Bilcon wins NAFTA dispute over Digby Neck quarry

Company claiming damages from Canada of $US 300 million

John DeMings
Published on March 21, 2015

The proposed Whites Point quarry and marine terminal on Digby Neck was controversial. ‘Stop the quarry’ signs drew this response in 2007 from others calling for its development.

©File photo

Canada has lost a lengthy trade dispute under Chapter 11 of the North American Free Trade Agreement involving the proposed Whites Point quarry on Digby Neck.

Bilcon, an American company, had applied to expand a small, existing gravel quarry operation, but was turned down following a joint federal and provincial environmental review panel.

In a statement released Friday, Bilcon of Delaware said the NAFTA tribunal found there was a failure of international law because the joint review panel considered factors outside Canada’s environmental law that were not disclosed to Bilcon during the review process.

The review panel had concluded that the project posed unacceptable risk to the environment and the community, and Nova Scotia Environment and Labour Minister Kerry Morash then rejected the application to establish Whites Point quarry and its planned marine terminal.

Bilcon is now seeking at least USD $300 million in damages from Canada in the next phase of the NAFTA tribunal hearing.

The tribunal hearing was held in Toronto in October 2013 and its decision was announced last week.

According to Bilcon, the tribunal determined, “It was unjust for officials to encourage coastal mining projects in general and specifically encourage the pursuit of the project at the Whites Point site, and then, after a massive expenditure of effort and resources by Bilcon on that basis, have other officials effectively determine that the area was a ‘no go’ zone for this kind of development, rather than carrying out the lawfully prescribed evaluation of its individual environmental merits.”

William Richard Clayton, CEO of Bilcon of Delaware, said the company was pleased by the favorable decision.

“We had a responsible plan to expand our existing mining facility, creating new jobs and economic activity for Nova Scotia. We followed the proper regulatory process and simply expected to be treated fairly.

“Unfortunately, that wasn’t the case, and as a result, it not only hurt our business, but it prevented the creation of 225 construction jobs and 34 full-time good jobs in the local community.”

In its review, the tribunal said the joint review panel headed by Dr. Robert Fournier ignored scientific and environmental evidence and instead imposed arbitrary requirements unrelated to the actual conditions at the quarry.

The tribunal found other environmental proponents who sought similar permissions to operate quarries were treated in a more transparent and fair manner.

Toronto lawyer Barry Appleton, who represented Bilcon at the tribunal hearings, said in the company’s statement that the tribunal concluded that Canada “engaged in a clear violation of the rule of law and fairness. The joint review panel dropped the ball. The failure to treat Bilcon fairly stands in stark contrast with the clear protections provided by the NAFTA.”

The tribunal’s decision was not unanimous.

In a published dissent, tribunal member Prof. Donald McRae argued that the majority decision could create a significant intrusion into Canada’s domestic jurisdiction and create a chill on the operation of environmental review panels.

What the majority has done is add a further control over environmental review panels, McRae said. Failure to comply with Canadian law by a review panel could becomes the basis for a NAFTA claim allowing a claimant to bypass the normal domestic remedy of appealing to a federal court.

The majority decision is that a review panel that put great weight on the effect on the human environment and took account of the community’s own expression of its interests and values means the state can be liable in damages to an investor.

“In this case…an environmental review panel concluded that the socio-economic effects of a project were sufficiently negative that, notwithstanding the existence of some positive benefits of the project, it should recommend against the project,” McRae wrote.

“Once again, a chill will be imposed on environmental review panels which will be concerned not to give too much weight to socio-economic considerations or other considerations of the human environment in case the result is a claim for damages under NAFTA Chapter 11.

“In this respect, the decision of the majority will be seen as a remarkable step backwards in environmental protection,” concluded McRae.