NEWS RELEASES
DECISION ON NAFTA CHAPTER 11 CLAIM FAVOURS CANADA
June 27, 2000 (2:50 p.m. EDT) No. 165
DECISION ON NAFTA CHAPTER 11 CLAIM FAVOURS CANADA
The Government of Canada today welcomed a NAFTA Tribunal decision clearly ruling that
Canada's implementation of the Canada-U.S. Softwood Lumber Agreement was consistent with
its obligations under two articles of NAFTA's investor-state chapter.
The unanimous decision released today by the NAFTA Tribunal ruled that, contrary to the claims
made by Pope & Talbot Inc. of Portland, Oregon, Canada met its obligations under the following
articles of NAFTA's Chapter 11: Performance Requirements (1106) and Expropriation (1110).
"We welcome the Tribunal's decision," said International Trade Minister Pierre Pettigrew. "The
Tribunal ruled on two claims, and Canada won both. In the remainder of this arbitration, we will
reiterate that Canada's actions are consistent with its NAFTA obligations."
The next phase of this arbitration would be an examination of the allegation that Canada failed to
meet its obligations under the Chapter 11 articles on Minimum Standard of Treatment (1105) and
National Treatment (1102). The Tribunal reserved its decision with respect to the allegation that
Canada failed to meet its National Treatment Obligation (1102).
The Canada-U.S. Softwood Lumber Agreement came into effect on April 1, 1996. On March 25,
1999, Pope & Talbot Inc. served the Government of Canada with a notice of arbitration, which
began formal proceedings under NAFTA's Chapter 11.
- 30 -
Detailed backgrounders are attached.
For further information, media representatives may contact:
Sylvie Bussières
Office of the Minister for International Trade
(613) 992-7332
Media Relations Office
Department of Foreign Affairs and International Trade
(613) 995-1874
Backgrounder
NAFTA CHAPTER 11 -- POPE & TALBOT, INC.
DECISION OF THE TRIBUNAL
Chronology
1. On March 25, 1999, Pope & Talbot, Inc. ("the Investor") served its Notice of
Arbitration and Statement of Claim on Canada. The Investor alleged that Canada's
implementation of the Softwood Lumber Agreement ("the SLA") breached four NAFTA
Chapter 11 obligations: Article 1102 (National Treatment), Article 1105 (Minimum
Standard of Treatment), Article 1106 (Performance Requirements) and Article 1110
(Expropriation). The claim is for US$381 894 500.
2. The Investor is a U.S. company that controls a Canadian company, Pope & Talbot
Ltd. ("the Investment"). The Investor operates three sawmills in British Columbia and
exports most of its production to the United States. As such, it is subject to the SLA.
3. The Tribunal was established on August 19, 1999. Lord Dervaird from Scotland is
presiding Arbitrator. Canada appointed the Honourable Benjamin Greenberg, QC, from
Montreal, and the Investor appointed Murray Belman from Washington as the other
Tribunal members.
4. On January 19, 2000, the Tribunal ordered the case to be heard as follows:
a) the Tribunal would deal with potential liability under Articles 1102, 1106 and 1110
first;
b) should the Tribunal find a breach of any of those obligations, the Tribunal would
proceed to a hearing to assess damages;
c) if the Investor is unsuccessful under (a), the Tribunal would then proceed to the
issue of potential liability under Article 1105 and deal at a later stage, if needed, with
issues of damages.
5. The Investor filed its written submission on the alleged breaches under Articles 1102,
1106 and 1110 on January 28, 2000. Canada filed its written submission on March 15,
2000. The hearing on these issues took place in Montreal from May 1 to 4, 2000.
Backgrounder
THE SOFTWOOD LUMBER AGREEMENT
The Canada-United States Softwood Lumber Agreement (SLA), which is a five-year
agreement expiring on March 31, 2001, provides Canadian softwood lumber exporters
with a guarantee against U.S. trade actions. It permits the fee-free export to the United
States of 14.7 billion board feet per year of lumber first manufactured in British
Columbia, Alberta, Ontario and Quebec. Canada is required to collect fees when that
limit is exceeded, using a tiered fee system. As stipulated in the SLA, Canada allocates
export-level allocations ("quota") to eligible companies on an annual basis. Lumber from
the other Canadian provinces and territories is exempt from the SLA.
The methodology for allocating quota was developed after wide-ranging consultations
with the industry and provinces and represents an effort to accommodate their varying
needs and priorities. In the first year of the SLA, the total quota available to Canada was
divided among the four covered provinces according to corporate provincial shares.
Allocations to individual companies are based on their historical exports to the United
States. In addition, new companies and those undertaking major expansions received
quota from a small "new entrants" pool. As such, allocations are based on each
company's utilization. It follows that there have been no "provincial shares" of quota
since the first year of the SLA.
In 1999, these exports represented roughly 70 percent of Canadian softwood lumber
production and were valued at more than C$10.7 billion, equivalent to the total value of
Canada's exports to the United Kingdom, France, Germany, Portugal and Sweden
combined.
| 
