A couple months ago, I mentioned the possibility of a NAFTA Chapter 11 claim by TransCanada related to the failure to approve the Keystone XL pipeline. I'm not sure why this issue suddenly made headlines again the other day, but here is something from Bloomberg:
A two-decade old trade accord could let TransCanada Corp. recoup some of the $2.4 billion spent on its Keystone XL project, even if President Barack Obama rejects the pipeline.
A provision in the North American Free Trade Agreement would let the Canadian company file a claim against the U.S., accusing the government of discrimination. While trade specialists say a successful challenge would be a long shot, a Nafta tribunal could award damages for costs as well as lost profit.
The article notes some skepticism about the chances of success:
“The Keystone regulatory decision-making process, while time consuming and probably frustrating from the point of view of TransCanada and others, is not obviously discriminatory,” said Scott Miller, a senior adviser for the Center for Strategic & International Studies, a Washington research group. “The burden required to prevail in these cases is fairly high.”
Of course, as we know, discrimination is not required for investment claims, and I would have thought a "fair and equitable" treatment claim would be a fairly strong claim here.
But let's talk about discrimination for a second. It can mean a couple different things.
Most prominently, there is nationality-based discrimination, where a government discriminates against a company because it is foreign. I'm guessing, although I'm not completely sure, that this is what the Bloomberg article has in mind when "discrimination" is mentioned.
But there is also just plain old "you discriminated against me" ("class of one" discrimination, for example). As for this kind, I'm not a fan of such a broad conception of discrimination in investment agreements, but the idea is out there, and I assume TransCanada would argue it, under one provision or another.
Turning back to nationality-based discrimination, could TransCanada come up with evidence that its treatment by the U.S. government is based on its nationality? Here are some quotes it might use in this regard:
- Sen. Udall: "There is really one basic question. Is the Keystone Pipeline in our Nation’s interest—not Canada’s interest or Wall Street’s interest but our Nation’s interest. I do not believe it is. I say this for two reasons. First, we are being asked to do something I believe is unprecedented—for Congress to step in and promote a bill for one private-sector energy project, to wave ahead a private pipeline for a private foreign company so that Canadian oil can be piped to Texas for export to other nations. Again, how does this serve our Nation?" https://www.congress.gov/crec/2015/01/16/CREC-2015-01-16-pt1-PgS221-9.pdf
- Rep. Waxman: "Today, we are voting once again to grant special treatment to TransCanada’s Keystone XL tar sands pipeline. This is the third time this Congress and the eighth time since Republicans took control of the House. Instead of helping families deal with pressing problems, we are helping Canadian tar sands producers and pipeline builders. We are spending our time trying to exempt a foreign company from the rules that every other company in America has to follow. This bill is not an energy policy. It is about a single pipeline that will allow Canadian tar sands to flow across our country for export to other countries. That is oil going through the United States but not to the United States. We don’t need this oil. We have our own sources of oil, and we are using less oil because of our efficiency in new cars getting better mileage.” https://www.congress.gov/crec/2014/11/13/CREC-2014-11-13-pt1-PgH7965-2.pdf
- Sen. Cantwell: "we are sitting here today discussing whether we are going to override current environmental law and give special carve-out exceptions to a foreign company to basically build a pipeline through the United States of America, the fundamental question in my mind is, What is the hurry in giving them exemptions to these various laws as a way to get the pipeline built? These are things U.S. businesses don’t get. They don’t get these exemptions and they certainly don’t get the U.S. Senate voting to basically override the President’s authority. . . we should be discussing what we can do to further pipeline safety in the United States of America and not let a foreign company roll back existing U.S. laws on environmental issues that they should be complying with." https://www.congress.gov/amendment/114th-congress/senate-amendment/25/text
- Sen. Durbin: “[t]he notion that we are going to use foreign steel to build a pipeline for a Canadian company so that the refined products from that pipeline can be exported overseas is somehow, in the eyes of the majority in the Senate, an American jobs bill. I don’t think the American people would agree with that." https://www.congress.gov/crec/2015/01/27/CREC-2015-01-27-pt1-PgS495-8.pdf
- Rep. Lucille Roybal-Allard: "this bill allows a foreign company to take property from U.S. landowners through eminent domain. The taking of private land for public purposes has always been for local government or local interests. We cannot allow a foreign company to take our private property to feed its corporate profits. . . Considering this foreign-built pipeline takes private property and poses serious economic and safety risks, I stand in firm opposition to this bill." https://www.congress.gov/crec/2015/01/13/CREC-2015-01-13-pt1-PgE56.pdf
There is lots of nationalist sentiment and many references to "Canada" and "foreign" in there! Is that enough to support a claim of nationality-based discrimination? I don't know, but I suspect that a well-financed team of investment lawyers could add quite a bit more to my quickly assembled list.
Of course, the law may be less important than the politics here. If a Republican wins the Presidency, the pipeline will almost certainly be approved and the debate will be over. What about Hillary Clinton or a Democrat? That's a little less clear, and that's when TransCanada might give up on politics and turn to the law.
On the other hand, even the law has politics in it, as Georgetown law prof Robert Stumberg points out in the same article:
Robert Stumberg, a law professor at Georgetown University in Washington, said challengers to the U.S. may face an especially high hurdle. Arbitrators may be wary of ruling against of the world’s biggest commercial partners for fear of turning its citizens against free trade.
I agree that a fear that finding against the U.S. would wreck the whole system could be a factor. But if we are focusing only on the law itself, it seems to me that TransCanada has a pretty good case, under one Chapter 11 provision or another.
