TC Energy Corporation and TransCanada Pipelines Limited v. United States of America (II)
ICSID · Investment (ICSID and treaty) · United States of America · 12 Jul 2024
Why it matters
This case is the first to interpret USMCA Annex 14-C, which governs legacy investment claims after NAFTA's replacement. The tribunal's strict textual approach limits investor-state arbitration to measures existing before USMCA's entry into force, potentially narrowing the scope of protection for legacy investments. The dissent highlights a significant interpretive divide, with implications for future claims under similar transitional provisions in other treaties.
Summary
TC Energy Corporation and TransCanada Pipelines Limited (Canadian investors) initiated arbitration against the United States under the USMCA's Annex 14-C, which provides a three-year transition period for legacy investment claims after NAFTA's termination. The claimants alleged that the United States breached NAFTA Chapter 11 obligations by revoking a presidential permit for the Keystone XL pipeline in 2021, after USMCA entered into force. The United States objected to jurisdiction, arguing that Annex 14-C only covers claims based on measures that existed before USMCA's entry into force (July 1, 2020), not new measures adopted during the transition period. The tribunal, by majority (President Mourre and Arbitrator Crook), agreed with the United States. Applying the Vienna Convention on the Law of Treaties (VCLT) Articles 31 and 32, the majority found that the ordinary meaning of Annex 14-C, read in context and in light of its object and purpose, limits consent to arbitration to claims arising from pre-existing measures. The tribunal rejected the claimants' argument that the three-year period was intended to allow claims for new measures, noting that the text refers to 'legacy investments' and 'measures adopted or maintained' before USMCA's entry into force. The majority also declined to consider negotiating history as it did not find the text ambiguous. Arbitrator Alvarez dissented, arguing that the text and negotiating history support jurisdiction over post-USMCA measures. The tribunal ordered each party to bear its own costs and share ICSID costs equally.
The detail
Parties: TC Energy Corporation and TransCanada Pipelines Limited v. United States of America (II)
Case number: ICSID Case No. ARB/21/63
Outcome: The Tribunal declined jurisdiction over the claims, finding that Annex 14-C of USMCA does not permit arbitration of claims based on measures adopted after NAFTA's termination.
Applicable law: USMCA Annex 14-C, NAFTA Chapter 11, ICSID Convention, VCLT Articles 31-32
Issues in play: Interpretation of USMCA Annex 14-C: whether it allows arbitration for legacy investments based on post-NAFTA measures. The majority held that the text limits claims to pre-existing measures; the dissenting arbitrator argued it covers measures within a three-year transition period.
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