This is from Canada's counter-memorial submission in the Eli Lilly NAFTA Chapter 11 case:
213. First, Article 1105(1) requires the NAFTA Parties to accord to investors and their investments the customary international law minimum standard of treatment of aliens. That standard, as has been overwhelmingly affirmed in NAFTA jurisprudence since 2001, protects investors against measures which “weighed against the given factual context, amount to a gross denial of justice or manifest arbitrariness falling below acceptable international standards.” In the context of this dispute, which deals exclusively with two Federal Court rulings, denial of justice is the only basis of liability in international law for the judgments of domestic courts interpreting domestic law.
214. There has been no such denial of justice or any other arbitrary or unfair conduct by the Federal Court, Federal Court of Appeal and the Supreme Court of Canada. Claimant was afforded full opportunity to plead its case in both the atomoxetine and olanzapine patent litigations. In deciding that Claimant’s two patents were invalid under the Patent Act, the Court considered extensive factual and expert evidence put forward in a full adversarial process. The Federal Court reached rational decisions based upon such evidence and issued reasoned judgments relying on long-standing precedent and principles of Canadian patent law. The courts acted in full compliance with their statutorily-directed, specialized jurisdiction and the judgments were upheld on appeal.
215. This NAFTA Tribunal cannot act as yet another court of appeal. International law provides no basis to second-guess the reasoning of the Canadian courts on questions of Canadian law in the absence of a denial of justice. Claimant uses inflammatory language such as “arbitrary,” “illogical and absurd” and “discriminatory” to describe the Federal Court’s interpretation of Canadian law. These are mere labels which cannot mask the lack of legal foundation of Claimant’s position.
I was recently discussing a similar issue with Jason Yackee. He was saying ISDS tribunals are not so much "courts of appeal" as "courts of first instance." With that in mind, I'm not completely sure about this, but it seems to me that perhaps ISDS tribunals can best be described in the following way. It is true that they do not act as a "court of appeal" on the domestic law issues. An investor cannot simply assert to an ISDS tribunal that a domestic court misapplied domestic law, and thus the domestic decision should be reversed. However, what the investor can assert is that the domestic court decision violates international law, as provided in the investment treaty/FTA chapter. In a sense, then, the ISDS tribunal is a supranational court of first instance, applying international law to the domestic government actions (here, a court decision).
Canada offers a narrow scope for when domestic court decisions can be invalidated by an ISDS tribunal ("denial of justice" only). I would have thought it was broader than that, but we'll see what the tribunal has to say.
