Resolute Forest Products Inc. v Government of Canada
PCA · Investment (ICSID and treaty) · Canada · 25 Jul 2022
Why it matters
This award is significant for its detailed analysis of NAFTA Article 1108(7) exceptions for subsidies and grants, and for clarifying the attribution of provincial measures to the federal government under the ILC Articles. It also underscores the high threshold for establishing a breach of the minimum standard of treatment under NAFTA Article 1105.
Summary
Resolute Forest Products Inc., a US-based paper company with investments in Canada, brought a NAFTA Chapter Eleven claim against Canada alleging that the Province of Nova Scotia's assistance measures to a competitor, Port Hawkesbury Paper (PHP), violated NAFTA Articles 1102 (national treatment) and 1105 (minimum standard of treatment). The assistance measures included a Forest Utilization License Agreement, land purchase, relief from pension liabilities, and a load retention rate for electricity. Resolute argued that these measures gave PHP an unfair competitive advantage, causing Resolute to close its Bowater Mersey mill. The Tribunal first addressed attribution, finding that most measures were attributable to Canada under ILC Article 4, except the load retention rate which was not attributable. On liability, the Tribunal analyzed Article 1108(7), which excludes government procurement and subsidies from NAFTA's national treatment obligation. It found that the assistance measures fell within the subsidies or grants exception, and thus Article 1102 did not apply. The Tribunal also rejected Resolute's argument that Canada's WTO reporting of 'nil' subsidies estopped it from claiming the exception. On Article 1105, the Tribunal held that the measures did not breach the minimum standard of treatment, as they were reasonable policy choices and not arbitrary or discriminatory. The Tribunal dismissed all claims and ordered Resolute to pay a portion of Canada's arbitration costs.
The detail
Parties: Resolute Forest Products Inc. v Government of Canada
Case number: PCA Case No. 2016-13
Outcome: The Tribunal dismissed all of Resolute's claims and ordered Resolute to pay Canada US$ 316,666.67 in arbitration costs.
Applicable law: NAFTA Chapter Eleven, UNCITRAL Arbitration Rules 1976
Issues in play: The case involved NAFTA Article 1102 (national treatment) and Article 1105 (minimum standard of treatment), with the key collision being whether provincial assistance measures to a competitor violated these obligations.
Read the full decision at italaw ↗
Locus Standi links to the source decision and publishes its own plain-language summary. It does not reproduce the text of the award.