- Arbitral Award
- Case No. 2009-04
- Permanent Court of Arbitration
- William Ralph Clayton, William Richard Clayton, Douglas Clayton, Daniel Clayton and Bilcon of Delaware Inc. v. Government of Canada
STATE CONTRACTS - LONG-TERM CONTRACTS - CONCESSION CONTRACT - BETWEEN UNITED STATES INVESTORS AND THE CANADIAN GOVERNMENT – BREACH OF THE LATTER OBLIGATIONS UNDER THE NORTH AMERICA FREE TRADE AGREEMENT (NAFTA) - REFERENCE TO UNIDROIT PRINCIPLES IN SUPPORT OF GENERAL PRINCIPLE OF INTERNATIONAL LAW
DAMAGES FOR LOSS OF A CHANCE - RIGHT TO COMPENSATION - REFERENCE TO ART. 7.4.3 UNIDROIT PRINCIPLES
DAMAGES – COMPENSATION FOR FUTURE HARM DUE WHEN THERE IS A REASONABLE OPPORTUNITY FOR SUCCESS – REFERENCE TO ART. 7.4.3 UNIDROIT PRINCIPLES
Claimants, a United States corporation and its shareholders, commenced arbitration in 2008 after the rejection by the Government of Nova Scotia and the federal Government of Canada of a project to build and operate a quarry in Nova Scotia for environmental reasons.
In a 2015 Award on Jurisdiction and Liability, the Tribunal unanimously decided that it had jurisdiction only insofar as Claimants based their claims on events occurring on or after 17 June 2005 (therefore falling within the three-year limitation period).
The Tribunal further decided, by majority, that Canada had breached certain obligations under NAFTA, in particular the obligation to accord treatment in accordance with international law, including fair and equitable treatment and full protection and security, and the obligation to accord treatment no less favorable than that it has accorded, in like circumstances, to investments of its own investors.
Canada unsuccessfully sought to set aside that award in Canadian courts while the Tribunal moved forward to assess the compensation owing to the Claimants.
In a subsequent award of 10.01.2019, the Arbitral Tribunal affirmed the only injury which has been proven by Claimants was that the latters were deprived of an opportunity to have the environmental impact of the project assessed in a fair and non-arbitrary manner. In particular, Claimants have not proven that "in all probability" or "with a sufficient degree of certainty" their project would have obtained all necessary approvals and would be operating profitably.
Claimants are thus only entitled to compensation equivalent to the value of the opportunity to have the environmental impact of the their project assessed in a fair and non-arbitrary manner.
While all three arbitrators were in agreement on the amount of compensation, the Arbitrator appointed by Claimants issued a concurring opinion wherein he analyzed the damages owing to the Claimants “based on viewing its losses as a lost chance – not a certainty – of obtaining regulatory approval and then operating the project profitably". In doing so, he quoted Article 7.4.3(2) of the UNIDROIT Principles in order to affirm the Claimants' right to compensation for ‘loss of opportunity’ or ‘loss of chance’. He also referred to the ICSID decision in Gemplus & Talmud v. Mexico (ICSID Case Nos. ARB(AF)/04/3 and ARB(AF)/04/4 of 16 June 2010)(see UNILEX), in which the Tribunal, in relation to a case of expropriation of an enterprise in its early stages of development, adopted an approach between lost investment costs and discounted future cash flow of a successful business, since there was no certainty of profitability as the project was originally envisaged, but that there was nonetheless a reasonable opportunity for success.