Canadian court has 'no jurisdiction' to overturn NAFTA ruling in Digby quarry case, lawyers argue

An American concrete company told the Federal Court of Canada Tuesday it "has no jurisdiction" to set aside a Nova Scotia-linked NAFTA award that could end up costing Canada more than $500 million.

Federal lawyers were in an Ottawa courtroom this week in a bid to throw out a 2015 international arbitration tribunal decision in favour of Bilcon, a Delaware-based company denied permission to open a quarry on Digby Neck, N.S.

Digby Neck was chosen by Bilcon as the future site of a 50-year stone quarry in 2002, only to have its proposal rejected by a joint federal-provincial review panel in 2008 due to environmental concerns.

Bilcon successfully sued Canada using a controversial investor protections clause in Chapter 11 of the North American Free Trade Agreement, which allows foreign companies to sue governments over unfair treatment.

Bilcon is now seeking more than $500 million in damages.

The case is seen by some as a test of sovereignty on whether Canada has the right to enforce its own environmental rules on foreign investors.

'No obligation'

The company's lawyer John Judge told the court Tuesday that Canada consented to the arbitration and is now effectively trying to re-argue a case it lost.

"This court has no jurisdiction to set aside this award," he said. "This court cannot review the merits of the award."

Canada is pushing for the tribunal's awarding of liability to be quashed, arguing it was based largely on a finding that Canadian environmental assessment rules were not followed in rejecting Bilcon's quarry proposal.

Federal lawyers have argued that the ruling was outside the scope of the NAFTA panel and the company's complaint about its treatment should have gone to a Canadian court.

"There is no obligation [under NAFTA] to exhaust local remedies," Judge told court.

The company's lawyers also argued the NAFTA tribunal's finding that Canadian rules were not followed was merely part of its fact-finding duty, and that Canadian courts "accept" the doctrine of judicial deference.

"An international tribunal is an appropriate forum to consider non-compliance of domestic law in determining whether an international standard has been breached," Judge said.

Question of costs

Bilcon's lawyers also urged the Federal Court justice to ignore the value of the huge award potentially hanging over the proceedings.

"These cases can involve huge amounts of money," Judge said. "That should not affect how this court deals with these issues."

But the size of the potential award is one reason why the case is so important, said Gretchen Fitzgerald, with the Sierra Club of Canada, an intervener in the case.

"Our leaders and public servants will look at his award and factor in the $500-million payout, the scope, the price we could pay for saying no to damaging projects," said Fitzgerald, speaking outside court Tuesday.

She also pointed out that if Nova Scotia were on the hook a portion of any damages awarded to Bilcon, it could be detrimental to the province and its finances.

"If you're looking at a province like Nova Scotia, if we are asked to contribute, it could have significant impacts on our bottom line," she said.

Officials with the Nova Scotia government have said there is no written agreement obligating the province to pay the NAFTA damages. 

Global Affairs Canada, meanwhile, did not directly respond to a question from CBC on whether Nova Scotia would be liable for any damages but instead provided this statement:

"Under Canada's Commercial Arbitration Act, decisions of arbitral tribunals can be subjected to statutory judicial review on limited grounds, including excess of jurisdiction," a spokesperson wrote.

Federal Court Justice Anne Mactavish reserved her decision after the two-day hearing. 

It is unlikely she will issue her decision before Bilcon goes back before the arbitration tribunal on Feb. 19 for the second phase of the NAFTA complaint: determining how much Canada must pay.