc pal incrit of daitingcs. bcforc an adininistnti\.c tribunA or court itndcr ttic \;ti\ of ihc dispixing Pan!.
1. A disputirig iiivcstor tri;iy subuttt n cf;iirii uridcr Arliclc I 1 17 to arbimrion otil? if bo~li thc iincstor arid fhc cnfcrprisc:
(a)
(b) of any Rny, or ollrcr dispu~c scttlcmcnt proccdurcs, an! procccdings tvith rcspcct lo tltc nicasurc of tlic disputing Pany ilia\ i s allcgcd to bc 1 breach rcfcrrcd 10 in Articlc I 117, i .e.. csccpr Tor procccdiilgs for injunctivc, dcclaratop or olticr cstraordiiiap rclicf. no1 iiivolving tfic prtxrricnt of darriagcs. kforc an administrative Iriburtiii or coun iindcr tlic I;w of tlic disputing Pirly.
.i. A conscrit arid tv:iiYcr rcqutrcd by 11tis Article shall bc 111 \\riltng. s lul i be dcli\rrcd to Iltc disputing Pan!' arid siiall hc iiicliidcd in lhc submission of n chi in to nrbilrarion.
4. Ortly I\ hcrc n disputing Parry Iias dcpritcd a disputing iii\.cstor ofconmt or an cntcrprisc:
(a)
(b)
thc iiv.xsror coriseiits to arbttra~ion in accordartcc 15 i th ~l i c proccdurcs sct out in this Agrcciucnt:
(tic irivcsror axid. \\.here lfic claiiti is for loss or d ~ n ~ a g c to art irircrcsr in a n critcrprisc of anothcr
consent to arbitration in accordaricc n.irli thc proccdttrcs sct otit in this Agrccmcnt; and
\vnivc chcir righi to initiate or continuc bcforc an! administrati.r.c tribunal or C O U ~ uIidcr thc In\\
;i uwvci~ froiri ihc mfcrprisc under parayapti I@) or 2(b) strail not bc rcquircd: and
Artt1es I120 l{b) sll;lll not q p I \
' Article 1137: Gcnorai
Ti1llc \ v i m a C l i m is Siibnrittcd to hrbitr~tloii
1 . A claim is subniiiicc! to arbitraiion uridcr this Scccion t\ t:cn.
. . . .
(continued . . )
- -.. ( . .continued)
( c ) disputioy Pan)..
tlic notice oJ3rbitration givcn undcr thc UXCITRAL Arbitration Rulcs is rcccivcd by lltc
:0 Articlc ? I ) 1: Ucfiiiirions of Ccncr:iI Aopfication
1. Fur purposcr of t t u s .%grccnictrt. uritcss othcnvisc spccilicd:
. . . .
nicisurc includcs any Inu-. rcgulatiori. proccdurc. rcquircmcnt or praclicc . . .
1 1 Article 110 1: Scogc arid Co\crzgc
1. This CiwpKr apphcs to tiicasiircs adoptcd or maintained by a Pan!. rclitirig to:
(b)
(e)
in\-csttncrits of invcscors of aiiorhcr Parry i n [lie rcrriton of thc Party: and
vich respcct 10 Anidcs 1 iOG and 1 1 14. a11 invcstrncnts in the ternlory of thc Pa*. I ? Articlc 200-4: Rccnursc to Dispute Sctltcriicnt Proccdurcs
Except lor ilic triattcrs coverccl it! Cliaptcr Nirictccri (Rcvic\v and Dispute Scttfcmcrit i n Arilidumping and Coit~itcn.ailiiig Dut?. Matrcrs) and 3s otlitnvisc providcd i t 1 r l i k AgrccrncnL. khc dispute sctllcmcnl prpvisions of [his Ciuptcr sti:ili apply u i t f i rcspcct to ihc avoidancc or settlcrncnt of all disputcs bct\rccn thc Parties rcgardirig ttic inrcrprctaiion or applicatiori of this Agrccnicnt or \\Iicrcver 3 P a q considcrs that an actual of proposed tncasurt of anothcr Party i s or would bc inconsistcnt \ d I t tttc obligations of t h i s Agrceinerit or causc riullificalion or irupnirnicnt i n the sctiw of Aiincs 3104 .
19
2. - .4rsut:ients of Ethvf Reeardins iurisdiction
46. In rcsponse to this extensive jurisdictional attack Ethyl points out, in essencc. that
at least by the time of thc Heariris on these issues held 24-25 February 1998 zll the requirements
of Chapter 1 1 cited by Canada, to the extent applicable, had been met. Spccificaily, according l o
Ethyl:
21
( i ) h i c k 20 I of SAFT.4, l:ad cotnc irito force on 24 June 1997,
( i i ) in thc cir.cuitistmces, i r tisd elapsed, and
(i i i ) bccn delivered with the Statement of Claim in a form not questioned by Canada.
tlic hLM-1' Act. which undoubtcd!p is a "measure" within the mcaning of
althorryh thc six-month period rct-erred to in Article 1 120 was inapplicable
the express wnscnt to arbitration artd waivers requircd by tlniclc 1 13 1 had
Ethyl corirends that the fact that any of thcsc requirements had not been fZllfilltd as of 1 4 April
1997 has t i 0 jurisdictional signtficanc::
47. As to thc tinher issties regardins the scope of Chapter 1 1 , Ethyl notes that:
( i ) ir complains ofacts asainst i t within the territory of Canada for which i t is entitlcd to cornpensation, inctudirig for damages resulting to it outside of Canada; and
( i i ) regarding not only i t 5 investment in Canada, but also trade in goods subject to Chapter 3 , the Tribunal nonetheless i s empowered to apply Chaptcr I I .
10 the extent, if at all, that the acts of which it complains constitute acts
4 5 . In rsercise ofits right to pmicipate in this arbitration pursuant to Ankle 1128,'"
.\lesico submitted views." I\..Icsico makes three points specitically supporting the position of
Canada: "
14
1 5
scc IlOtC 3 , strpn7.
Rccausc kfcsico's noticc w s rcccivcd only 011 rhc sccorid and ]as( day of the ticaring on jurisdiction. Ethj.1 rniscd an issuc of tirricliIicss. I n tlicsc circuinsmccs 111c Tribunal finds it appropriate to uridcrscorc rlic iniponancc nf NAFTA Pndics csercising tltcir Anicle 1 123 rigfits in J timcly fashion IIidccd. Article I127 I S dcsigicd :o fitciliratc triiicl! intcnwrion utidcr Xrtrclc 1 12% b). pro\.iding:
Article 1127: Notice
A disputing far-ry Slt i i l l ddivcr to ttlc otlicr Panics
(a) writtcxi I I O I ~ C C of 3 chin1 thar fias bcen subrniricd la nrbiintion no l a m 0 1 m
30 dn\s aftcr ttrc di\tc t1aat ~ I C cl;iirri is siibrtii(ttd. atid
(continued.. . )
22
- -- (. . . continued)
(b) copics of all picadings ftlcd in tlic arbitration.
I'lic Tribun;il notcs. as i t was irifornicd b!, Canada by lcltcr dafcd 2 hfarch I998 pursuant to tlic Tribuital's rcqucsi. that thc Go\.crnnicnt of Mcsico had bccn infonncd of Caiwda's jutisdictiorial objcctions as Carl!. as 3 Dcccinbcr 1907 2nd that on 1 I Ucccnibcr 1997 Canadian Govcrnmcnt rcprcscntativcs had met in OItiwa nit11 a Mtsicarr Emb;issy oficcr and Mcsico's legal counscl ..lo discuss Canada's jurisdictional arguments and tlic possibility o f Mcsico filing n subiiiission pursuani LO Aiiiclc 1125." Civcn lfiat Mcsico filcd its Eubstiinitvc submissioti \v i th in fiftccri d;tys aficr thc Hcaririg on jurisdiction. trouci cr. as it had undenakcii [O
do arid as ttic Tribunal had rcqucsrcd. artd givcn that ilic Panics t\.crc accordcd a pcriod of tiircc wwks willtin wfiich 10 commcnl rhcrcori. of \\hrch opponurrity Ethyl asailcd itsclf. rlic Tribunal pcrccivcd no prcjudicc to Ethyl in acccpticg Mcsico's submission.
Tlic [csts arc quoicd vcrbaiiiri from Mcsico's submission 16
2 ;
4 P.Oirits Made bxEttwl in ResDonse tc Mesico’s SubmissiQn
49. C a m l a advised {tic l * r i b u I d by letter dated 1 April t 99s that i i did “not interid to
make comntents in respect of bLlcsico’s submissions.”
Ethyl commented hiefly as Follows:
(i) ;t statemeni by counsel for Canada at the Ilearing on jurisdiction that Canada ‘‘didit7 tfiittk it I ~ ~ I . S nit issi te rhnt was ahsolit fely crirrcol to he ciispossJ of at ihis /i,enr.iiig. . . I -
A s regards the “fro& irt goods ” issue, i t called attention to
-- -- .-___-_ . .-
I: Page 29X. lincs 12-1.I. o l !hc transcript of rhc Hearing on jurisdiction
VIl. Conclusions of the Tr.i.btut
I . General Considerations for the ln tegxc@-t~o~of the Retevarrt NAFTA Provisions
(a) &eplkable L a y
50. T h e Tribunal finds i t usefill to set out here the rules i t i s required to apply in
intcrpreting and applying KAFTA. Article I 13 1 of NAF'CA is the first guide:
No Party has argued, and the Tribunal is not otherwise informed, that the NAFTA Cornrnission
has provided any intcrprctzltiorr here relevant. T tic Tribunal therefore looks LO NAFTA itself arid
"app I icablc rules of in terria tio nal law."
5 1. The applicable rules of international taw include the Sienna Convention on the
Law of 'I'rcaties ("Vicnna Corrventian"). done at Vienna. May Z, I9G9, entered into force,
26
52 Canada is a party to thc Vienna Convention, having acceded to it on 14 October
13 197G, a i d the Uriitcd Starcs accepts i t as a correct statement of customary irtternational law
hIorcovc;, sivcti tfiat 84 Statts arc parties to the l 'icnna Convcntian (as of 15 April t998), and
itiat Articles 3 1 acb 32 "tvcre adopted without a dissenting vote," these Ar:iclcs clearly "may be
considered as dcclararory of csisting l aw *""
5 3 . On the procedural level, Ankle I 120(2) of NAFTA provides that:
(b) Determination of Junidiction a s a Prelirninarv Question
54 Ar;iclc 2 t (4) of ihe UNCITRAL Arbitration Rules, which i s not modified by a n y
provision of Scction H, provides
The present jurisdictional phase takes place in adherence to Article 2 l(4).
11 DC ArCchagn. Jnrermr!ctrrrrl imr. in (he Pc:s[ Third of N Cenrur>.. I59 RECUEIt DES COUTG I , 42 (1975) (''Legal mlcs C O I Y C C ~ I I ~ ~ ~ ~ the intcrircinrion of trcsrics conslitutc o ~ i c of thc Stxitons or the Vienna Conwit ion
hicli tvcrc adopted tvit tiout a disscnting \'OK 31 tfic Confcrcncc and conscqucntly may bc considered a5 dcclarnmp of csrst~trfi In\v").
27
(c) Particular Considerations Rclevapt to the Deferntiita&on of Jurisdiction
5 5 The Tribunal considcrs i t appropriate first to dispense with any notion that
Section l3 ofchapter I t is to be construed “strictly.”x The erstwhile nation that “in case of
doubt a limitation of‘ sovereignty must be construed restrictively”” has long since been dispiaced
by Articles 3 1 and 32 of the Vienna Convention.22 As was so aptly stated by the Tribunal in
Sept. 1983). repririfed irt 23 I.L.M. 35 1, 359 (1983) and 1 ICSID Rep. 389 (1993)
“(Ljike aty other cortverttiotts, a consenfiorr to arbitrate is iiot to be cotistrrred restrictively, !tor, as a mnlter of fact, broadly or liberally. 11 is to be coristrtred iti a way which lends tojrtd uuf anti lo respect the coinnion will of [he parties; srrch a method of itilerpreiutioti is birr /he application of 1lief2rndamenkd principle pacta sunt sewandii, u prirtciple conirnoti. irrifeed, fa all Jyslems of ititemu1 lmv utid to rtiieniuiiorial lmci.
(Emphasis in original.)
Canada’s statcmcnt at Paragraph 23 of i t s Memorial on lurisdiciion that “these proccdurcs [of Section 81 must be strictly adhcrcd to for a Tribunal lo have jurisdiction to h a r a claim under Chapter Elcvcn“ a p p r s at least to hint at such a principle. Canada’s Mcmoriaf on Jurisdiction tatcr quilc clc3rly urgcs this principic in stating (in the hcading prefacing Paragraph 49) that “Jurisdidion Must Bc Strictly Interprctcd. . . *’
20
21 Free Zones 0-f Lpper Savoy and !fie District ofGex (Fr. v. Swiu.), 1932 P.C.I.J., scr. NB, No. 46, a l 167 (Judgmcnt of 7 June).
22 ?he I’ienna Convention resotvedpust debates concerning [he wsdom 01 pronounctnmxrs by inrernationol tribunals that fimitutions ofsovereignty must be s:ncf[v consrr-ed.
tlN~l~d.Smf~cs-lrn, Case ,Yo. . t 17, Decision No. DEC 3 7 - A 1 7 - n (May 13, 198S)(Browcr, J . , concurring). repinfed in 8 Iran-U S. C1. Trib. Rep. 189. 207 (1989).
28
36. Given [tie rc!cvaiicl: urider Article 3 t ( 1 f of the Vieriria Convention of NAF‘I‘A’s
”object arid purpose ,” i t IS X C C S S ~ I J ) ~ to take note of NXFPA Articlc 102, parttcularl~ I ~ S (I)t;c>
and (c)
Artirk 102: Objectives
‘[hc Tribunal reads tlrticle 102(2) as specibing that the “objccr and purpose” of
NAF‘I‘A within the meaning ofthosc terms in Arricle 3 I ( ! ) of thc Vienna Convention are to bc
found by thc l‘ributial in .4.rticle lo?( I ) , artd corifirniirig the applicability of Articles 3 1 and 32 of
the Vienria Convention
29
_ _ 7 The Distinction Bctwgen Jurisdictional Provisions and I’roccdural Rule2
55. I t is iinpofinni to distinguish between jurisdictional provisions, i,i?., the hiits SCI to
the authori ty of this Tribunal to act at all or1 the merits of the dispute, and procedural rules that
must be satisfied by Claimanr, but the failure to satisfy which results not in an absence of
jorisdiction cih i t r i iw , but rather in a possible dclay of proceedings, follotved tiltimatcty, stiviiltl
such r;on-compliance persist, by dismissal of the claim Canada arsues that all of its objections fall
into the first categoq, whereas Ethyl i s of the vicw that such objections as may have been valid at
one paint fall into the second category and have since bcen obviated
59. The sole basis of jurisdiction under NAFTA Chapter I t in an arSitration under the
UXCtTFUL Arbitration Rules is the conscnt of the Parties. Unlike ICSID arid i t s Additional
Facility Rules, there mist under thc UNCITRAL Rules no other jurisdictional criteria ’j I t is clear
th3t Ethyl has conscntcd to this arbitration by the very act ofcomniericiny i t . Normally such act is
takcti as consent to the arbitration thereby initiated.”
60 The fundamental jurisdictional issue here, thcrcfore, is whet her Canada has
consented to this arbitration. I t has two aspects, as the jurisdictional proceedings have
underscored. One aspect is that of scope: Is Ethyl’s claim within the types of claims that Canada
2 .; For a discussion of ICSlD’s objcctivc critcria .wc. I i1crrunr S d t F‘rolfuct..r I,imrtetf 1‘. I%e Government of the I<rpuhlJc of Ghanci. ICSlD Case so. ARBJOZi1 (Atvard of 16 Fcb. l994), rrtprirrtcdin V ICSlD Rcs.-F.I.L.J. 32 ( 139.4)
See, e.p.. Christoph Schreucr, Coirtnientory wt thc IC.S/f> Conrnenrion. 1 ICSIIJ f?w -F’ 1. L.J. 5 18, para. 277 (199G1 (In tt ic C O Y ~ I C S ~ of ICSID. jurisdiciiori may be cstablisficd by virtuc of an oflcr to arbitrak by a host StatC conraincd in its lcgislatioti or in 3 m a t ? . uhicli m a y bc xccpccd by an investor. Tlic linlc of mutual consent is dcccnnincd by the m\*csmr’s acccpt;incc of rhc offer. This o h rn;iy SC accepted through bringitis a rcqucsi for iirbiiratiori to tlic Ccrilrc )
?I
has consented in Chaptcr 1 1 to arbitratc? ‘i’tie orher aspect is that of conditions to conscni ‘1’0
what extent. if ariy, is Canada’s coriscnt to arbitration In Chapter 1 1 coilditiuned absolutely OII the
fi:liiIlmcrit of spccifted procedural reiluircmcixts at a given time?
6
claims to
Article t
(a) CIairn.fbr Brencf1-of Section A
On the fate OF the Notice o f Arbitration arid rhc Statement of Clairn, Ethyl states .
alleged breaches by Canada of i ts obligations under hnicic I 102 (Hariunal Treatmnt),
06 (Performance kquirements) and Article 1 I 10 (Expropriation and Compensation).
The Claimant indisputably i s an “inves:or of a Party,” narncly the United States, and allegcs that it
has ”incurred loss or damage by reason of, or arising out of,” such breaches, all as required by
Articlr 1 1 16( I ) . I t likervist is beyond doubt that Claimant tias acted within three years of the tirne
when it “first acquired, or should havc first acquired, knowledge of the alleged breach and
knowfedgc that [ i t ] incurred loss or danraye” as stipulated in Article I 1 16(2). Claimant’s
Sratemcnt of Claim sat isf iesyrinmf~cie the requirements of Article I 1 16 to establish thc
jurisdiction of this Tribunal. As was stated in Adritinistrative Decision No. 11 (1922). Decisions
and Opinions, M i x e d Claims Commission, United States and Germany (1925) 6-7, quoted in K.S.
Carlskon, The Process of International Arbitration 77 ( I 946): “’&‘t’hen the allegations in a perition
. . .bring a claim within the terms of the Treaty, ttie jurisdiction of the Commission attaches ”
,Ycc a h Anthaiit.lo.s Cast’ (Greccr 1’. f h i i / e r l Kitigdonr), nwiis: ohliplioir lo nrbirmtc, 195;
t.C; J. Rep 10, I 1-12 (ludgrnent of May 19) (“[Tfhe words ‘claims . . . based on the provisions OF
t h r , . . *I’reaty ur 1386’
.I’rcaty of 1586 , ,
. . car1 only nied11 claims depending for suppun on rhc prCJViSiUJlS ofihc
‘I‘hc f x t that a claim purportins to be based on the Treaty may eventual\y be
3 1
ti>und by the Conwiissiori of :lrbitratiori to be u~isupponablc tirider the Treaty, does not of itsef f
remove the claim from thc catcgnrj ofchinis wliizh, for the purposc of arbitration. should be
regarded a5 falling withiu the term of the Uoclsration of 1926.”), and b‘iriicd S l n ~ ofAttict.ica
P.S rcl. Alhwi I~legwticrrmr v. 7 h * Iiciliirti f k p h l i c , Case No. 20, Decisiori KO. 152, 5 Dccisioris
lin!ian-Unitcd States Conc%ation Cornmission I S- 19 (Scpt. 20, i 9%).
(b) Relation to 1npcstme:it or Trade in Goods
62 Carla& nxm i b rhat siiicr tlir MhlT ALt c-.dudeb hlh.1T frum impor taliori into
Carmda, and prohibits inter-provmcial tradc it1 h.lMT, i t should be viewed as af’Tecririg trade in
goods and therefore falling within SAFTA Cliaptcr 3, Lchich cosers “Narional Treatment and
klarkct Access for Goods” within a broader Part 2 on “Trade In Goods” (which embr-aces
Chapters 3 - S } I’he argument made is that issues of trade in goods under Chapier 3 give rise to
u ctovernment-to-government dispute sctt!crrierit procedures under Section B of Chapter 20, and, i t
is contcnded, thereby ncccssarily exclude the possibility of investor-State arbitration under
Chaptci i 1
63. Canada cites no authority, and does not elaborate any argumcnt. however, as to
why the two necessarily are incompatible Canada confines itselfin this regard to a reference to
Article 1 112, which simply requires that “ I n the event ofany inconsistency between this
Chaptcr [ I I ] and anotlicr Chapter [e.g.. 31, the other- Chapter shall prevail to the extent of the
iriconsistency. ’’
64 A s Ethyl has pointed out, Canada indicated at thc Hcaritig on jurisdiction that this
was not “an issue h a t was absolutely critical to be disposed of at [rfiarf hearing ” In the
:; 2
circunistarices, furtttcr mat t t ie r i t of this issuc, i f any, must abide another day. *I’hc Tribunal
catitlot prescntly exclude Ethyl’s claim 011 this basis
65. ‘i‘hc hulk of the written and oral proceedings have Seen devoted to what
constitutes a “nlcas:rre” within the meaning of Article 1101, xvvhich stipulates ttint Ctiaptcr 1
(includiny, thedore, Articlcs 1 102, I 106 arid 1 1 10, all of which Ethyl claims Canada has
bl-raclicd) “npplics tu mcasut-cs adopted or maintaincd by a Party.” (“Mcasurc“ appcars also
several t imes in Article I I 06”. and hr-ticfe I f 10 addresses specifically “a measure tantamount to
nationalizatioii or expropriation.”) Succinctly, Canada has argued that 110 lcgislarive action short
of a statute that has passed both the 1 Iouse oFCornmotx and the Senate and has received Koyal
Assent constitutes a “‘r~:easure” subject to arbitration under Uhaptcr 1 1 . Sirlcc ai the tittic Ethyl’s
claim was “submittcd to arbitration.” i .c., I4 April 1097, by delivery of its Kiotice of Arbitration
Spccificall~. Articlc IIOG(2) and (6): 25
2. A nicasurc ttint rccjuircs art iIlscstIttciit to USC a tcclwology to incct gcncraliy applicablc hcakli. snfcty or cnsiror\mcnwl rcquiscrlrcnts slrnll no[ bc construcd to bc inconsislcnl !vitli par3graph l(0. For grcatcr CcrtaiIlty. A~riclcs I102 nrld 1103 appl\. lo [tic InCa511rC.
6. Providcd that such cncastircs arc riot applicd i t ) an arbitrat? or u~ijustifi:iblc imiincr. or do not coiislittitc a disguised rcstrtction ori i it~ernatior~af mdc or iii\.cslmcnt. nothing in paragraph I(%) or ( c ) or .:(a) or fb) shall bc construcd to prc\cur any Part!. froin adoptiq! or mei n ~ i ning iiicasurcs. i Iicl udi ng cnv i roniiicat;ll Iticasurcs:
rhar:
This is borne out by Articlc 2011 11, which provides that:
Clearly some thin^ other rhan a “law,” even somerhiny in the nature of a “practice,” which may not
even amount to a legal stric:ure, may qualify.
07 Soncthclcss, Canada argues, not without effect, that an unenacted leyislativc
proposal, which is unlikely to havc resulted even in a “practice,” cannot constitute a measure. I t
is rcjnforced in this coririection by the fact that Articles 1SO3( I ) and (2) employ the term
“proposed or actual measure:”
Canada draws tunficr strcngth froiti thc reference to “‘an actual or proyoscd ttieastire” in
Article 2004, which providcs ‘’Rccour.sc: to Dispute Scttkmcnt I’rocedui es“ by ktic three N.AFT.4
Parties thcrnsdves ’The irnplication is that wtiereas any of these may compiairi d a “proposed
iiieasurc.” an investor cannot.
6 s . !I\ the end, hoivcvcr, thc >!Al l ‘ Act did come into force 24 JUIW 1997, after hsving
received Royal Asscnt on 25 April 1997, just eleven days following Claimant’s delivery of its
Notice of Arbitration. The bIMT Act is, Catiada concedes, a measure within ttie n~anIng of
Articlc 1101( Canada’s objection, then, is that Ethyl “jumped the gun,” and, having done so,
sliould be required to cornrnencc an cntircly nc~v arbitratiori, xvhich, it is conceded, it can (subject
to any scope limitations)
69 The Tribunal notes that the Alh.11’ Act, according to the allegntions of Claimant’s
Koticc of Inten:, Kotice of Arbitration, and Statement of Claim, \\as the realizatiorl of a legislative
program of the Canadian Govcrnmcnt, sustained over a period of ;ime. As of the datc on which
Clairirant deliverrd it5 Yotire nf Intent pursuant to Ankle 1 1 19. on 10 September 1996. Hiit C-
94, the original proposal that resulted in the iLIiv1-T Act and that had dicd after it had had a second
rcading (and been reported back by committcc without amendment) due to the prorogation. of
PdilidIIXnt, tiad been rcinsrared as Bill C-29 and deemed lo h v t z brcri rcdd tlrc second tinic,
reported out of cormnittee without amendment and subject to th i rd reading In other words, thc
ncw Parliament was persuaded by the Government to pick up where thc previous one had left off.
’tVithin the 90-day rninirtruni period Ethyl was then required by, Article I 1 19 to wait before
cornrncncing i?rbitration, C-29 tiad passed the f louse of Commons and been introduced i n Ihe
Scnntc, which, thc 'Tribunal utidcrstnrids froiri Canada's Icgisiativc cspcri witnesses, gericrally
coricurs in I Iousc action '' As alrcady noted. by the timc Claimanr's Notice of Arbitration was
dclivcrcd on 14 April 1997. Bill C-29 had in fact passed the Senate, five days earlier on 9 April
1907, a;id wi ly awaited Itoynl Assertt. which, the Tribunal is yivcn to undersrand, is g a n t e d as a
nintter of coiirsc once the Government has requested it"
111 any event, the M M T Act is, as of 24 June 1997, a rcality, and therefore the Tribunal is
now presented with a claim bawd on a "measure" which has been "adopted or maintained" within
the meaning of Article 1 101.
(d) Limitation uf Claims to rhc Terrirmy of Canada
70 Cariada asserts that "Ethyl's claim i n reqpect o f expropriation nf i t s intcllccttial
propcity, reputation. and goodwill throughout the world is not within t h e scope of NAE"fA,"
since Article 1 101( I )@) applies Chapter I I only to "investments of investors of another
[ K M T A ] Pany [ti rAe rerrrroty ufrhe Party,"" and Ankle 1 I 10, orie ofrhe rhree provisions
alleged to h a w been breached by Canada, likewise addresses nationalizations or expropriations by
Canada's lfirce witnesses all dcah with itic Icgislatitc proccss. Thcy wcrc hyrnortd L. dit Plcssis, for 20 ?cars Law Clcrk and Parliarncntn~ Counscl to rlic Scrraic of Canada. florin Nickcis. 3 Coripressioiial Consultarii it1 tfic United Sratcs ui t i i . infer ntia. 13 ?cars scnicc in [tic Cotigressioiial Rtscarch Scnicc; arid Professor Alcsnndcr Wayne MacKay. an cspcn on Cancldim conslilutional la\\..
Canada coricrdcs tli;ii :i Rill beconics ;! "incxucc" upon itic gh.ing of Royal Asscnr. C\'CII tliouglr liic Act may not coitic into force in accordance with its tcmis for sofnc r i m . e.p.. GO days as in Ihc case of the MM'I' Act. Pages IS4 (firrc 17-185 (liric 18) oftlic transcript of l l ic Hcaririg 011 jurisdiction.
36
7 I . R distirictioii niiist be niade, however, between thc I O C L I S of the Claimant’s brcach
and that ofttie daniages suffer-ed I t is beyond doubt that the hGNT Act was adopied. and
purports to have, ai;d it1 hct has, legal forcc oriiy in Canada. It bans icliLI1’ from importation into
Canada arid prevcrits irs moverneiit between provinccs. Ethyl’s claim is premised on the lcgd
forcc the MMT Act has in relation to its invcstnierit in Canada, i .e. . Ethyl Canada.
72 Ethyl has argued. hotvmeer, that r l x damages resuliing to it in conscqucncc ofthe
MhIT Act include losses suirered outside of Canada As Ethyl itself succinctly notes (at
Ynragaph 97 of i t > Cuur;rci-McriwriaI o n Jurisdiciion), “thc Investor [Ethyl] claims that an
expropriation occtiirerl i tside Canada, but the Investor’s r e s u l h s losses were surered both iiisidc
and outside Canada ’*
7 3 . Deterrniiiariori of thc cxterit 10 which the damages claimed by Ethyl are in fact
co~npetisable under Chapter 1 I is an issue rhar can be considered by the Tribunal only in the
context of the merits. At rhis siagc detailed allegations regarding damayes have not been
advanced, as is reflected in the Tribunal’s Procedural Order dated 13 October 1997, which
expressly provided that in the submission of Canada’s Statement of Defence “no detailed response
to issues of damages i s required.” Indeed, at thc Hearing on jurisdiction held 24-25 February
1998 the Parties appeared to concur that i f the ‘I’ribunal would find that i t has jurisdiction. they
would favor bifurcation of liability and daniages, each to he addressed in a separate stage
Tttc Tribunal tliereforc dccides that i t canriot at this tirnc esciude any portion of thc
51 il i in due to cons idcrat ioris of t c rrit or; a1 i t y . "'
74 . I t rcriiaitis to determine wherhcr our jurisdiction fails diie to lack of fulfilln~ent by
Ethyl o f a r ~ y of the scvcrnt ptocedural requircments to which Canada points.
There i s rio doubt :ha! Chapter i I embodies certain rcquirenients that an
dibilratiiig irivesror niust nieer before a Tribunal can proceed to corisider i rs claim. The qucsrion
rather i s whether the NAE'I'A Parties intended that any of these conditions must bc fulfilled prior
to or simultancously with delivery of a Notice of Arbitration in order for a Tributial'sjurisdiztion
to attach.
75 Canada argues that such is the case Ethyl, noting that by now all of-the
;cquiretncnrs cited by Canada have becri fulfilled, urges the cowary i n effeci, I t takes the view
(ha: their fulfiiliiicrir was a prerequisite to i t s claim being, adn:issiblc, arid thus impliedly accepts
that a prolonged absence o f compliance \\itti thcrn would have justified dismissal of the clairil I t
cotitends. however, that ouI jurisdiction a h irirrrcz cannot be denied Ethyl adds the quite practical
points that Canada has in 110 way been prejudiced, that Canada concedes Ethyl could now
commence a new arbitration addressed to the MZLII' Act with all conditions fulfilled, and hence
I0 Accordingl!, rlic Tribiinal docs riot decide tiltat significnncc. i f arp. is to bc attributed [o ilic fact that ArtiClC 1 106. likc Article t 1 LO. includcs thc phrasc "111 11s tcmtoQ ..* nticrcns Article 1 102 docs 1101.
that the solc result o f a dismissal for lack ofjurisdiction 011 these grounds would bc tlic
irielXciciicy, arid, as Ethyl sees i t . thc injustice, of having to “start all ovcr agaiii.”
(3) Qe Requiren!c~fConsu[lac~or X e ~ o k i t i ~ t ~
76 While Carinda does not raise tkc point directly, ir could be understood as implying
that E:tiyI failed to heed Article 1 I 15, stylcti “Settlement of a Claim through Consultathi and
Negotiation ’’
77. I t is diflicult to credit rhe possibility, however, that Canada would through
corrsultation or ncgotiatiori desist from a course which, accordiny to Claimant’s allegations, was
rfctcrniined on arid persisted i n by the Canadian Governmcnt through two I’arliarnents as a mattcr
(If i i n p O r t a n t national policy. Certainly, Canada has givcti no indication that i t would have
rctented arid the Tribunal discerns none.
78. In any evcnt, Claimant’s undisputed proof in this ptiasc of the arbitration i s that i r
in fact approached Canada a s urged by XrtIcle I I I8 and was rebuffed Through a witness
affdavit of Mr Jeffrey Paul Smith, Vice President, Public Affairs, and Ileputy General Manager,
SIarketing, ofthe Ottawa o f h e of Hill and Knowlton Canada, sworn to 28 January 1998, Ethyl
details attcrnpts ar high levels to achicve a mutually satisfactory solution, begirwing with the
introductiuii of Bill C-94. In particular, klr Smirh confirms rhar at a rnceting held with Canadian
Cioverntnent oft?cirils on 12 November 1996, wio months following deliver), of Ethyl’s Noricc of
Intciit, “[II]OIIC , . claimed to have authority to consulr or ncgotiate.” He specifically identified
.‘hlr. [lofut] Gcro, the senior reprcsentaiive from the International Trade Branch,” with whom
cour~scl for Ethyl tiad cscharlgeti three lctiers dated 5 and 8 (two) November 1996 i n his capacity
as Director General, Tradc “olicy Burmil t 1. Depannmt of Foreign Atyaks and International
I radc I t is noteworttis that on 12 Sosunkcr 1996, apparently just moments prior to that * .
niceting, counsel for Ethyl reccivcd a telefascd niessagc from Mr. Steve Brcrctori, Inves tmi i t
Trade Policy Division, stating that “apparently it needs to be clarified that, in our view, today’s
ciicctiny i s not a consultation ’”’
(b) Notice of Iritrnt to Arbitratc arid The Six-Month Rule of Aniclc 1 120- . _ ~ . _ _ _ _ _ _ _ _ ~ _ . _ - -- . -
79. Clairnant’s Sotice of tntent to Submit a Claim to Arbitration piirsirant to
:lnicle 1 I I9 w a s delivcred 10 September 1996. h‘lore than scven months etapscd from then until
14 April 1997, when CLaimant delivered i ts Notice of Arbitration and tfiereby submitted i ts claim
to arbitrate pursuant to Article I l37( l)(c). Thus the former was delivered “at least 90 days
before” the tatter as required by Article 1 I 19.
SO. Canada’s only objection as regards Article 1 1 19 is that it appears io questioii the
dff‘ectiveness of the Not ice of intent whcn, in its view, ncither at thc dace of its delivery. nor at thc
tirnc of the subsequcnt delivery of thc Notice of Arbitratioit. could Canada have “breached an
obligation” under Section A of Chapter 1 1, which is the basis of i ts consent to arbitration in
Article I 1 IG, becausc no “measure” was in effect as required by Article 1101
; I I t is possible that the Cartadinn officiafs fcared that admitting a ”consullation“ migfir comproniisc the posilioti that Bill C-94, tlieii pcndiitg third reading in Ihc Housc of Cornrnnns. u i is no( a “ineiistire ’’
S I. Sirnitarly, Cariada 3ryucs fbrcefully that Claimant biled to comply with the
retiuircitient of‘ Articlc i 120 that it is otily "provided that si.u months have elapsed sirice the everits
giving rise to ;i clairri [that] a disputing investor m y submit the claim to arbitration.”
33 A clairii is “submitled to arbitration” urider the UNCL’I‘RAL Arbitratiori Rules,
accurding to Article I 1371 i)(c>, whcri “the Sotice o f Arbitration . . . is received by the disputing
P a ~ y . * ’ Claimant’s Notkc of Arbitration w-as rccc;ved 14 April 1997. Therefort, accordins to
Canada. as of six rnonttis earlier, rrarncly 14 October 1996, ”events giving rise to a claim“ rnust
have existed. Canada maintains that. since as of I4 October 1996 Bill C-29 was still awaiting third
i-eading in the House of Commons, hence had riot even been introduccd in thc Senate, arid Royal
Assent fay more than six months in the htute , no “measure” existed to be breached and hence no
“events giving risc to a claim” existcd.
8.3. Initially, rticre is an issue as to whether thc phrasc “events giving rise to a claim” is
intended to includc all events (or elements) required to constitute a claim. or instead sortie, at
least, of the events Iczdiny to crystallization of a claim. The argument is made that the o3jecr and
pitrpose of NAFTA, set forth in i t s Article 102( l)(c) and (e), to “increase substantially investment
opportunities” and at the same time to “create cffective procedures . . . for the resolution of
disputes” would not be best served by a rulc absolutely mandating a six-month respite follo\+ing
the final efikctivcness of a measure until the investor may proceed to arbitration. Had rhc
S’AFTA Parties desired such riyidity, i t is contended, they explicitly could have required passage
of’sis ITlOnthS “since the adoption or maintenance of a measure giving rise to a claim.” I t
nonetheless remains debatable, we are told, whetlicr as of I 4 October 1996 the status of Rill C-29
w i s suflkient to comtitute “cvents givins risc to a claim ’’
S-l There also is an issue as to tshcther a six-motith "cooling OK period" sliould bc
app!iciible at all in this case, given t h e cvcri:s discussed abovc. The Tribunal has been given no
reason lo believe that any "consultation or negotiation" purscrant to Article 1 1 lS , which Canada
contirms the six-month provision in Ai-ticle 1 120 was designed to encoura~e," was even possible.
I ( is ariycd, thcrcforc, that iio pu~pose ivoiild be scned by any further susperision of Claimant's
:istit to proceed. Ti i s rule i; analogized to the internationat law requircmen\ of cuhaustion crf
reniedies, which i s disregarded when i t is denionstrated that in fact no remedy was availablo and
any attempt at eshaustion would liave been tiltilc. - _ ''
8 5 . '1k Triburial finds no need to address these aro,urnents as to Articles I t 19 and
I 120 since the fact is that in m y event six rrionths and more have passed following Royal Assent
to Bill C-29 and the cornins into force of the k4MT Act. I t is not doubted that today Claimant
could resubmit the very claim advanced hcre (subject to a n y scope limitations). No disposition i s
e\.kleut on the p a n of Caiiadri to repent [tie L43U Act or amend i t . Indeed, it could hardly be
expected. Clearly a dismissal of the claim ai this junciure woutd disserve, rather than serve, the
objcct and purpose of i%\FT:\.
.-
111 ;iic speciiic cirzuinstnnrcs of rhis cnsc the 'Tribunal decides that ncither
57.
legislative process T h e Tribunal notes that the House of Commons debate on Bill C-29 on third
readirig co~~i i~ icr~ced 25 Scptenibcr 1396, and Claiiiiant rmy have dccided to l i lc its Nolicc of
Intent on 10 Septcniber 1996 for the purpose of affecting that debate This is infcreritially
confirmed by the witness atlidavit of MI.' Sniith of Hill and Kno\vl~on, \\hich states
The Claimant may ha\e "jumpcd the guri" for tactical ccasons relating to the
(Paragraph 17) that
.: 4 Spcc~ficall\.. ihe Tr~btlrli~l i^oiicltides that this results from inrcryreting hosc Anicics in good fairh i r r ~ I C C O ~ ~ ; I ~ I C C nit11 ~ I C ordinan. nicaniiig to bc givctr to [lie tcrms tlicrcof in thcir csntcst and iri the light o f thc objcci arid p~i'posc of NAFTA, as prcscrrbed bv Aniclc 3 I of ihc Vicnna Convcnrion. arid that. cortsidcrhg pnrticularl? tfic circunisianccs of NAfTA's conclusiorr. m y difTcrcnt inicrprctation u.ould lcad lo a rcsult 1Vhicti is ni;iniicstly ;ihsard or unrcasoriabtc within l l i c mcaning of An ic l c 3 2 of rhc t'icnn3 Convenlion
43
Bill C-29, i .c . , five days later
SS. Had Ethyl first awaited Royal Asscrir to Bill C-29, and then bided i t s time ariotlter
six nionrtis. thc Triburial \c.o~iId not have been rcquired to deal with this issue. ?'he Tribtinal
decrtis i t appropria:e to decide, tticrefwc. thai Claimant shall bear the costs of the proceedings or1
jurisdiction insofar as tlicse issues arc involved.
(c) Consent and Waivers Urtder Article 1 12 1
89 Canada ague:, that jurisdittiuii iicic ib abscrit because Itir written co~fsrnl of Ethyl
to arbitratiorl, and the urit ten waivers by Ethyl and also Ethyl Canada of arty rights to certain
o:ht.r dispute settlement proccdurcs, which were required by Article 1 121 (according to i t s title)
as ''Corictitions I'recedcnt to Submission ot'a Claim to Arbitration," wcrc provided only with the
Statement of Claiiri, dciiscrcd 2 October 1997. and not with the Kotice of Arbitration. delivcred
14 April 1997, which, according to Article I l37( I)(c), is \vhen the "claim [was) submitted to
arbitration" under Section B The sufficiency ofttie consent arid waivers thus provided is not
othenvisc questioned
90. The Tribunal has not gained any insight into thc reasons for the formditics
pr-escI-ihed by Article 1 12 1. which on their face seem designed to mcmoriaIize cxpressi.~ verbis
\+hat normally is thc case ii1 any event, namely, that the initiation of arbitration coristitutes corisent
tu arbitration by the initiator, whereby accus5 to nrry cour t or otlicr dispute scttlcniciit rncchatiisni
is precluded (esccpt as allowed aricilfar).. to or in su\?port of :he arbitration). The Triburd
9 1, I ’ h e ‘I‘ribunal tias little trotible deciding that Claimant’s unexplained delay in
cornplying with Anicltl 1 12 1 is not of significance for jurisdiciion in this case. While
,Article 1 1 2 1 ’ s title cliaractcrizes its reqctiremcnrs as “Conditions Precedent,” i t docs not say to
what they are precedent. Caniida’s contention that they are a precondition to jurisdiction, as
opposed to a prci-equisite 10 adrnissibiliry, is not borne out by the text of Article I 12 I, which must
%over-n. Article 1 13 l (3) . instead of saying “shall be included in the submission o f a claim to
arbitration“ - in itself n broadly cricompassitig coticcpt could havc said “shall bc iricludcd
with the Notice of Arbitration” if the drastically preclusive effect for which Canada arsucs truly
were intcndcd. Tfic Tribunal therefore concludes that jurisdiction here is not absent due to
Ulaitriant‘s having provided the consen! arid waivers necessary under. Ankle I I2 I with its
Statement of Claim ratiier than tvith its Notice of :It-bitration.
92. Here, too, however, the Tribunal deems i t appropriate that Claimant be responsibte
for the costs of the jurisdictional proceedings insofar as they have related to the issues arising in
cmiiiectioii w i t h Article I121
furnished w i t h the %;ice of Arhirration, which would have been the better practice, Elad they
been, a certain pan oi‘thcse procecdirrgs would have beer1 obviated.
30 reasor1 appears why thc consent and waivers were not
i d ) 1 Ias a ‘’XeJv Claim” Becri Asserted?
93 The Tribunal finally deals with Canada’s contention that reliarice in the Statement
of Clniiti o n the M X I I ’ Act, which was cnactcd sonic six nmrirh:, fic~lluwiitg deiikci y nf tlic Ntmce
ot‘:\rbitratioil, which Notice was directed iit Bill C-29 (which became the h.I?vl*l ;\ct), and specific
refi.rcrrce in the Statement of Clairri for- the first timc to the product Greenburn,” constitiire the
assertion o f ” i~cw clainis” which the Tribunal is pi-ohibited from considerins
94 The revised and expanded terminoiogy in the Statcnient of Claim is not intri:isicaliy
of sac11 y’ertt sigtiificance. This is particularly so, bearing in rnirrd that Article 3 of the
L‘NIC:TR+iL Arbiirarion Rules, which in this regard rertiairis unniodifitld by anything in Part 8,
and which prescribes the form of a notice of arbitration, requires (in ( 3 j ( q ) simply that such
notice inciude “The yxera l nature of thc claim and an indication ofthc arnotim involved, i f any.”
By contrast, c\r.ticic 1s of those Rules, likewise unmodified by Part H, requires (at (I)(b) and (c ) )
that a staterrlent of claim set forth a ‘‘statement of t!ie facts supportins the c la im“ 2nd t h e “pointr.
i r r issue.” Thus a geater elaboration of cictail in the Statenicnt of Clairn is permissible, if not,
intlccd, required.
95 The nub n f the matter, however, is that the specific inc1~:sion of references to the
ktMT Act arid ihe p rodwt Greenburn 111 the Statcrrient of Claim is not , as the Tribunal sees i r , to
be viewed as adding “new ctairns,” but rather, if anything, as amending the claim previously
described in the Notice of Arbitration Article 20 of tho UKCITRAI, Arbitration Rules, which
Part I3 docs riot modify, providcs that Claimant “niay” so airmid “uiilcn ttic ‘tibiti a1 11 iburid
corisiders i t inap1)ropriate to allow siicii arncndrncrir having regard to the delay in makin?: I[ o r
prejudice to the other parry 01. any other circumstances.” An amendment of Ethyl’s ctatm, if’oric
there lias been, made as early as hi the Statmerit of Claim hardly can be regarded as ~nvolving any
46
‘‘delay ”” 30 prcjiidict: or any other circuinst3imx are cited by Canada i\hicl~ would tend to
rcbut Article 20’s prcsumprion of an;cndability” arid the Tribunal apprehends none. Therefarc, to
[he cstcnt, i f nriy, tfia; the S K ~ ~ C R I ~ X I ~ of Claim aiticiids the clnitn of Ethyl, the Tribunal accepts
such anicndrtie:it
L ’ I I I i\rvn!d
96 Fur rhc reasons set fcxrh above the Tribunal awards as folloLvs
.: 6 Kornmliy it i s a siaicmcnt of claim i lmi is iisclraineedcd ar n tatcr siagc. Thc issue of n possiblc anicnditicnt m d c b! n slxcmcnt ofclnini (0 a noiicc ofnrhitrntioii nriscs in t t ic biAf3.A coiitcst. Imscscr, bccatisc of lhc proccdur:il stricturcs disciisscd nbo\-c.
47
1. The 'rributml rejects Cariadcl's objcctions to jurisdiction bascd on Articles I 10 i
jescepi Lbr 1 10 i(5) add[-essed in 2. below), I 116. 1 I19, 1 120 arid 1 I21 ot
ix A F T A
2 -1hc Tribunal joins to t h e merits Canada's objections to jurisdiction based on
Aniclcs I 1 I Of I) and f I0 1 (b) (as referred to in Paragraphs 70-73, .qwu) , arid on
Ankles 1 1 i2(1) and Chapter 3 of NMTX (as refcrrcd to in Paragraphs 62-54,
srrprii).
? > . The costs of the Government of Canada and of the Tribunal attributablc to the
jurisdictional proceedings insofar as they have related to issues raised under-
N..-l'A Articles 1 1 19, 1 120 and 1 12 1 shall be borne by thc Claimant, and will bc
set forth iri the Fkal Aivard.
48
k farc Lalonde:
Date of last sig,riaturc:
