The award in the Windstream v. Canada NAFTA Chapter 11 investment arbitration was recently published. Investment Arbitration Reporter has a full summary here. I wanted to highlight two aspects of the fair and equitable treatment reasoning.
First, the tribunal seemed to apply a strict "no dictionaries" principle:
357. In the present case, the Claimant argues that the Respondent is in breach of the “fair and equitable” treatment component of the minimum standard of treatment, but does not allege that the Respondent has failed to provide “full protection and security.” The Tribunal does not consider it helpful, for purposes of determining the content of the “fair and equitable” treatment component of the standard, to look for dictionary definitions of the terms used in Article 1105(1) – “fair” and “equitable.” This is not only unhelpful as it would effectively result in replacing these terms with other words which would then also have to be interpreted; but also because it would create the risk that if the alleged breach were to be assessed in light of such other terms rather than the terms actually used in Article 1105(1), the standard to be applied would not be the standard set out in Article 1105(1), but another standard that might not be in accordance with the customary international law minimum standard of treatment. The State parties to NAFTA must have considered, when using the terms “fair and equitable treatment” and “full protection and security,” that it is these terms, and not any others, that best reflect the content of the minimum standard of treatment set out in the provision. Nor can the FTC’s Notes of Interpretation be taken to mean that a NAFTA tribunal must entirely disregard the terms “fair and equitable” and “full protection and security” in Article 1105(1) when considering whether the customary international law standard of treatment set out in the provision has been met.
I'm having a little trouble understanding the tribunal's reluctance to look at the dictionary here. Not that I think dictionary definitions would resolve all of the disagreements over the precise meaning of the legal obligations, but why not take a look? And why make such a big deal about not looking? Using a dictionary to help understand terms in treaties and statutes is pretty common practice for courts. Is there something special about the words at issue here that precludes it? Have other investment tribunals made similar anti-dictionary statements?
Second, in finding a violation, the tribunal applied the fair and equitable treatment standard as follows:
379. Most importantly, the Government did little to address the legal and contractual limbo in which Windstream found itself after the imposition of the moratorium. While the regulatory framework continued to envisage the development of offshore wind, additional and more detailed regulations governing offshore wind specifically were never developed. The Government let the OPA conduct the negotiations with Windstream even if the decision on the moratorium had been taken by the Government and not by the OPA, and without providing any direction to the OPA for the negotiations although it had the authority to do so under the GEGEA (a power it had exercised when introducing the FIT program). As a result, as the negotiations between the OPA and Windstream failed to produce results, by May 2012 the Project had a reached a point at which it was no longer financeable. Nonetheless, the Government failed to clarify the situation, either by way of promptly completing the required scientific research and establishing the appropriate regulatory framework for offshore wind and reactivating Windstream’s FIT Contract, or by amending the relevant regulations so as to exclude offshore wind altogether as a source of renewable energy and terminating Windstream’s FIT Contract in accordance with the applicable law. For these reasons, the Tribunal finds that the Government’s conduct vis-à-vis Windstream during the period following the imposition of the moratorium was unfair and inequitable within the meaning of Article 1105(1) of NAFTA.
380. The Tribunal concludes that the failure of the Government of Ontario to take the necessary measures, including when necessary by way of directing the OPA, within a reasonable period of time after the imposition of the moratorium to bring clarity to the regulatory uncertainty surrounding the status and the development of the Project created by the moratorium, constitutes a breach of Article 1105(1) of NAFTA. It was indeed the Government of Ontario that imposed the moratorium, not the OPA, so it cannot be said that the resulting regulatory and contractual limbo was a result of the Claimant’s own failure to negotiate a reasonable settlement with the OPA. The regulatory and contractual limbo in which the Claimant found itself in the years following the imposition of the moratorium was a result of acts and omissions of the Government of Ontario, and as such is attributable to the Respondent. The Tribunal therefore need not consider whether the conduct of the OPA during the relevant period must also be considered attributable to the Respondent.
Here's what I can't figure out: Is this a really broad application of the standard, or is it a really narrow one? How often do governments fail "to bring clarity to regulatory uncertainty"?
