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www.lexpert.ca | LEXPERT • December 2015 | 27 NAFTA been granted contingent on production. e NL provincial government justified its repatri- ation of those resource rights on the grounds that AbitibiBowater had violated its contract with the province. "e Canadian government concluded that NL's argument was so flimsy that it preferred to settle rather than put that issue to a tribunal," says Lalonde. Canada, however, has had some significant victo- ries in Chapter 11 arbitrations. In 2007, Canada won a seven-year dispute with US courier service UPS. e US firm sued Canada for C$230 million, claiming that Canada Post had an unfair advantage because it used the public postal system to support its own courier business. UPS contended that Canada Post's courier services, such as Express Post and Priority Courier, draw on an infrastructure of sorting facilities, mailboxes and post offices that private firms had to provide for themselves. UPS's claim that it suffered discrimina- tory treatment relative to Canada Post was rejected by the NAFTA panel. "e case addressed fundamental issues of how the government of Canada interacts with its Crown corporations," says Lalonde, including the issue of whether Crown corporations benefit from subsidies that have a discriminatory effect under Chapter 11. "at was a really important case that Canada won." More recently, Canada won in Detroit Interna- tional Bridge Company v. Government of Canada. e owner and operator of the Ambassador Bridge, a toll bridge linking Windsor and Detroit, unsuccessfully challenged the Canadian government's project to build a competing span across the Detroit River — the Gordie Howe International Bridge. e existing crossing between Ontario and Michigan is unique — trans-national transportation infrastructure that is owned by a private investor, Michigan's Manuel Moroun. In a claim filed in 2010, his Detroit International Bridge Company (DIBC) alleged breaches of Articles 1102, 1105 and 1110 and sought damages of "not less than $1.5-billion." In a ruling released in April 2015, the Chapter 11 panel dismissed DIBC's claim, saying NAFTA did not have jurisdiction over the matter. "I thought the claim was far-fetched to begin with," says Herman. "It was never contemplated that a government infra- structure project that didn't expropriate any property would be subject to a NAFTA claim. But when there's a process that says, 'You can sue, you've got a cause of action,' it opens the door to those actions." Canada has suffered some controversial defeats, such as in the 2000 ruling in S.D. Myers Inc. v. Government of Canada. Ameri- can company S.D. Myers successfully challenged Canada's ban on exports of hazardous PCB waste from Canada to the US. e export ban was intended to comply with the Basel Convention on the Control of Trans-boundary Movements of Hazardous Wastes and their Disposal. e NAFTA tribunal, however, decided that the ban violated Chapter 11, in that it was designed to favor Canadian waste companies. It awarded $6 million to S.D. Myers. e case raised concern that investors could use Chapter 11 to pressure governments to weaken environmental measures, including curbs on the transport of hazardous waste. e tribunal acknowledged that Canadian officials had legitimate concerns about whether exports of PCB waste from Canada to the US would comply with the Basel Convention and about the impact on Canadian PCB disposal capacity if the US were suddenly to close its border to PCB imports. Nevertheless, the tribunal's decision discounted the public policy rationales for the PCB export ban. e tribunal's ruling was controversial in other respects: it adopted an expansive definition of investment; the only invest- ment made by the corporate claimant was a loan to a Canadian company, Myers Canada, that was not owned by the claimant. e tribunal also awarded damages to the claimant simply for loss of anticipated market share in Canada; the tribunal did not explain how the investor's expectation of business in Canada could have been met despite the eventual closing of the US border to PCB imports. Two current cases under Chapter 11 are being closely watched by international trade lawyers. In Eli Lilly and Company v. Government of Canada, the global pharmaceutical company is challenging how Ottawa has implemented patent protection. "If it's successful, it will have significant ramifications on how drug patents work in Canada," says Lalonde. e Indiana-based company in 2012 sought C$500 million against the Canadian government, aer Canadian courts "IT WAS NEVER contemplated that a government infrastructure project that didn't expropriate any property would be subject to a NAFTA claim. But when there's a process that says, 'You can sue, you've got a cause of action,' it opens the door to those actions." Lawrence Herman, Herman & Associates LLP

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