Merrill and Ring Forestry L.P. v. Canada, ICSID Case No. UNCT/07/1
ICSID · Investment (ICSID and treaty) · Canada · 31 Mar 2010
Why it matters
This award is notable for its detailed analysis of the fair and equitable treatment standard under NAFTA Article 1105, particularly the threshold for breach. The tribunal considered both a low and high threshold but ultimately dismissed the claim due to lack of proven damages, emphasizing that an international wrongful act requires both breach and damages. The case also addressed the time bar under NAFTA Article 1116(2) and the treatment of log export restrictions.
Summary
Merrill & Ring Forestry L.P., a U.S. investor, brought a claim against Canada under NAFTA Chapter 11, alleging that British Columbia's log export restrictions and related federal measures breached several NAFTA obligations, including national treatment (Article 1102), performance requirements (Article 1106), expropriation (Article 1110), and fair and equitable treatment (Article 1105). The investor argued that the regulatory regime prevented it from exporting logs to obtain higher prices, causing losses. Canada defended the measures as legitimate environmental and resource management policies. The tribunal, after extensive proceedings, dismissed all claims. On fair and equitable treatment, the tribunal examined two possible thresholds: a low threshold (requiring mere unfairness) and a high threshold (requiring egregious conduct). It found that even under the lower threshold, the investor failed to prove damages. The tribunal noted that the investor's claimed past and future losses were speculative, as its profitability was inextricably linked to the regulatory regime. The cost of compliance was not compensable as it was ordinary. The tribunal also declined to rule on the time bar under Article 1116(2) because no breach with damages was established. The award is significant for its discussion of the relationship between breach and damages in investment law.
The detail
Parties: Merrill and Ring Forestry L.P. v. Canada, ICSID Case No. UNCT/07/1
Case number: italaw/cases/669
Outcome: Claim dismissed. Each party to bear its own costs and share arbitration costs equally.
Applicable law: NAFTA Chapter 11, UNCITRAL Arbitration Rules, international law
Issues in play: The case involved the interplay between NAFTA's fair and equitable treatment standard (Article 1105) and the minimum standard of treatment under customary international law, as well as the relationship between breach and damages in investment arbitration.
Read the full decision at italaw ↗
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