It has been a while since I've had an excuse to talk about National Treatment issues in investment treaties, so I'm happy to see the Bilcon NAFTA Chapter 11 case going forward. As usual, I turn to Luke Peterson for a basic overview of the facts:
The claim, which is being arbitrated under the UNCITRAL rules, and administered by the Permanent Court of Arbitration, arises out of a thwarted investment in a quarrying project in the Canadian province of Nova Scotia.
A New Jersey-based family, the Claytons, and their Delaware corporate vehicle, Bilcon, allege that a lengthy environmental assessment process was conducted in an arbitrary and unfair manner by Canadian authorities, ultimately stymieing the investors plans to mine basalt – a key ingredient in the production of concrete and asphalt – and then ship it by bulk tanker to their New Jersey manufacturing site.
The proposed investment attracted considerable local opposition and scrutiny in Nova Scotia.
Following the ultimate rejection of the project in 2007 by a joint provincial/federal environmental assessment process, the U.S. investors moved to arbitration under the NAFTA. In a Notice of Arbitration filed in the case, the claimants allege that they were subjected to the most onerous of a series of possible reviews under Canada’s environmental assessment legislation – contrary to the treatment of other similar projects – and that the resulting review misstated or incorrectly applied relevant legal rules and procedures.
There are a lot more issues than just National Treatment, but I'm going to focus on that one. The investors' memorial is here. Here's an excerpt from the National Treatment part:
538. Canada has acted inconsistently with its National Treatment obligation in NAFTA Article 1102:
a) There are Canadian investors and investments in like circumstances with Bilcon and its Investors;
b) Canada accorded Bilcon and its Investors treatment that was less favorable than the treatment accorded to Canadian companies in like circumstances;
c) The impugned measures interfered with the conduct, management, operation and expansion of Bilcon.
A. Likeness
539. The Canadian environmental assessment scheme is of general application. Therefore, the universe of investors and investments that are in like circumstances includes in principle the general class of proponents under the scheme.
...
B. Canada Provided Better Treatment
546. Canada provided the worst level of treatment possible to the Investors and their Investment. By comparison, Canada provided more favorable treatment to Canadian investors and their investments in like circumstances. ...
D. Conclusion
598. Canada has failed to meet its obligations under NAFTA Article 1102 as a result of the provision of better treatment to Canadian investments or Canadian investors who are in like circumstances to the Investors or their Investment, Bilcon.
...
600. Canada has acted inconsistently with its national treatment obligation in Article 1102 by not treating the Investors and their Investment as favorably as investors and investments of investors from Canada.
601. Rather than providing the best treatment available, Canada actually provided the worst level of treatment possible to the Investors and their Investment. By comparison, and as described in this Part of the Memorial, Canada provided more favorable treatment to the Canadian investments.
Canada's counter-memorial is here. Here's an excerpt of the National Treatment arguments:
400. Accordingly, for the Claimants to make out a claim under Article 1102 or 1103, they bear the burden of showing that: (1) a government accorded them “treatment” during the EA of the Whites Point project and that the same government accorded treatment to other domestic or foreign investors or investments; (2) the treatment this government accorded to the Claimants or their investment was “less favourable” than that which it accorded to these other domestic or foreign EA proponents; and (3) the government accorded the allegedly discriminatory treatment in question “in like circumstances”.
401. This analysis has to be conducted in light of the object and purpose of Articles 1102 and 1103, which is to prevent discriminatory treatment based on the nationality of an investor or its investment. In past NAFTA Chapter Eleven arbitrations, all three NAFTA Parties have agreed that the national treatment obligation is designed to protect against discrimination on the basis of nationality. The statements of the NAFTA Parties on Article 1102 apply equally to the MFN obligation under Article 1103.
402. Likewise, NAFTA Chapter Eleven Awards reflect that the central object of Article 1102 is to prevent nationality-based discrimination. ...
403. As is shown below, the Claimants here make no attempt to demonstrate that Bilcon was “unreasonably” treated “less favourably” than any of the domestic or foreign investors they identify as potential comparators. Nor can they. The treatment accorded to Bilcon was identical to the treatment accorded to many other domestic or foreign proponents. Further, to the extent that any of the treatment was different, the individual circumstances present in each of the cases resulted in their being reasonable scientific and policy reasons for the different treatment.
...
478. The Claimants have failed to meet their burden to prove that the treatment Canada and Nova Scotia accorded to Bilcon during the EA of the Whites Point project discriminated against them on the basis of their nationality. At most the Claimants have established that in comparison with some EA proponents, though not all, Bilcon was accorded different treatment. What they have failed to show, however, is that all of what they challenge is treatment covered by Articles 1102 and 1103. Similarly, they have failed to provide any analysis of how the treatment they received was in any way less favourable. Finally, the evidence presented above concerning the fifteen comparators identified by the Claimants demonstrates that any differences in treatment resulted from the significantly different circumstances of the comparator projects, including (1) the biophysical and socio-economic environments; (2) the nature of the projects (including, among others, size, duration, and activities involved); and (3) the level of public concern. For all of these reasons, the treatment accorded to Bilcon is no basis for a claim under 1102 or 1103. To hold otherwise would negate the right of the NAFTA States to make reasonable distinctions based on valid policy and scientific reasons.
There are a number of issues to talk about in the context of National Treatment, but one of particular interest to me is the meaning of "nationality-based" discrimination, a phrase used by Canada but not the claimaints. The issue hasn't been developed in great detail yet, but hopefully later submissions and the hearing will give us more.
