Chemtura Corporation (formerly Crompton Corporation) v. Government of Canada
NAFTA (UNCITRAL) · Investment (ICSID and treaty) · Canada · 2 Aug 2010
Why it matters
This award is a landmark NAFTA decision affirming that non-discriminatory, good-faith health and environmental regulations fall within a state's police powers and do not constitute expropriation. It clarified that a substantial deprivation of the investment as a whole is required for an indirect expropriation claim, and that mere loss of a product line is insufficient. The case also illustrates the application of the minimum standard of treatment under NAFTA Article 1105, rejecting a higher standard than customary international law.
Summary
Chemtura Corporation, a US-based pesticide manufacturer, challenged Canada's cancellation of registrations for lindane-based pesticides. Lindane was used as a seed treatment for canola, but concerns over health risks led Canada's Pest Management Regulatory Agency (PMRA) to initiate a Special Review in 1999. Chemtura had previously agreed to voluntarily withdraw canola use from its lindane labels, but later sought reinstatement. The PMRA terminated all lindane registrations in 2002 due to unacceptable occupational exposure risks. Chemtura claimed this breached NAFTA's minimum standard of treatment (Article 1105), most-favoured-nation treatment (Article 1103), and expropriation (Article 1110). The Tribunal held that the minimum standard under Article 1105 is that of customary international law, not an autonomous standard. It found no violation because the PMRA acted within its mandate, in good faith, and based on scientific evidence. The treatment of Chemtura was not discriminatory or arbitrary. The MFN claim failed because no better treatment was proven. On expropriation, the Tribunal found no substantial deprivation of Chemtura's overall investment in Canada; lindane sales were a small part of its business. Moreover, the measures were a valid exercise of police powers for health and environmental protection. The Tribunal dismissed all claims and ordered Chemtura to pay half of Canada's costs.
The detail
Parties: Chemtura Corporation (formerly Crompton Corporation) v. Government of Canada
Case number: PCA Case No. 2008-01
Outcome: The Tribunal dismissed all claims; Canada did not breach NAFTA Articles 1105, 1103, or 1110. Claimant ordered to pay costs.
Applicable law: NAFTA Articles 1105 (Minimum Standard of Treatment), 1103 (Most-Favoured-Nation), 1110 (Expropriation); UNCITRAL Arbitration Rules; Pest Control Products Act (Canada)
Issues in play: The case involved the collision between investor protection under NAFTA and Canada's regulatory powers to protect health and environment. The key issue was whether Canada's cancellation of lindane pesticide registrations breached fair and equitable treatment or constituted expropriation.
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