Canada loses NAFTA court challenge on marine quarry

OTTAWA — The federal government has lost a court bid to overturn a NAFTA ruling involving a Nova Scotia quarry and marine terminal project, sparking renewed concerns about the trade deal’s effects on Canada’s environmental regime.

The U.S. firm that backed the proposed project welcomed the Federal Court of Canada decision, while environmental groups said it highlights how the North American Free Trade Agreement hamstrings Canada’s ability to protect its environment.

In her decision, Federal Court Justice Anne Mactavish rejected federal arguments that a NAFTA tribunal inappropriately decided questions of Canadian law when it found problems with an environmental review panel process.

Sixteen years ago, American firm Bilcon planned to develop a basalt quarry, processing facility and marine terminal on the Bay of Fundy at Whites Point in southwestern Nova Scotia. The company hoped to ship 40,000 tons of stone to the U.S. each week for a period of 50 years.

The Nova Scotia and federal governments nixed the project in 2007 after a joint environmental assessment panel said it should not go ahead. The panel concluded the initiative would have a “significant adverse effect” on the surrounding communities, damaging the quality of life.

Bilcon, which had invested considerable time and money in the project, filed a NAFTA challenge under Chapter 11, alleging Canada’s environmental regulatory regime had been applied in an arbitrary, unfair and discriminatory manner.

The NAFTA tribunal found Nova Scotia created expectations the project might proceed as long as federal and provincial environmental laws were respected. The tribunal ruled the assessment panel indeed acted arbitrarily by effectively creating a new standard of assessment concerning “community core values,” without notice to Bilcon.

After winning at the tribunal, Bilcon said it would seek at least $300 million US in damages from Canada. Ottawa took the matter to Federal Court, but Mactavish determined the NAFTA tribunal made no errors warranting a reversal of its ruling.

The Clayton family of New Jersey, principals of Bilcon, called their experience a “cautionary tale” to U.S. and Canadian investors who expect fair treatment in both countries.