by Public Citizen
In 2007 Mobil Investments Canada, owned by U.S. oil giant ExxonMobil, and U.S.-based Murphy Oil Corporation used NAFTA to launch an ISDS case against a Canadian province’s policies relating to oil exploration contracts. The “Canada- Newfoundland Offshore Petroleum Board’s Guidelines for Research and Development Expenditures” require oil extraction firms to pay fees to support research and development in one of Canada’s poorest provinces, Newfoundland and Labrador. The guidelines apply to domestic and foreign concession holders alike. Offshore oil fields in the region, developed after significant infusions of public and private funds, were discovered to be far larger than anticipated, prompting a variety of new government measures that applied to all concession holders.
In their NAFTA claim, the oil corporations argued that the new guidelines violated NAFTA’s prohibition on performance requirements. In 2012, a tribunal majority ruled in favour of Mobil and Murphy Oil, deeming the requirement to use larger-than-expected oil revenue to fund research and development as a NAFTA-barred performance requirement. That the policy applied to both domestic and foreign investors was irrelevant. NAFTA’s investment chapter, like those of most ISDS-enforced agreements, includes among the substantive rights it guarantees investors a flat ban on signatory nations’ establishment or maintenance of various requirements that investors must meet.
The tribunal’s order for Canada to pay $13.2 million plus interest for damages incurred until 2012 was made public in February 2015. The Canadian government attempted to have the award “set aside”, arguing that the tribunal had exceeded its jurisdiction in making the award — but that application was denied. Furthermore, in its ruling, the tribunal determined that, as long as the Offshore Petroleum Board’s guidelines remained in place, Canada would be in “continuing breach” of its NAFTA obligations “resulting in ongoing damage” to the oil company’s interest, so Mobile launched another case demanding even more damages since 2012, so Canada may end up having to pay much more.
last update : April 2021