Q&A: Int’l arbitration expert on Alberta’s threat of ’slam-dunk’ case v. USA over Keystone veto

West Law | 5 February 2021

Q&A: Int’l arbitration expert on Alberta’s threat of ’slam-dunk’ case v. USA over Keystone veto

(Reuters) - Alberta’s Premier Jason Kenney said that the Canadian province, which has an equity in the now-canceled Keystone XL pipeline, may seek compensation under investor-protection provisions still in effect under the North American Free Trade Agreement (NAFTA).

Kenney in a Facebook Live broadcast Tuesday called the potential case a "slam dunk" after the United States "retroactively remove(d) regulatory approval on the basis of which an investment was made." The U.S. has never lost a NAFTA investor-state dispute.

George Bermann, the director of the Center for International Commercial & Investment Arbitration at Columbia Law School, spoke with Reuters about Alberta’s odds.

Questions and answers have been edited for clarity and brevity.

REUTERS: Investors with so-called legacy investments can still file claims under NAFTA until July 2023. What claims could Canada make under the treaty’s Chapter 11?

BERMANN: The foremost claim is something that’s called fair and equitable treatment. An investor must be treated fairly and equitably.
In a good many cases, an expropriation claim is brought. You might think of an expropriation as the physical takeover of property, (but) it is extended to regulatory takings, which reduce, drastically, perhaps to a vanishing point, the value of an asset. In this case, the asset is a license.
Under the United States-Mexico-Canada Agreement, which is the successor (to NAFTA), there is a possibility of bringing contract claims; any breach of an obligation right in connection with an investment gives rise to a claim. NAFTA doesn’t have that provision. But determination has to be made as to which treaty governs.

REUTERS: What could we expect from the United States in terms of its defense?

BERMANN: The most obvious argument is that what we did was fair, reasonable. Then that has to be operationalized. One of the ways it’s operationalized is to say the measure we took was not only rationally related to an important public policy - I assume it would be climate change - but was distinctly proportionate to it.

REUTERS: So can Alberta succeed?

BERMANN: The United States has never lost. So what is the likelihood of winning? I hate to say it, but there’s always the first time.

REUTERS: What is the advantage of going to arbitration under NAFTA versus filing a case in U.S. federal court?

BERMANN: Most of these treaties provide options and you pick the one you want; arbitration or litigation in the host country. The fact is that most parties would rather be before an arbitral tribunal than before a court of a host country which is presumed to be less than entirely neutral.

REUTERS: What kind of awards are we talking about?

BERMANN: Well, these cases are huge. We’re talking about millions easily. There was an award against Russia (that) was a record. Larger than any award or any judgment anywhere in the world - for $50 billion.

(In 2014 a U.N. arbitral tribunal under the auspices of the Permanent Court of Arbitration ordered Russia to pay more than $50 billion for the indirect expropriation of OAO Yukos Oil Company.)

source: West Law