North American ruling poses questions for national sovereignty

In 2007, building construction company Bilcon proposed to develop a 152ha basalt operation in Nova Scotia, Canada that would export 40,000 tonnes of stone to the US each week over 50 years.

The DA was ultimately denied by Canadian provincial and federal authorities, with a joint environmental panel ruling the quarry would have “significant adverse effects” on the nearby community.

In response, Bilcon filed an appeal under the North American Free Trade Agreement’s (NAFTA) Chapter 11 laws, which gives foreign investors the right to sue governments for unfair treatment.

Bilcon alleged that Canada had applied its environmental laws in an “arbitrary, unfair, and discriminatory manner” and argued that as an American company, it was held to a higher standard than a Canadian company would have been held.

In 2015, the NAFTA tribunal ruled in Bilcon’s favour after it found Canadian authorities had created ‘expectations’ the project would proceed, as long as federal and provincial environmental laws were upheld.

Canada’s Federal Government went on to appeal the decision but it was ultimately denied earlier this month. While Federal Court of Canada Justice Anne Mactavish ruled in favour of the NAFTA panel, she also acknowledged that the panel’s finding that Canada was liable for damages to the American company raised “significant policy concerns”.

Bilcon is now entitled to seek up to $USD300 million in damages in lost profits from the Canadian Government.

National sovereignty at risk?

A number of law experts have queried what precedent the Bilcon case sets when a company, in seeking a judicial review of the environmental assessment, can bypass national processes by appealing to NAFTA.

“We want anybody, Canadian and foreign investors, to actually use our systems as opposed to jumping to an international tribunal composed of members that don’t actually have any expertise on the environmental issues at play,” Sara Seck, associate professor of law at Dalhouse University, in Halifax, Nova Scotia, told The Chronicle Herald.

“When officials speak out in favour of a project before an environmental assessment is conducted, they may be in violation of NAFTA if they later take the advice of an independent environmental assessment that concludes the project should not be permitted to proceed because of its negative impact on local communities,” she added.

While the ruling favoured the US in this instance (the US is yet to be sued under NAFTA’s Chapter 11 provisions), an editorial in The New American warned it “set the dangerous precedent … of increasing regional governments at the expense of national sovereignty … next time it may very well be an infringement of US national sovereignty in a case that advances some radical objective of environmentalists. It may be a decision in an area other than environmentalism. But in the end, it will mean less national sovereignty for the United States”.

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