NAFTA - Chapter 11 - Investment

Cases filed against the Government of Canada

Koch Industries, Inc. and Koch Supply & Trading, LP v. Government of Canada

Claimants

The claimants are Koch Industries, Inc. and Koch Supply & Trading, LP (collectively, “Koch”).

Koch Industries, Inc. is a company incorporated under the laws of Kansas. Koch Supply & Trading, LP (“KS&T”) is a partnership organized under the laws of Delaware and an indirect, wholly owned subsidiary of Koch Industries, Inc.

Articles

• NAFTA Article 1105 (Minimum Standard of Treatment)
• NAFTA Article 1110 (Expropriation and Compensation)
• CUSMA Annex 14-C

Damages claimed

No less than US$30,158,240.95, plus interest and costs.

Status

Won. The Tribunal dismissed the case in its entirety on jurisdictional grounds.

Arbitration rules

International Centre for Settlement of Investment Disputes (ICSID).

Summary

Procedural history

On February 20, 2020, Koch served the Government of Canada with a Notice of Intent to Submit a Claim to Arbitration. On December 7, 2020, Koch filed a Request for Arbitration against the Government of Canada.

The disputing parties exchanged written pleadings and the Tribunal held a hearing on jurisdiction, liability, and damages in Washington D.C., from December 5 to 8, 2022. The Tribunal rendered its decision on March 13, 2024, and determined that it lacked jurisdiction over claims made by Koch Industries, Inc. and Koch Supply & Trading, LP against Canada.

Factual overview and nature of the claim

The Claimants alleged that the Province of Ontario’s cancellation of its cap and trade program in 2018 breached NAFTA (North American Free Trade Agreement) Articles 1105 (Minimum Standard of Treatment) and 1110 (Expropriation and Compensation). The Claimants sought damages of not less than US$30,158,240.95, plus interest and costs. This amount represents the purchase price of the emission allowances acquired by Koch Supply & Trading, LP in May 2018 at an Ontario-Québec-California joint auction.

Award

The Koch v. Canada Tribunal unanimously found that it lacked jurisdiction ratione materiae because the Claimants failed to establish that either KS&T or Koch Industries had a covered investment under NAFTA.

In particular, the Tribunal agreed with Canada that the emission allowances purchased by KS&T did not meet the Ontario common law definition of “property”. Accordingly, the Tribunal concluded they did not constitute a protected investment under NAFTA Article 1139(g), which protects “real estate or other property, tangible or intangible, acquired in the expectation or used for the purpose of economic benefit or other business purposes”. Furthermore, the Tribunal found that neither the emission allowances KS&T purchased nor KS&T’s business activities in Ontario constituted the types of interests protected under NAFTA Article 1139(h) (i.e., “interests arising from the commitment of capital or other resources in the territory of a Party to economic activity in such territory”, such as under certain types of contracts). Finally, the Tribunal noted that the Claimants had failed to establish that Koch Industries held any relevant investments and, on that basis, concluded it lacked jurisdiction with respect to Koch Industries.

The Tribunal ordered each side to bear their own litigation costs, and ordered that the costs of the arbitration be borne equally by both disputing parties.

Legal documents

Additional documents related to this case can be viewed on the ICSID website.

Copies of all legal documents posted have been prepared in a language of operation of the Tribunal or Court in question. The Government of Canada has not modified or changed them in any way. As such they have not been translated from the original.

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