Dispute Settlement

NAFTA - Chapter 11 - Investment

NAFTA Chapter Eleven Arbitration between
Pope & Talbot, Inc. and Canada

Executive Summary of Award dated June 26, 2000

Pope & Talbot Inc. ("the Investor") is a U.S. forest products company with an investment in Canada consisting of three softwood lumber mills and one pulp and paper mill, all located in British Columbia. In its claim to arbitration under the investor-state provisions (Chapter Eleven) of the North American Free Trade Agreement ("NAFTA"), the Investor alleges that Canada's implementation of the Canada-U.S. Softwood Lumber Agreement ("the SLA") breached four of Canada's obligations under NAFTA Chapter Eleven.

On June 26, 2000, the Tribunal hearing the claim issued an award respecting two of the Investor's allegations and deferred a decision respecting a third allegation. It held that Canada's implementation of the SLA was consistent with its obligations respecting performance requirements (NAFTA Article 1106) and expropriation (NAFTA Article 1110). The next phase of the arbitration, initially planned to focus on the Investor's allegation that Canada breached its minimum standard of treatment obligation (NAFTA Article 1105), will also include the Tribunal's deferred decision on alleged breaches of Canada's national treatment obligation (NAFTA Article 1102).

In dismissing the Investor's claim that Canada breached its NAFTA obligations by setting "performance requirements", the Tribunal agreed with Canada that this term must be interpreted according to its express terms and cannot be given a broader meaning. The Tribunal noted that, while setting a limit on exports may breach the performance requirements article, the regime set up to implement the SLA did not fix any such export cap. Softwood lumber quota holders may export unlimited amounts of softwood lumber to the U.S. upon payment of a fee over certain levels. The Tribunal concluded that export fees may deter producers from exporting beyond a certain level but they do not prevent producers from doing so, and there is therefore no breach of Article 1106. The Tribunal further found that the "use it or lose it" feature of the softwood lumber quota regime is consistent with Article 1106.

In dismissing the Investor's claim that its investment in Canada had been expropriated, the Tribunal held that government "interference", by regulation or otherwise, is not expropriation unless it interferes substantially with the owner's ability to use, enjoy or dispose of its property. The Tribunal accepted Canada's argument that the scope of Article 1110 is not broader than the scope of expropriation generally found in international law and rejected the Investor's argument that the scope was broadened by the inclusion of the term "measure tantamount to" expropriation. It found that the softwood quota regime did not restrict the Investor's investment in Canada according to this international standard.

The foregoing is a summary of the Tribunal's Interim Award.

For the complete text of the award please refer to Award_Merits (PDF Document - 3.40 MB)

Updated on April 27, 2001