Reply Memorial of the Investors
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IN THE MATTER OF AN ARBITRATION UNDER CHAPTER 11 OF THE NORTH AMERICAN FREE TRADE AGREEMENT AND THE UNCITRAL ARBITRATION RULES WILLIAM RALPH CLAYTON, WILLIAM RICHARD CLAYTON, DOUGLAS CLAYTON, DANIEL CLAYTON and BILCON OF DELAWARE Investors v. GOVERNMENT OF CANADA Respondent REPLY MEMORIAL OF THE INVESTORS Appleton & Associates International Lawyers 77 Bloor St West Suite 1800 Toronto, Ontario M5S 1M2 Tel.: (416) 966-8800 Fax: (416) 966-8801 Counsel for the Investors Reply Memorial of the Investors Re: Bilcon of Delaware et. al. PART ONE: OVERVIEW ......................................................................................................................................... 1 PART TWO: STATEMENT OF FACTS ..................................................................................................................... 7 I. The Beginning ......................................................................................................................................... 7 II. The 3.9ha Quarry is Approved, with Conditions .................................................................................... 9 III. The Imposition Of An Environmental Assessment ............................................................................... 12 IV. Politics Behind the Scenes and Unfair Treatment ................................................................................ 14 V. Different Treatment ............................................................................................................................. 17 VI. The Joint Review Panel Takes Shape .................................................................................................... 19 VII. The Joint Review Panel Report ............................................................................................................. 28 VIII. The Ministers’ Decisions ....................................................................................................................... 35 PART THREE: LEGAL ISSUES ............................................................................................................................... 37 I. NAFTA ARTICLE 1105 – FAIR AND EQUITABLE TREATMENT ................................................................ 37 A. Overview ................................................................................................................................... 37 B. “Fair and Equitable Treatment” is an Autonomous Standard .................................................. 37 C. It is Customary to Interpret Treaties in Accordance with All Sources of International Law .... 44 D. The “Fair and Equitable Treatment” Standard May Be Inferred from International Jurisprudence............................................................................................................................ 45 E. The Autonomous “Fair and Equitable Treatment” Standard and the International Law Standard Have Converged ........................................................................................................ 48 F. The Content and Scope of “Fair and Equitable Treatment” ..................................................... 49 i. Duration and Delay .................................................................................................. 50 G. Canada Need Not Act in Bad Faith to Breach its Duty to Act in Good Faith............................. 52 H. Breach of Any One of the Elements of “Fair and Equitable Treatment” is Sufficient but not Necessary for a Violation of NAFTA Article 1105(1) ................................................................. 52 I. The Threshold for a Breach is Not What Canada Contends ..................................................... 54 J. The Test is Flexible and Applied to All Circumstances .............................................................. 62 II. ARTICLE 1102 - NATIONAL TREATMENT ............................................................................................... 63 A. Overview ................................................................................................................................... 63 B. GATT/WTO Experience is Important in Interpreting Article 1102 ............................................ 63 C. NAFTA Article 1102 - The Analytical Steps ............................................................................... 66 D. Step 1: “Like Circumstances” Analysis ...................................................................................... 69 i. “Like Circumstances” Requires a Comparison Between the Investor Claimant and Domestic Investors Engaged in Similar Economic Activities and/or Regulated by the same General Legal Framework .............................................................................. 70 ii. “Like Circumstances” Does Not Mean “Identical” or “Most Like” Circumstances .. 75 iii. “Like Circumstances” Analysis Should Not Factor In Policy Objectives ................... 77 E. NAFTA Jurisprudence Interpreting Likeness in 1102 ................................................................ 84 i. The Analogous National Treatment Obligations in the TBT Agreement and the NAFTA Confirms That Equality of Competitive Opportunities Applies to National Treatment ................................................................................................................ 87 Reply Memorial of the Investors Re: Bilcon of Delaware et. al. ii. The Appellate Body Confirms the Competitive-based Approach for Likeness in the Clove-Cigarettes Dispute ......................................................................................... 89 iii. “Like Circumstances” as applied to cases of joint and overlapping regulatory authority in a federal system of government .......................................................... 93 F. The Element of ‘Less Favourable Treatment’ ........................................................................... 95 i. “Treatment No Less Favorable” Means Equality of Competitive Opportunities..... 97 ii. “Treatment No Less Favorable” Means “Best” Treatment ..................................... 97 iii. “Less Favorable Treatment” Does not Require Discriminatory Intent .................... 97 iv. Demonstrating Treatment Does Not Require Proof of Nationality-Based Intent ... 99 G. Duration .................................................................................................................................. 104 H. Step 3: “With Respect to the Establishment, Acquisition, Expansion, Management, Conduct, Operation, and Sale or Other Disposition of Investments” .................................................... 106 I. Likeness ................................................................................................................................... 107 III. ARTICLE 1103 OF THE NAFTA ............................................................................................................. 110 A. Canada has acted inconsistently with its Most-Favoured-Nation Treatment obligation in NAFTA Article 1103 ................................................................................................................. 110 i. The Law of Most-Favoured-Nation Treatment ...................................................... 110 B. Clarifying the Analytical Steps of NAFTA Article 1103 ............................................................ 112 C. The Meaning of Most-Favoured-Nation Treatment ............................................................... 113 i. The Overriding Economic Considerations of MFN Treatment............................... 114 ii. The Influence of Most-Favoured-Nation Treatment from the International Trade Regime upon the NAFTA ........................................................................................ 116 iii. Determining the Competitive Relationship ........................................................... 116 D. NAFTA ARTICLE 1103 – THE ANALYTICAL STEPS ..................................................................... 119 i. Likeness .................................................................................................................. 119 ii. Treatment .............................................................................................................. 121 iii. Government Intent is Not a Primary Element of “Likeness” under NAFTA Article 1103 ....................................................................................................................... 122 PART FOUR: THE LAW APPLIED TO THE FACTS................................................................................................ 128 I. INTERNATIONAL LAW STANDARD OF TREATMENT ........................................................................... 129 A. Lack of Due Process, Natural Justice and Fairness and Reasonableness Before the Joint Review Panel Process ............................................................................................................. 129 i. Imposition of Blasting Conditions and Setback Distances ..................................... 130 ii. The DFO’s Decision to Scope in Land Based Quarry .............................................. 131 iii. Whales ................................................................................................................... 132 iv. Inner Bay of Fundy Salmon .................................................................................... 134 B. Lack of Due Process, Natural Justice and Fairness and Reasonableness During the Joint Review Panel Process Before