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Canada Border Services Agency IN THE ARBITRATION UNDER THE ARBITRATION RULES OF THE UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW AND THE NORTH AMERICAN FREE TRADE AGREEMENT BETWEEN: CHEMTURA CORPORATION (FORMERLY CROMPTON CORP.) Claimant/Investor - AND - THE GOVERNMENT OF CANADA Respondent/Party REDACTED MEMORIAL OF THE CLAIMANT/INVESTOR Gregory O. Somers / Benjamin P. Bedard Paul D. Conlin / Alison FitzGerald / Renée Thériault OGILVY RENAULT LLP 45 O’Connor Street, Suite 1600 Ottawa, ON K1P 1A4 CANADA Telephone: (613) 780-8661 Facsimile: (613- 230-5459 Counsel for the Investor, Chemtura Corporation (Formerly Crompton Corp.) TABLE OF CONTENTS EXECUTIVE SUMMARY ............................................................................................................ 1 PART ONE - A BRIEF HISTORY OF THE CLAIM .............................................................. 3 PART TWO - FACTUAL BACKGROUND............................................................................. 9 I. CHEMTURA (CROMPTON) ............................................................................................ 9 II. LINDANE......................................................................................................................... 11 A. The Importance of Lindane........................................................................................... 11 B. The Development and Uses of Crompton’s Lindane Products..................................... 12 III. TERMINATION OF THE CANADIAN MARKET FOR LINDANE PRODUCTS ...... 17 A. United States Trade Issues............................................................................................ 17 B. The “Agreement” Between the PMRA and the CCGA ................................................. 22 C.Canada-U.S. Record of Understanding........................................................................ 23 D.Negotiation of the Conditional Withdrawal Agreement ............................................... 24 IV. THE CONDITIONAL WITHDRAWAL AGREEMENT................................................ 35 V. CANADA’S FAILURES TO ABIDE BY ITS COMMITMENTS.................................. 38 A. The PMRA’s Threats and Misinformation Regarding the July 1, 2001 Deadline........ 38 B. Failure to Complete a Scientific Assessment of Lindane by the End of 2000............... 47 C.Termination of the Canadian Market for all Lindane Products................................... 51 D.The PMRA’s Flawed Special Review Process and Assessment.................................... 57 E. The PMRA’s Failures with respect to Registration of Replacement Products............. 68 VI. THE LINDANE REVIEW BOARD PROCEEDING AND ITS FINDINGS.................. 85 VII. RELATED DEVELOPMENTS IN THE UNITED STATES.......................................... 93 PART THREE - LEGAL ANALYSIS..................................................................................... 98 I. OVERVIEW OF THE LEGAL ARGUMENT................................................................. 98 II. JURISDICTION OF THIS TRIBUNAL ........................................................................ 100 III. GOVERNING LAW, INTERPRETATION AND BURDEN OF PROOF.................... 101 A. The Object and Purpose of NAFTA ............................................................................ 101 B. Principles of Interpretation Applicable to NAFTA..................................................... 102 C.The Burden of Proof.................................................................................................... 105 IV. CANADA HAS BREACHED ITS OBLIGATIONS UNDER NAFTA ARTICLE 1105 ........................................................................................................................................ 106 A. Overview ..................................................................................................................... 106 B. NAFTA Article 1105 ................................................................................................... 106 C.Canada’s Breaches of Article 1105 ............................................................................ 125 V. CANADA HAS BREACHED ITS OBLIGATIONS UNDER NAFTA ARTICLE 1103 ........................................................................................................................................ 153 A. Overview ..................................................................................................................... 153 B. NAFTA Article 1103 ................................................................................................... 153 C.Canada’s Breaches of Article 1103 ............................................................................ 167 VI. CANADA HAS BREACHED ITS OBLIGATIONS UNDER ARTICLE 1110 ........... 170 A. Overview ..................................................................................................................... 170 B. NAFTA Article 1110 ................................................................................................... 170 C.Canada’s Breaches of Article 1110 ............................................................................ 180 VII. DAMAGES, INTEREST AND COSTS......................................................................... 184 A. Overview ..................................................................................................................... 184 B. The Measure of Compensation for Breach of NAFTA................................................ 184 C.Valuation of Damages................................................................................................. 189 D.Interest ........................................................................................................................ 200 E. Costs............................................................................................................................ 201 PART FOUR - RELIEF SOUGHT...................................................................................... 201 ANNEX A -TERMS ANNEX B -TIMELINE OF KEY EVENTS ANNEX C -LINDANE REVIEW BOARD - KEY FINDINGS REGARDING PROCEDURAL FAIRNESS ANNEX D -LINDANE REVIEW BOARD - KEY FINDINGS REGARDING SCIENTIFIC ISSUES ANNEX E -PROCEDURAL HISTORY OF THE DISPUTE REDACTED EXECUTIVE SUMMARY 1. Crompton Canada, a wholly-owned subsidiary of the Investor, Chemtura Corporation (“Chemtura”), has manufactured and sold agricultural pesticide products in Canada since the 1940s. Among its most profitable businesses in the 1990s were lindane-based pesticides, that were approved for use on cereal and cole crops, mustard, and most importantly, canola. 2. Canada, through its Pest Management Regulatory Agency (the “PMRA”), wrongfully terminated this business. In doing so, Canada acted contrary to its NAFTA obligations to the Investor Chemtura and caused it significant loss and damage. More particularly, Canada failed to meet the minimum standard of treatment in Article 1105 of NAFTA by: · Improperly demanding a “voluntary” withdrawal of lindane products based on irrelevant considerations, (i.e. trade rather than scientific concerns); and deregistering products without a sufficient evidentiary basis; · failing to abide by promised conditions of Crompton Canada’s withdrawal of lindane products from the Canadian market, which gave rise to legitimate expectations and on which Crompton Canada had reasonably relied; · denying Crompton Canada a right to be heard prior to the suspension of its lindane product registrations; · failing to maintain a transparent regulatory process; · suspending Crompton Canada’s lindane registrations without evidence or lawful authority; · acting in an arbitrary, grossly unfair and unjust manner in dealings with Crompton Canada; and · failing to act in good faith in respect of the treatment accorded to Crompton Canada. 3. Alternatively, Canada acted contrary to its NAFTA obligations in Article 1103 to accord the Investor Chemtura the treatment available to non-NAFTA investors in like circumstances in the fair and equitable treatment obligation contained in other treaties to which Canada is a party. REDACTED 4. Canada also wrongfully expropriated Chemtura’s lindane product business in Canada contrary to its NAFTA obligations in Article 1110 in the following way: · the suspension of Crompton Canada’s lindane product registrations constituted expropriation or measures tantamount to expropriation; · the measures at issue were not taken for a public purpose; · the expropriation discriminated against Chemtura; · the expropriation was carried out without due process and was a breach of international law; and · no compensation was paid as a consequence of the expropriation. 5. As a result of Canada’s various breaches under the NAFTA, the Investor has suffered significant damages resulting from the loss of its lindane products seed treatment business. 6. The Investor’s position regarding all of the above is set forth in this Memorial in the following manner. Part One provides a brief overview of the Investor’s claim, and Part Two consists of a comprehensive discussion of the factual background. The legal analysis of Canada’s breaches is set out in Part Three, followed by the relief sought under Part Four. 7. The Investor’s Memorial is supported by the Statements of Evidence of Mr. Alfred Ingulli, who was Executive Vice-President, Crop Protection Division, of the Investor for many years before his retirement and who has been retained by the Investor to assist in this proceeding; Mr. Paul Thomson, who is Director, New Business Development and
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