Mobil Investments Canada Inc. and Murphy Oil Corporation v. Canada
ICSID · Investment (ICSID and treaty) · Canada · 22 May 2012
Why it matters
This is a landmark NAFTA Chapter Eleven case clarifying the scope of Article 1106 (performance requirements) and the Article 1108 reservation for existing non-conforming measures. The Tribunal held that the 2004 Guidelines were not covered by Canada's reservation because they were a new, more onerous measure, not a mere continuation of prior practice. It also set a high bar for proving future damages, requiring 'actual' losses rather than speculative projections.
Summary
The dispute arose from Canada's 2004 Guidelines requiring offshore petroleum projects in Newfoundland to spend a minimum amount on research and development (R&D) and education/training (E&T) in the province. The Claimants, U.S. investors in the Hibernia and Terra Nova projects, argued that the Guidelines violated NAFTA Article 1106 (prohibition on performance requirements) and Article 1105 (minimum standard of treatment). Canada argued that the Guidelines were exempt under Article 1108(1) as a continuation of prior measures in effect when NAFTA entered into force. The Tribunal unanimously rejected the Article 1105 claim, finding no breach of fair and equitable treatment. On Article 1106, the Tribunal unanimously held that the Guidelines constituted a prohibited performance requirement (requiring local R&D spending). By a majority, the Tribunal found that Canada's Article 1108 reservation did not cover the 2004 Guidelines because they were a new, subordinate measure that was not 'consistent with' the reserved measure (the Accord Act and earlier guidelines). The majority reasoned that the 2004 Guidelines imposed significantly more onerous obligations than the prior regime. On damages, the majority held that only 'actual' damages (where a call for payment had been made) could be compensated, rejecting claims for future speculative losses. The Claimants were given 60 days to submit evidence of actual damages. The decision is significant for its interpretation of NAFTA's performance requirements and the scope of reservations for existing measures.
The detail
Parties: Mobil Investments Canada Inc. and Murphy Oil Corporation v. Canada
Case number: ICSID Case No. ARB(AF)/07/4
Outcome: The Tribunal found that Canada's 2004 Guidelines violated NAFTA Article 1106 (performance requirements) but not Article 1105 (minimum standard of treatment). The Claimants were invited to submit evidence of actual damages for a subsequent quantum decision.
Applicable law: NAFTA Chapter Eleven, ICSID Additional Facility Rules, Canada-Newfoundland Accord Act
Issues in play: The case involved a conflict between Canada's right to regulate for local economic benefits (through R&D spending requirements) and NAFTA's prohibition on performance requirements (Article 1106). The Tribunal also considered whether the measures were exempt under Canada's Article 1108 reservation.
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