NAFTA - Chapter 11 - Investment
Cases Filed Against the Government of Canada
Lone Pine Resources Inc. v. Government of Canada
Claimant
Lone Pine Resources Inc. (“LPRI”) is a company incorporated in the State of Delaware in the United States. LPRI owns Lone Pine Resources Canada Ltd. (“LPRC”), which is incorporated in Alberta. LPRC is an oil and gas resources development and production company operating in Alberta, British Columbia, Quebec and the Northwest Territories.
Articles
- 1105 (Minimum Standard of Treatment)
- 1110 (Expropriation)
Damages claimed
$118.9 million USD
Status
Won. The Tribunal has dismissed the claim on November 21, 2022.
Arbitration rules
United Nations Commission on International Trade Law (UNCITRAL)
Summary
Procedural history
The claimant submitted a Notice of Intent to Submit a Claim to Arbitration on November 8, 2012, followed by a Notice of Arbitration on September 6, 2013. The parties exchanged written pleadings and the Tribunal held a hearing on jurisdiction, merits, and damages in Toronto, Ontario, October 2 to 13, 2017. Closing arguments were heard on November 24, 2017, in Montreal, Quebec. On September 21, 2020, following the passing of the president of the Tribunal, a new president was appointed and the Tribunal was reconstituted in accordance with the UNCITRAL Arbitration Rules (2010) and Chapter Eleven of the North American Free Trade Agreement. The Tribunal rendered its award on November 21, 2022.
Factual overview and nature of the claim
The claimant alleged that LPRC had contractual interests relating to five contiguous exploration licences for petroleum, natural gas and underground reservoirs (“exploration licences”) located near Trois-Rivières. These interests stemmed from a farmout agreement signed with the holder of these exploration licences, a Canadian company named Junex Inc. Four of the exploration licences were located on land and one was located in the St. Lawrence River.
The exploration licence located in the St. Lawrence River was revoked following the coming into force, on June 13, 2011, of a Quebec law titled An Act to limit oil and gas activities (“Act”). The Act revoked exploration licences located in the St. Lawrence River and limited the area of those that crossed the water’s edge to their land portion.
The Act was passed in response to the findings of a strategic environmental study on hydrocarbon development in the maritime estuary basin and the northwestern Gulf of St. Lawrence, which concluded that this environment was not conducive to hydrocarbon development activities.
The claimant alleged that Quebec’s energy policy in effect at the time of the facts promoted investments in the hydrocarbon sector. It also alleged that Quebec government workers assured it that it could conduct exploration work in the territory covered by the Junex licences in which it had interests.
The claimant alleged that the revocation of the river licence violated Canada’s obligations under articles 1105 (Minimum Standard of Treatment) and 1110 (Expropriation). More specifically, it alleged that the passing of the Act was an arbitrary, unfair and inequitable measure based on political and populist grounds rather than actual environmental grounds. It also allegd that this measure violated the legitimate expectations that it had when it decided to invest in Quebec. Finally, the claimant alleged that the revocation of the river licence expropriated its investment without any compensation. It alleged that this violation of Canada’s international obligations caused it damages.
Conversely, the Government of Canada alleged that the Act was not a measure that affected the claimant because it was not the holder of the exploration licence owned by Junex. Moreover, according to the Government of Canada, the Act was a legitimate measure of public interest that applied indiscriminately to all holders of exploration licences that were located fully or partially in the St. Lawrence River. The measure was enacted by a fundamental democratic institution of Quebec and was preceded by numerous studies that establish that the Act seeks to achieve an important public policy objective, namely, the protection of the St. Lawrence River. Therefore, the Act could not be considered an arbitrary, unfair or inequitable measure.
The Government of Canada also pointed out that the minimum standard of treatment guaranteed in Article 1105 of NAFTA did not protect investors’ legitimate expectations. Even if this were the case, no representative of the Government of Quebec communicated to the claimant any guarantee, promise or specific assurance that could create legitimate expectations relating to the development of hydrocarbon resources that may be found beneath the St. Lawrence River.
Finally, the Government of Canada disputed that the claimant had an investment that was capable of being expropriated. Even if this were the case, the disputed measure did not substantially deprive it of its investment because the Act revoked only one of the five exploration licences that were the subject of the farmout agreement with Junex. Furthermore, passing the Act was a legitimate exercise of the Government of Quebec’s police power and, thus, the measure could not constitute an expropriation. Lastly, the Government of Canada alleged that the damages claimed by the claimant were highly exaggerated.
Legal documents
Legal documents related to this case can be viewed at the website of the International Centre for Settlement of Investment Disputes.
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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