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Canada's Amended Statement of Defence Bilcon v. The Government of Canada Amended Statement of Defence December 18th, 2009 IN THE MATTER OF AN ARBITRATION UNDER CHAPTER ELEVEN OF THE NORTH AMERICAN FREE TRADE AGREEMENT AND THE UNCITRAL ARBITRATION RULES BETWEEN: WILLIAM RALPH CLAYTON, WILLIAM RICHARD CLAYTON, DOUGLAS CLAYTON, DANIEL CLAYTON, AND BILCON OF DELAWARE, INC. Claimants and GOVERNMENT OF CANADA Respondent AMENDED STATEMENT OF DEFENCE OF THE GOVERNMENT OF CANADA STATEMENT OF DEFENCE: May 4, 2009 AMENDED STATEMENT OF DEFENCE: DECEMBER 18, 2009 Departments of Justice and of Foreign Affairs and International Trade Trade Law Bureau Lester B. Pearson Building 125 Sussex Drive Ottawa, Ontario K1A 0G2 CANADA TABLE OF CONTENTS I. PRELIMINARY STATEMENT ..................................................................................... 1 II. FACTUAL BACKGROUND........................................................................................... 2 A. Digby Neck, Nova Scotia and the Claimants’ Proposal for a 152 Hectare Quarry and Marine Terminal............................................................................................... 2 1. Digby Neck – Environment, Community and Economy............................ 2 2. The Claimants’ Proposal for a 152 Hectare Quarry and Marine Terminal. 4 B. Environmental Assessment in Canada.................................................................... 4 1. The Canadian Environmental Assessment Act........................................... 5 2. The Nova Scotia Environment Act............................................................. 8 3. The Joint Review Panel Process ............................................................... 10 C. The Environmental Assessment of the Proposed 152 Hectare Quarry and Marine Terminal................................................................................................................ 12 1. Overview of the Claimants’ Proposal....................................................... 12 a) Nova Stone’s Initial Application for a 3.9 Hectare Quarry on the 152 Hectare Quarry Site.......................................................................... 13 b) GQP’s Proposal to Construct the 152 Hectare Quarry and Marine Terminal........................................................................................... 14 2. Determinations by the Department of Fisheries and Oceans.................... 15 3. Applicable Environmental Assessment Regime....................................... 15 4. Bilcon’s Request to Delay the Constitution of the Joint Review Panel.... 16 5. The Establishment of the Joint Review Panel........................................... 16 6. The Joint Review Panel Process ............................................................... 17 D. The Decisions of Nova Scotia and Canada Not to Approve the Quarry and Marine Terminal................................................................................................................ 19 III. THE TRIBUNAL HAS NO JURISDICTION TO HEAR CERTAIN ASPECTS OF THE CLAIM ................................................................................................................... 20 1. The Tribunal Does Not Have Jurisdiction over the Actions and Recommendations of the Joint Review Panel........................................... 21 2. The Claimants Do Not Have Standing to Bring a Claim with Respect to the 3.9 Hectare Quarry Permit Issued to Nova Stone ............................... 21 3. The Tribunal Does Not Have Jurisdiction to Consider Measures Prior to June 17, 2005 ............................................................................................ 22 ii a) Measures Alleged in Connection with 3.9 Hectare Quarry Permit . 22 b) Measures Alleged in Connection with Referral of Environmental Assessment to a Joint Review Panel................................................ 23 c) Measures Alleged in Connection with Department of Fisheries and Oceans.............................................................................................. 24 d) Measures Alleged in Connection with Offer to Purchase Public Road .......................................................................................................... 24 IV. CANADA HAS NOT BREACHED CHAPTER 11 OF NAFTA................................ 24 A. Canada has Not Breached NAFTA Article 1102.................................................. 25 B. Canada has Not Breached NAFTA Article 1105.................................................. 26 1. The Alleged Actions of the Department of Fisheries and Oceans did not Violate Article 1105.................................................................................. 26 2. The Refusal to Sell the Road Did Not Violate Article 1105..................... 27 3. The Environmental Assessment Process Did Not Violate Article 1105... 28 4. The Decision of the Joint Review Panel Did Not Violate Article 1105 ... 29 5. The Decisions of Nova Scotia and Canada to Not Approve the Quarry and Marine Terminal did not Violate Article 1105 ......................................... 30 C. Canada Has Not Breached Article 1103 ............................................................... 30 V. THE CLAIMANTS ARE NOT ENTITLED TO DAMAGES.................................... 31 VI. AWARD SOUGHT BY CANADA................................................................................ 31 APPENDICES I. Map of Nova Scotia and Map of Digby, Nova Scotia (Enlargement) II. Map of Whites Point Quarry and Marine Terminal Project, Digby County, Nova Scotia iii Pursuant to Article 19 of the UNCITRAL Arbitration Rules, the Government of Canada (“Respondent” or “Canada”) respectfully submits this Statement of Defence in response to the Statement of Claim submitted by William Ralph Clayton, William Richard Clayton, Douglas Clayton, Daniel Clayton and Bilcon of Delaware, Inc. (“the Claimants”) on February 2, 2009. I. PRELIMINARY STATEMENT 1. Canada and Nova Scotia have rules and regulations for the environmental assessment of projects such as quarries and marine terminals: the Canadian Environmental Assessment Act at the federal level, and the Nova Scotia Environment Act at the provincial level. When an environmental assessment of such projects is required at both levels, the federal and provincial governments may enter into an agreement to conduct a single joint environmental assessment. 2. Environmental assessments in Canada are carried out without regard to the nationality of a project proponent. They provide for a fair and impartial process for assessing the environmental impact of proposed projects. 3. The Claimants in this case may be disappointed with the outcome of the environmental assessment of their proposed project. However, an investor is not entitled to bring a NAFTA claim simply because it disagrees with or is disappointed by the decisions of governmental authorities made in the course of such an assessment. The Claimants’ proposed project was subject to Canadian and Nova Scotia environmental assessment rules and regulations. They were entitled to be treated like other project proponents under NAFTA Articles 1102 and 1103 and to be subject to an environmental assessment process that did not fall below the minimum standard of treatment under NAFTA Article 1105. This treatment must be afforded to all project proponents subject to an environmental assessment in Canada, and was afforded to the Claimants. 4. In Part II of this Statement of Defence, Canada briefly outlines the facts relevant to the Claimants’ allegations. This part includes: (a) a description of the Claimants’ proposed quarry and marine terminal and of the region and community in which it was to operate—Digby Neck, Nova Scotia; (b) a summary of the rules and regulations governing the environmental assessment of projects in Canada; and, (c) an overview of the environmental assessment of the Claimants’ project. 5. In Part III, Canada identifies the Claimants’ allegations that are beyond the jurisdiction of this Tribunal. In particular, Canada identifies those allegations that: (a) do not relate to a measure of the Government of Canada; (b) the Claimants do not have standing to bring; and (c) are time- barred. 6. In Part IV, Canada demonstrates that there is no merit to the Claimants’ claims based on NAFTA Articles 1102, 1103 and 1105. The environmental assessment of the proposed quarry and marine terminal did not provide the Claimants with treatment less favourable than that accorded to Canadian investors, or investors of other nationalities, in like circumstances (NAFTA Articles 1102 and 1103). Nor have the Claimants identified treatment by Canada of the investment that falls below the minimum standard of treatment required by customary international law (NAFTA Article 1105). 7. In Part V, Canada outlines its position on the damages sought by the Claimants and puts the Claimants to the strict proof of their alleged losses. II. FACTUAL BACKGROUND A. Digby Neck, Nova Scotia and the Claimants’ Proposal for a 152 Hectare Quarry and Marine Terminal 1. Digby Neck – Environment, Community and Economy 8. Digby Neck is located on the southwest coast of the province of Nova Scotia. It is a narrow, 58 km-long peninsula extending between the Bay of Fundy and St. Mary’s Bay. Geologically, it is the spine of the North Mountain range. At the top end of the peninsula is the town of Digby. At the bottom are two small islands, Long Island and Brier Island. Maps of Nova Scotia and Digby Neck are attached at Appendix I. 9. The Bay of Fundy is a 270 km long bay that is 80 km wide at
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