Pope & Talbot Inc. v Canada

Year of the award: 2000 - 2002
Forum/Rules: Ad Hoc Tribunal (UNCITRAL arbitration rules)
Applicable investment treaty: NAFTA

Arbitrators:
The Hon. Lord Dervaird - President
The Hon. Benjamin J. Greenberg
Mr Murray J. Belman

Executive summary

Pope & Talbot, Inc. (the "Investor") was a U.S. company with a Canadian subsidiary, which operated three sawmills in Canada and exported to the U.S. most of the softwood lumber it produced. The dispute arose out of Canada's actions in the implementation of the 5-year Softwood Lumber Agreement ("SLA") concluded by Canada and the U.S. in 1996. The SLA established a limit on the free export of softwood lumber into the U.S. and required Canada to collect a fee for export of softwood lumber in excess of certain established quantities. Each year Canada allocated export quotas among its softwood lumber producers in accordance with the developed procedures and criteria (Export Control Regime).

The Investor claimed that certain aspects of Canada's Export Control Regime and its application by the Canadian authorities violated Canada's obligations under NAFTA Chapter 11. The majority of Investor's claims (in particular, those relating to expropriation, national treatment and performance requirements) were dismissed by the Tribunal. Only in relation to the minimum standard of treatment claim, the Tribunal found violation of NAFTA Article 1105 in one out of the seven episodes alleged by the Investor. With regard to that episode, the Tribunal established that Canada's Softwood Lumber Division treated the Investor in an unfair way subjecting it to threats, denying reasonable requests for pertinent information, requiring to incur unnecessary expense and disruption.

Addressing the issue of compensation, the Tribunal determined that NAFTA Article 1116, under which the claims were brought, did not limit recoverable damages to damages of the Investor itself but also allowed to claim damages suffered by the Investor's Canadian subsidiary. The Tribunal awarded US$ 461,600 in compensation for out of pocket expenses borne by the Investor and its Investment as a result of Canada's wrongful conduct. The Tribunal denied the claim for compensation of lost profits allegedly suffered as a result of the 7-day closure of the Investor's production facility, because the Claimant had not shown that the closure had caused any loss of profit. The Tribunal also awarded interest at a rate of 5% p.a. compounded quarterly.