NEWS RELEASES
NAFTA TRIBUNAL AWARDS MINIMAL DAMAGES TO POPE & TALBOT
May 31, 2002 (1:45 p.m. EDT) No. 60
NAFTA TRIBUNAL AWARDS MINIMAL DAMAGES
TO POPE & TALBOT
The Government of Canada received a decision from a NAFTA tribunal today that has awarded American
lumber producer, Pope & Talbot, Inc., US$461,566 in damages and interest arising out of the tribunal ruling that
administrative actions taken by Canada violated NAFTA's investment rules (Chapter 11).
"Overall, the tribunal found that Canada had not violated NAFTA in its implementation of the Softwood Lumber
Agreement," said International Trade Minister Pierre Pettigrew. "The only damages arose from an
administrative audit undertaken to verify Pope & Talbot's quota."
Pope & Talbot, Inc. originally claimed US$508 million in damages. According to NAFTA, the award of damages
should compensate the company for expenses incurred as a result of a verification audit. The tribunal found
that Canada breached NAFTA in the course of a quota audit, when it asked Pope & Talbot, Inc. to ship its
Canadian company's records back to Canada.
In April 2001, the tribunal confirmed that Canada's implementation of the Canada-U.S. Softwood Lumber
Agreement was consistent with its NAFTA obligations. Its unanimous decision ruled that Canada met its
obligations under National Treatment (article 1102) of NAFTA's Chapter 11, but that the verification audit
violated the Minimum Standard of Treatment (article 1105). An earlier June 2000 ruling by the same tribunal
found in Canada's favour on two other obligations under Chapter 11: Performance Requirements (article 1106)
and Expropriation (article 1110).
The Canada-U.S. Softwood Lumber Agreement came into effect on April 1, 1996, and expired on March 31,
2001. The agreement limited lumber exports from Canada to the United States to 14.7 billion board feet. To
meet these limits, the Government of Canada set up a system that awarded various quotas to lumber
companies. Audits of quota holders were a normal activity conducted by officials responsible for the
administration of the agreement in Canada. Pope & Talbot, Inc. felt that the agreement was discriminatory and
that the quotas damaged its business. On March 25, 1999, it served the Government of Canada with a notice of
arbitration. This began formal proceedings under NAFTA's Chapter 11.
For more information, please visit the following Web site:
http://www.dfait-maeci.gc.ca/tna-nac/NAFTA-e.asp#P&T
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A backgrounder is attached.
For further information, media representatives may contact:
Sébastien Théberge
Office of the Minister for International Trade
(613) 992-7332
Media Relations Office
Department of Foreign Affairs and International Trade
(613) 995-1874
http://www.dfait-maeci.gc.ca
Backgrounder
CHRONOLOGY OF EVENTS
• Pope & Talbot, Inc. is a U.S. company that controls a Canadian company, Pope & Talbot Ltd., which
operates three sawmills in British Columbia and exports most of its production to the United States. It was,
accordingly, subject to the1996 Canada-U.S. Softwood Lumber Agreement.
• On March 25, 1999, Pope & Talbot, Inc. served a Notice of Arbitration and Statement of Claim on Canada. It
alleged that Canada's implementation of the Softwood Lumber Agreement breached five NAFTA Chapter 11
obligations: National Treatment (Article 1102), Most Favoured Nation (Article 1103), Minimum Standard of
Treatment (Article 1105), Performance Requirements (Article 1106) and Expropriation (Article 1110).
• The claim was originally for approximately $784 million (US$508 million).
• The Tribunal was established on August 19, 1999. Lord Dervaird of Scotland is the presiding arbitrator.
Canada appointed Benjamin Greenberg, QC, of Montreal, and the investor appointed Murray Belman, of
Washington, D.C., as the party-appointed arbitrators.
• On November 18, 1999, Pope & Talbot, Inc. withdrew its claim that Canada acted in a manner inconsistent
with its Most Favoured Nation obligation (Article 1103).
• On January 19, 2000, the Tribunal ordered the case to be heard in several phases. In the first phase, the
Tribunal would deal with potential liability under Articles 1102, 1106 and 1110; if Pope & Talbot, Inc. was
unsuccessful in the first phase, the Tribunal would deal with potential liability under Article 1105 in a second
phase. Only if liability was found would the arbitration proceed to a third phase in which the Tribunal would
assess damages.
• The first phase included written submissions by the parties and a hearing in Montreal from May 1 to 4, 2000.
• The Tribunal issued an interim decision on June 26, 2000. It dismissed the claims that Canada expropriated
Pope & Talbot Ltd. (Article 1110) and that Canada imposed performance requirements (Article 1106).
• The Tribunal deferred final determination on National Treatment allegations to the second phase of the
arbitration.
• The second phase included written submissions by the parties and a hearing in Montreal from November 13
to 17, 2000.
• The Tribunal issued its decision on April 10, 2001, confirming that Canada had met its obligations under
National Treatment (Article 1102), with the exception of one administrative procedure related to verifying the
company's quota, the Minimum Standard of Treatment (Article 1105).
• In July 2001, the NAFTA Free Trade Commission clarified the NAFTA Chapter 11 investment provisions
relating to minimum standard of treatment and transparency.
• The Tribunal proceeded with the damages phase, including written submissions by the parties and a hearing
in Washington, D.C., from November 13 to 16, 2001.
• On May 31, 2002, the Tribunal issued an award of US$461,566 in damages to Pope & Talbot, Inc.
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