Bilcon Of Delaware Et Al V Government Of Canada: NAFTA Has Teeth, And Decisions Have Consequences

In late 2015, the arbitral decision in Bilcon of Delaware et al v Government of Canada1 (the "Award") spawned a host of controversy, with certain commentators expressing fears that the Award might chill the willingness of NAFTA2 signatories to engage in environmental regulation.3 The Bilcon saga has reared its head again with recent decisions in the Federal Court of Canada (the "Federal Court") and Federal Court of Appeal (the "FCA"), each worthy of comment:

The FCA decision4 (the "Stay Application") reiterates the strategic importance of decisions made at the outset of arbitration, including any decision to bifurcate liability and damages proceedings. In short, a party may not have their cake and eat it too by obtaining bifurcation and then seeking to stay appeal of the liability proceedings pending assessment of damages. The Federal Court decision ("Clayton") has continued the trend toward judicial recognition of finality in arbitral proceedings, confirming that the court will not lightly interfere with NAFTA arbitral awards unless there is a true jurisdictional issue. Facts and Background

The facts are well-known and boil down as follows. A group of American investors consisting of Bilcon of Delaware and its principals, the Clayton family (collectively, the "Investors"), intended to open a basalt quarry and marine terminal. After receiving encouragement from "the highest levels of government", the Investors spent a significant amount of time and millions of dollars initiating the project in Nova Scotia. When the project was ultimately rejected by an environmental assessment panel for failure to comply with "core community values", the Investors began arbitration alleging that they had received unfair treatment in breach of Canada's obligations under NAFTA. A tribunal of three arbitrators (the "Tribunal") heard the first half of the bifurcated proceedings and found in favour of the Investors on jurisdiction and liability.5 Canada then began the Federal Court proceedings to have the Award overturned (the "Review Application").

The FCA Decision

The Federal Court may stay judicial review of an arbitral award, giving the tribunal time to cure any defect in the award.6 The Investors sought to stay the Review Application pending the Tribunal's determination on damages, arguing this might affect the interpretation of the Award and preclude the need for judicial review. The FCA disposed of this argument as an absurdity: the Award was wholly...