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NAFTA - Chapter 11 - Investment

Cases Filed Against the Government of Canada

V. G. Gallo v. Government of Canada

Claimant

Mr. Vito G. Gallo (“the Claimant”) is a U.S. citizen who claimed to be the owner and sole shareholder of 1532382 Ontario Inc. (the “Enterprise”).  The Enterprise owned Adams Mine, an abandoned open pit mine and partially permitted waste disposal site, which it had purchased in September 2002. 

Articles

  • 1105 (Minimum Standard of Treatment)
  • 1110 (Expropriation)

Damages claimed

$105 million CAD.

Arbitration Rules

UNCITRAL

Summary

Procedural History

On March 30, 2007, the Claimant filed a Notice of Arbitration to commence a NAFTA Chapter 11 arbitration on behalf of the Enterprise. The Claimant filed his Memorial on March 1, 2010 which claimed damages in an amount of $105 million CAD. Canada’s Counter Memorial was subsequently filed on June 29, 2010. On August 30, 2010, the Tribunal, after receiving additional evidence from Canada, decided to consider the jurisdictional issue of whether the Claimant owned the Enterprise prior to hearing other aspects of the case including the merits of his claim and damages. The Tribunal held a Jurisdictional Hearing from January 29-February 4, 2011 in Toronto.

Factual overview and nature of the claim

The Government of Ontario, in 2004, enacted the Adams Mine Lake Act (“AMLA”) to prevent the use of Adams Mine as a landfill site for municipal waste. The AMLA prohibited the use of Adams Mine as a landfill, revoked certain regulatory permits and offered compensation to the Enterprise. 

Adams Mine had previously been touted as a potential waste disposal site for garbage from the Greater Toronto Area.  However, the City of Toronto and the surrounding regional municipalities had rejected this proposal several times over concerns that it could contaminate local drinking water.  The Enterprise continued to promote the site to these municipalities for this purpose despite these environmental concerns.

The Claimant alleged that the AMLA breached Canada’s obligations under the NAFTA Articles 1110 (Expropriation) and 1105 (Minimum Standard of Treatment).  He also asserted that he had standing on behalf of the Enterprise under NAFTA Chapter 11 because he owned the Enterprise prior to the enactment of the AMLA. 

Canada argued the revocation of regulatory permits in the AMLA did not amount to an expropriation of an “investment” of the Enterprise under NAFTA Chapter 11.  Moreover, even if the AMLA did expropriate these permits, Canada argued that this expropriation was a legal expropriation pursuant to NAFTA Article 1110.  Canada also argued that the AMLA did not breach Article 1105 as the Claimant had been consulted and afforded due process with respect to this legislation.

Canada identified several inconsistencies in the Claimant’s evidence concerning his ownership of the Enterprise. This led Canada to move for the production of original documents, and to subject these documents to a forensic examination.  The Tribunal, after receiving additional evidence from Canada, decided to consider the jurisdictional issue of whether the Claimant owned the Enterprise prior to hearing other aspects of the case including the merits of his claim and damages.

Award

On September 16, 2011, the Tribunal issued its Award on Jurisdiction.  The Tribunal found “without hesitation” that there was insufficient evidence to show that the Claimant owned the Enterprise prior to the enactment of the AMLA and dismissed his claim.  In doing so, the Tribunal questioned the lack of contemporaneous documents and found that a number of the corporate documents were backdated.  It also questioned the Claimant’s minimal involvement in acquisition and management of the Enterprise. 

The Tribunal awarded Canada $450,000 USD in costs.

Status

Dismissed.

Legal Documents (all documents are in pdf)

This case was governed by the arbitral rules of the United Nations Commission on International Trade Law.  Additional documents related to this case can be viewed at the website of the Permanent Court of Arbitration.

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