Windstream Energy LLC v. Government of Canada (I)
PCA · Investment (ICSID and treaty) · Canada · 27 Sep 2016
Why it matters
This award is significant for clarifying the scope of fair and equitable treatment under NAFTA Article 1105 in the context of regulatory changes. It held that a moratorium that frustrates an investor's legitimate expectations without providing a clear timeline or compensation can breach the minimum standard of treatment. The case also illustrates the limits of expropriation claims where the state does not permanently take property but merely delays development.
Summary
Windstream Energy LLC, a US company, invested in an offshore wind project in Ontario, Canada, after the province enacted the Green Energy and Green Economy Act and established a Feed-in-Tariff program. Windstream entered into a FIT Contract with the Ontario Power Authority. However, in February 2011, Ontario imposed a moratorium on offshore wind projects due to scientific uncertainty about environmental and health impacts. The moratorium effectively halted Windstream's project indefinitely. Windstream brought a claim under NAFTA Chapter 11, alleging expropriation (Article 1110), fair and equitable treatment (Article 1105), national treatment (Article 1102), and most-favored-nation treatment (Article 1103). The Tribunal dismissed the expropriation claim, finding that the moratorium did not constitute a permanent taking and that Windstream retained its FIT Contract and permits. However, the Tribunal found that the moratorium breached Article 1105 because it frustrated Windstream's legitimate expectations that the regulatory framework would be stable and that the project would proceed. The Tribunal noted that Ontario had made specific commitments and that the moratorium was imposed without a clear timeline or process for lifting it, which was arbitrary and unfair. The Tribunal awarded CAD 25,182,900 in damages, representing Windstream's sunk costs and lost profits, but rejected the discounted cash flow method proposed by Windstream. The Tribunal also ordered Canada to pay 50% of Windstream's legal costs. The award was rendered under the UNCITRAL Rules with the PCA as registry.
The detail
Parties: Windstream Energy LLC v. Government of Canada (I)
Case number: PCA Case No. 2013-22
Outcome: The Tribunal granted the claim under NAFTA Article 1105 (fair and equitable treatment) and awarded CAD 25,182,900 in compensation, plus 50% of legal costs (CAD 2,912,432). The expropriation, national treatment, and most-favored-nation claims were dismissed.
Quantum: CAD 25,182,900
Applicable law: NAFTA Chapter 11, UNCITRAL Arbitration Rules 2010
Issues in play: The case involved the collision between Ontario's regulatory power to impose a moratorium on offshore wind projects for environmental reasons and the investor's legitimate expectations under NAFTA Article 1105. The Tribunal balanced the state's right to regulate against the obligation to provide fair and equitable treatment.
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