William Richard Clayton, Douglas Clayton, Daniel Clayton, and Bilcon of Delaware, Inc. v. Government of Canada
PCA · Investment (ICSID and treaty) · Canada · 17 Mar 2015
Why it matters
This is a landmark NAFTA case clarifying that environmental assessments must follow statutory requirements and cannot be used as a disguised restriction on foreign investment. The tribunal held that introducing novel, undefined criteria like 'community core values' without notice to the investor breaches the minimum standard of treatment. It also confirmed that discriminatory application of environmental laws can violate national treatment obligations. The case sets important limits on how host states may conduct environmental reviews of foreign investments.
Summary
The case arose from a proposed quarry and marine terminal project at Whites Point, Nova Scotia, by Bilcon, a US-owned company. After initial encouragement from Canadian officials, the project underwent a joint federal-provincial environmental assessment by a Review Panel (JRP). The JRP recommended rejection based on 'community core values', a concept not found in the governing legislation, finding the project inconsistent with local values. The federal and provincial governments adopted this recommendation, effectively killing the project. Bilcon and its shareholders brought a NAFTA claim alleging breaches of minimum standard of treatment (Article 1105), national treatment (Article 1102), and most-favored-nation treatment (Article 1103). The Tribunal upheld jurisdiction over claims arising after June 17, 2005. On the merits, a majority found that the JRP's reliance on 'community core values' as a determinative factor, without statutory basis and without prior notice to the investor, was arbitrary and unfair, violating Article 1105. The majority also found that the treatment was less favorable than that accorded to domestic investors in like circumstances, breaching Article 1102. The Tribunal deferred the quantum of damages to a later phase. One arbitrator dissented on the Article 1105 finding. The case is significant for its detailed analysis of the interplay between environmental regulation and investment treaty protections.
The detail
Parties: William Richard Clayton, Douglas Clayton, Daniel Clayton, and Bilcon of Delaware, Inc. v. Government of Canada
Case number: PCA Case No. 2009-04
Outcome: The Tribunal found Canada breached NAFTA Articles 1105 (minimum standard of treatment) and 1102 (national treatment). Liability was established; quantum deferred.
Applicable law: NAFTA Chapter Eleven, UNCITRAL Rules 1976, Canadian Environmental Assessment Act, Nova Scotia Environment Act
Issues in play: The case involved a collision between Canada's environmental assessment process and NAFTA's investment protections. The JRP's use of 'community core values' as a determinative factor was found to be arbitrary and discriminatory, violating fair and equitable treatment and national treatment.
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