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Cablegate: 2003 Report On Investment Disputes And

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 04 OTTAWA 001543

SIPDIS

STATE FOR EB/IFD/OIA (NEFIRD), L/CID (GLEHNER), AND WHA/CA
TREASURY FOR OASIA/IMI - HARLOW, MATHIEU, AND ITI
DEPARTMENT PASS USTR

E.O. 12958: N/A
TAGS: EINV EFIN PGOV KIDE CA
SUBJECT: 2003 REPORT ON INVESTMENT DISPUTES AND
EXPROPRIATION CLAIMS: CANADA

REF: A. STATE 83098
B. 02 OTTAWA 1466

1. Mission Canada has updated the the non-NAFTA investment
disputes (Claimants B, F, and H) and will e-mail the text as
requested in ref A. We have not updated the NAFTA Chapter 11
disputes being handled by L/CID (Claimants A, C, D, E, and
G). We are not aware of any new investor-state disputes this
past year.

2. Begin updated text:

CANADA

The United States Government is aware of eight (8) claims of
U.S. persons that may be outstanding against the Government
of Canada.

1. a) Claimant A
b) 1995

c) In response to a price increase by Claimant A in charges
to landfill customers in Quebec, more than 20 municipalities
formed the La Mauricie Intermunicipal Waste Management
Authority (REGIE) to take control of the landfill. Claimant
A appealed a January 1995 preliminary indemnity order for
$7.5 million (Canadian dollars), but the REGIE took
possession on May 1, 1995 and the $7.5 million was paid. The
claimant was dissatisfied with this amount, and Quebec
Indemnity Court proceedings began in December 1995. On
December 21, 1998, the Quebec Court Expropriation Chamber
awarded Claimant A C$24 million. The Regie appealed this
ruling to the Quebec Court of Appeals in 1999. Claimant's
legal counsel informs the Embassy that the Claimant prefers
to pursue legal remedies through the Quebec courts. Prior to
the court decision of 1998, the U.S. Ambassador to Canada, at
Claimant's request, wrote Quebec provincial officials urging
resolution of the dispute. The Quebec Court of Appeals will
not hear the case until
fall 2002 or winter 2003. Claimant A would negotiate an
out-of-court settlement, and is passing this message through
provincial political authorities, but would insist on a
reasonable sum. Since waste management companies and
municipal authorities in Quebec collaborate and compete, the
claimant says he will continue the suit in court because of
the precedent it may set. Interest on the 1998 award of C$24
million has increased the sum to C$30 million.


2. a) Claimant B
b) 1993

c) The property in question is an undeveloped 2.29 acre plot
of land, including 220 feet of beachfront on Kingsburg beach
in Nova Scotia. The legal owner of the property is a Nova
Scotia Corporation owned by Claimant B that acquired the
property on March 3, 1993. On March 9, 1993, the provincial
Ministry of Natural Resources declared Kingsburg beach and
its dune system "protected" under the Nova Scotia Beaches
Protection Act. This designation prohibited development of
the property, and Claimant B contends the designation has
reduced the value of the property to zero, and amounts to a
taking of the property without compensation. Claimant B has
not provided the U.S. Government with an estimate of the
property's value.

Claimant B is one of several landowners affected by the
designation that has not resolved his dispute. Claimant B is
prohibited from building on his property because, unlike
other landowners that have been permitted to build, he did
not have required permits in place at the time of the
designation.

In June 1998, the provincial Supreme Court of Nova Scotia
ruled in favor of Claimant B. The Crown appealed that
decision, however. A court hearing date was held in May
1999, and on August 18, 1999, the Nova Scotia Court of
Appeals handed down its decision allowing the appeal and
dismissing Claimant B's action. Claimant was advised by the
Court to offer the provincial government a new proposal for a
development permit that would meet environmental objections.
A new proposal was submitted in 2000, but the Nova Scotia
Ministry of Natural Resources, responding in 2001, did not
concur with the conclusions of the environmental study and
request for construction permit submitted by Claimant B.

At the Claimant's request, Consulate Hallifax arranged a
meeting for the Claimant's representative with the provincial
Minister of Natural Resources. At the meeting, in October,
2002, the Minister conceded that the Ministry's past approach
did seem unfair as it did not provide clear guidance to
landowners. He stated that he would request a follow-up
study/report from the environmental consulting firm that
produced the original study and recommendations for
protection of the beach, with specific guidelines as to what
type of construction and land use should be permitted. This
would provide landowners with a benchmark when submitting
development plans to the Ministry of Natural Resources.

3. a) Claimant C
b) 1991
c) In 1990 Claimant C formed a joint venture with a British
Columbia (BC) company to export water from BC streams by
tanker ship to California. According to Claimant C, the BC
Government promised the firm, orally and in writing, that it
could obtain the license required under the BC Water Act for
the purpose of export by tanker. On March 14, 1991, the
Goleta Water District in the Santa Barbara area announced
that Claimant C and its Canadian partner had won the contract
to supply fresh water, in a competition that also included
three BC firms. On March 18, 1991, the BC Government imposed
a moratorium on new bulk water licenses, saying it had to
review its policies; the moratorium was later extended
indefinitely. In 1995, the BC Government enacted a Water
Protection Act that banned water export by tanker ship.

In January 1993, Claimant C and its partner began litigation,
and in July 1995, the BC Government asked the two companies
to submit claims for a negotiated settlement. The claim of
the Canadian Partner was settled by a cash payment in July
1996. According to Claimant C, the BC Government has refused
to negotiate a settlement with it, and Claimant continued to
pursue litigation against the BC government until 1999. In
December 1998, Claimant C filed notice of intent to pursue
compensation under NAFTA Chapter 11 provisions.

In April and May 1999, Claimant C consulted with Canadian
government officials but was unable to arrive at a
resolution. In October 1999, Claimant C filed documents
requesting arbitration under Chapter 11. However, the
Canadian government officials found these documents lacked
certain required features that permit the Government of
Canada to organize Chapter 11 arbitration, and requested that
Claimant C resubmit them. Claimant C resubmitted these
documents in May 2000, but the government of Canada has not
been satisfied that the requirements to initiate Chapter 11
arbitration proceedings have been fulfilled.

Estimates of value vary. Claimant C's Canadian partner
reportedly sued for less than $1 million (Canadian Dollars)
and settled for $335,000 (Canadian). In 1998, Claimant C
assessed its damages at between $400 and $500 million. When
filing its claim for arbitration in 1999, Claimant C assessed
its "temporary lost business opportunity" at $1.5 billion
and, in the alternative, damages for permanent lost business
at $10.5 billion.

The Embassy in Ottawa and Consulate in Vancouver have been in
contact sporadically with Claimant C, and the Government of
Canada is aware of USG interest in the case. In keeping with
NAFTA Chapter 11 procedures, however, the Embassy does not
take an active role on behalf of Claimant C while
consultations and dispute resolution measures are proceeding.

4. a) Claimant D
b) 1998

c) In 1995, Claimant D solicited contracts with Canadian
companies to provide processing, transportation and disposal
of old electric transformers, which contain significant
quantities of PCB waste. Later that year, the Government of
Canada announced a ban on the export of PCB waste. Because
Claimant D proposed to treat the Canadian waste in the U.S.,
Claimant D believes the export ban imposed a material loss to
the company. The Canadian ban on PCB waste was in place
until February 1997, when Canada adopted new regulations
permitting exports of PCB waste to the U.S. In July 1997,
the U.S. closed its border to imports of PCB waste. On July
22, 1998, Claimant D announced it would seek compensation
from the Government of Canada under NAFTA Chapter 11.
Claimant D requested $20 million in compensation for business
lost due to the over one-year PCB export ban.

This dispute became a NAFTA Chapter 11 arbitration claim when
Claimant D filed with the Canadian Government on October 30,
1988. The Embassy continues to monitor the case, but does
not intervene with Canadian authorities while Chapter 11
dispute resolution measures are proceeding.
In November 2000, the tribunal rendered a partial award
denying claimant's expropriation claim, but finding that
Canada had breached its obligations under the NAFTA's
national treatment and minimum standard of treatment
provisions. A hearing on damages was held in September 2001.
The tribunal has not yet issued its decision on damages.
Canada has petitioned the federal court in Ottawa to set
aside the arbitral award.

5. a) Claimant E
b) 1998

c) Claimant E owns and operates lumber operations in British
Columbia. In December 1998, Claimant E announced it intended
to file under NAFTA Chapter 11 provisions for compensation
from the Government of Canada. Claimant E believes Canada
breached its NAFTA national-treatment obligations through its
implementation of the Bilateral Softwood Lumber Agreement,
which governs the export of softwood lumber manufactured in
the provinces of British Columbia, Alberta, Ontario, and
Quebec to the United States. The agreement imposed an export
levy once a given quota of lumber has been reached. Claimant
E alleges that the Government of Canada acted in a manner
inconsistent with its NAFTA national-treatment obligations
because it distinguishes between investors in the four
"listed" provinces in the Softwood Lumber Agreement versus
investors in the non-listed provinces, and treated investors
in Quebec more favorably than investors in the other listed
provinces. Claimant E also alleges that Canada failed to
accord it th
e international minimum standard of treatment.

In March 1999, this dispute became a NAFTA Chapter 11
arbitration claim when Claimant E officially filed a claim
with the Canadian government, seeking $382 million in
compensation for damages it claims it suffered. The Tribunal
proceeding rejected two of Claimant E's allegations relating
to expropriation and performance requirements in June 2000,
and in April 2001 the tribunal rejected much of the national
treatment and minimum standard of treatment claims.

On May 31, 2002, the Tribunal issued an award on damages with
respect to Claimant E's minimum standard of treatment claim.
The Tribunal ordered Canada to pay Claimant E U.S. $461,566,
with interest payable from and after May 31, 2002 at the rate
of 5% per annum compounded quarterly and pro rata within a
quarter. Further proceedings are being held on questions as
to costs.

Claimant E has not consulted with the U.S. Embassy or the
U.S. Consulate in Vancouver. In keeping with USG policy, the
Embassy continues to monitor the case, but does not intervene
with Canadian authorities while Chapter 11 dispute resolution
measures are proceeding.

6. a) Claimant F
b) 1995

c) Claimant F purchased in good faith a 32 acre parcel of
land on Prince Edward Island in 1995. After the purchase, a
local resident successfully argued in court that he had title
to the land under the principle of adverse possession, or
"squatters' rights." In January 1999, the provincial Supreme
Court of Prince Edward Island ruled against Claimant F.
Claimant F believes this decision constitutes a taking of his
land by government decision. Claimant F said he would appeal
the decision through the court system with a locally-hired
attorney. Claimant F has not provided the U.S. Government
with an estimated value of the claim. U.S. Consulate
personnel have not heard from Claimant F since, 1999, and
attempts to contact him have been unsuccessful.

7. a) Claimant G
b) 2000

c) Claimant G operates an express courier delivery service
worldwide, and asserts that the Government of Canada has
allowed the Canadian Post system monopoly unfair advantages
in its competition with private sector service providers.
These advantages, Claimant G believes, take the form of
monetary subsidies from non-courier services Canada Post
provides, and discriminatory treatment by Canada customs.
Claimant G has filed for arbitration alleging the Government
of Canada breached its commitments under articles 1102, 1105,
and 1502 of the NAFTA.

Attorneys for Claimant G have briefed the Ambassador on their
claim, and are in periodic communication with Embassy staff.
They have let the Canadian government know that they are not
averse to a non-judicial settlement of the claim through
negotiations. The Claimant has not put a sum on the amount
of damages it claims due to Canadian government actions.

In keeping with USG policy, the Embassy continues to monitor
the case, but does not intervene with Canadian authorities
while Chapter 11 dispute resolution measures are proceeding.

8. a) Claimant H
b) 1999

c) Claimant H says he invested US$600,000 in prospecting for
diamonds at a site 100 miles north of Yellowknife, Northwest
Territories. In early 1999 Claimant H says he requested the
provincial Mining Recorders Office in Yellowknife to "void" a
claim of a competing prospector because they "overstaked" on
his property. An official of the Recorders Office claims
that the Claimant had exceeded his land use threshold, and
had not applied for a land use permit. Claimant was arrested
as a squatter in February, 1999, detained two weeks, and
deported to the United States for overstaying. Provincial
Mining office says Claimant made threats on the staff of the
office. In August 1999 the property of Claimant H was
returned to him through Canada Customs.

In July 2001 Claimant H sent a letter to the Embassy noting
his claim, and in December 2001 he retransmitted the same
information, also alleging that civic authorities conspired
to kill him to prevent his claim to discovery and ownership
of mineral deposits. Claimant H contacted the Department in
May, 2003 to let us know he is running for Congress and to
refer us to his web site that features details of his claim.

Claimant A: NAFTA Chpt 11 - USA Waste (formerly Waste
Management). Claimant's attorney does not believe it has
signed a privacy act waiver.

Claimant B: William Hamilton, a private U.S. citizen who has
not signed a privacy act waiver.

Claimant C: NAFTA Chapter 11- Sunbelt Water, Inc., Santa
Barbara, CA. Has not signed privacy act waiver.

Claimant D: NAFTA Chapter 11 - SD Myers Company, Tallmadge,
Ohio. Has not signed privacy act waiver to Embassy's
knowledge.

Claimant E: NAFTA Chapter 11 - Pope and Talbott, Portland,
Oregon. Has not signed privacy act waiver to Embassy's
knowledge.

Claimant F: David Johnson, a private U.S. citizen. Has not
signed a privacy act waiver.

Claimant G: NAFTA Chapter 11 - United Parcel Service,
Atlanta, Georgia. Has not signed privacy act waiver to
Embassy's knowledge.

Claimant H: Robert Curtis, a private U.S. citizen. Gave a
full verbal privacy act waiver to Consulate officials in
1999. His web site is Curtisforcongress.com.

End updated text.
CELLUCCI

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