NAFTA allowed U.S. quarry to sue Canada
Many want right removed for a country to sue another, as Bilcon seeks $443M
This far-flung peninsula in the North Atlantic seems an unlikely place for an international trade dispute. But a U.S. company’s scuttled plans to build a quarry here have turned these quiet fishing grounds into a case study of the kind of thorny disputes that threaten to derail the North American Free Trade Agreement.
Digby Neck, a remote strip of volcanic rock in southwest Nova Scotia, has a population of about 2,000. The location was chosen by a Delaware company, Bilcon, to be the site of a large stone quarry in 2002. Lured here by the government of Nova Scotia, Bilcon planned to blast the basalt rock that lines the shore, then load 40,000 tons of it onto a ship that would leave the Bay of Fundy each week and head to New Jersey, where it would be mixed into concrete for roads, bridges and other projects.
The quarry was expected to operate for 50 years and create about 30 local jobs in Digby Neck. Instead, the project was killed by the Canadian government after a years-long review concluded that it would damage the environment. But Bilcon, which had invested significant sums trying to get the project underway, seized on an obscure NAFTA provision allowing foreign companies to sue governments for unfair treatment.
Bilcon sued Canada — and won. The company is seeking as much as $443 million, plus costs. While the Canadian government can fight to lower that sum, NAFTA provides no appeal mechanism to reverse the underlying legal decision.
The ability of foreign companies to sue governments is one of the most contentious issues in the clash among the United States, Mexico and Canada over how to rework NAFTA. The Trump administration views that section of NAFTA as impinging on national sovereignty, saying it undermines government decision-making. The U.S. is pushing for dramatic changes in that provision that would roll back the ability of companies to bring cases under NAFTA. Those changes are fiercely opposed by businesses, Mexico and — despite its loss to Bilcon — Canada.
It is the latest in a series of demands by the United States that have pushed the trade talks to the brink of collapse.
The provision that Bilcon used — known as investor-state dispute settlement — gives a tribunal of private-sector lawyers the power to rule on whether countries treat foreign investors fairly. It is a tool that critics, including labour unions and environmental groups, say puts billions of taxpayer dollars at risk by taking power away from democratically elected governments and putting it in the hands of lawyers and multinational corporations.
Canada and Mexico have said they are open to improving the provision, but not dropping it. Businesses regard it as essential to protecting their investments abroad.
In Digby Neck, residents like Kemp Stanton, whose family has harvested lobsters from these waters for generations, objected to the quarry over concerns that it would harm the ecosystem and the local economy, which depends on fishing and tourism from whale watching.
“It was way, way, way too big of a project for Digby Neck,” said Stanton, a retired lobsterman.
The Canadian government commissioned an independent panel to review the project in 2003 and, after four years of deliberation, it recommended rejecting the quarry, citing its potential for “significant adverse environmental effects.” The Canadian federal and provincial governments agreed, and the project was officially killed in 2007.
Stanton and others in Digby Neck thought that was the end of the dispute. But Bilcon filed a complaint against the Canadian government, claiming unfair treatment under the investor-state dispute settlement provision. In early 2018, a NAFTA panel of lawyers will begin deciding how much Canada must pay.
Stanton, leaning on a seawall with the Bay of Fundy behind him, said he found it disturbing that a NAFTA tribunal could hand down a ruling regarding his community. “NAFTA allows decisions to be made by people we’ve never seen in places we’ve never heard of that directly affect us,” he said.
NAFTA allows decisions … by people we’ve never seen. KEMP STANTON, DIGBY NECK