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BINDING ARBITRATION - Powers and duties - Jurisdiction of the court to review

Tuesday, July 03, 2018 @ 8:33 AM  

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Application by Canada to set aside an arbitration award by a NAFTA Tribunal in favour of the respondents concluding that Canada had violated certain of its NAFTA obligations. The respondents, US investors in a proposed quarry and marine terminal project in Nova Scotia, sought damages when an environmental assessment panel recommended that the project should not go forward because it would have a significant adverse effect on a valued environmental component represented by the core values of the affected communities. Based upon the findings of this assessment, the federal and Nova Scotia governments refused to approve the project. According to the Tribunal, the assessment panel acted in an arbitrary manner by effectively creating a new standard of assessment, that of community core values, without notice to the respondents and by having this standard play a predominant role in its conclusion that the project should not proceed. The Tribunal further found that the assessment panel had effectively found the proposed location to be a "no go" zone for projects of this kind, without considering any measures that could mitigate the adverse environmental impact of the project. Canada argued that the Tribunal erred by basing its liability finding on its conclusion that the environmental assessment was not carried out in accordance with applicable federal and provincial legislation. Canada argued NAFTA Tribunals did not sit in review of judicial or administrative decisions made by State Parties, and that they had only been empowered to decide questions of international law. While the majority of the Tribunal purported to base its decision on international law principles, Canada argued that it instead decided questions of Canadian law that were reserved for the Court.

HELD: Application dismissed. Canada had not established that the Tribunal decision dealt with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contained decisions on matters beyond the scope of the submission to arbitration. The alleged errors did not involve true questions of jurisdiction. Canada disputed findings of fact made by the Tribunal or its application of the law to the facts as it had found them. In the absence of a true jurisdictional error on the part of the Tribunal, the Court could not intervene. The central issue decided by the Tribunal was whether Canada's conduct in relation to the environmental assessment and approvals process for the project and its treatment of the respondents breached its NAFTA obligations. This issue was contained within the respondents’ submission to arbitration. The Tribunal's discussion of domestic law was incidental to the main issues that were before it, and did not constitute an excess of jurisdiction. Deciding preliminary or incidental questions of national law did not convert a NAFTA Tribunal into a domestic court of appeal. Nothing in NAFTA precluded the Tribunal from making the award that it made. The assessment of the facts of a case went to the merits of the decision and did not involve a jurisdictional question. The application of the law to the facts of a case was a challenge to the conclusion reached by the Tribunal and not a matter of jurisdiction.

Canada (Attorney General) v. Clayton, [2018] F.C.J. No. 472, Federal Court, A.L. Mactavish J., May 2, 2018. Digest No. TLD-July22018002