NEWS RELEASES

February 8, 2001 (3:00 p.m. EST) No. 20

CANADA SEEKS APPLICATION TO SET ASIDE

NAFTA TRIBUNAL AWARD IN S.D. MYERS ARBITRATION

The Government of Canada will ask the Federal Court of Canada to set aside a decision by a NAFTA tribunal that ruled that Canada violated several aspects of NAFTA's investor-state chapter (Chapter 11), International Trade Minister Pierre Pettigrew announced today.

"While Canada agrees with certain aspects of the NAFTA tribunal's ruling, we are seeking this review because we believe the tribunal exceeded its jurisdiction in several key elements of the award," said Minister Pettigrew.

Under Canada's Commercial Arbitration Act, decisions of arbitral tribunals, such as NAFTA Chapter 11 tribunals, are subject to statutory review on limited grounds, including excess of jurisdiction. Canada believes that elements of the NAFTA tribunal's award exceeded its jurisdiction and were made in conflict with the public policy of Canada.

Canada will ask the Federal Court to have the tribunal's decision set aside. Canada will also seek a stay of the tribunal's damages proceedings, the next phase in the S.D. Myers arbitration, pending the result of the review.

On November 13, 2000, a NAFTA tribunal found that Canada breached its obligations under the following sections of Chapter 11: National Treatment (1102) and Minimum Standard of Treatment (1105). The decision also held that Canada did not breach Chapter 11 with respect to Performance Requirements (1106) and Expropriation (1110).

The tribunal has not ruled on whether S.D. Myers has suffered any damages. A second phase to hear arguments regarding damages has just begun its proceedings.

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A backgrounder is attached.

For information specific to Chapter 11 consult the following address:

http://www.dfait-maeci.gc.ca/tna-nac/NAFTA-e.asp

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

CHRONOLOGY OF NAFTA CHAPTER 11 -- S.D. MYERS INC.

DECISION OF THE TRIBUNAL

1. On July 22, 1998, S.D. Myers Inc. (headquartered in Tallmadge, Ohio) served on the Government its Notice of Intent to Submit a Claim to Arbitration under the investor-state dispute settlement provisions of Chapter 11 (Investment) of the NAFTA.

2. On October 30, 1998, S.D. Myers filed a Claim to Arbitration, which started the formal arbitration process. S.D. Myers alleged that Canada's PCB Waste Export Interim Order (issued November 20, 1995, rescinded February 4, 1997) breached the following NAFTA obligations: (i) Article 1102 -- National Treatment; (ii) Article 1105 -- Minimum Standard of Treatment; (iii) Article 1106 -- Performance Requirements; and (iv) Article 1110 -- Expropriation. S.D. Myers claimed that the Canadian export ban prohibited it from conducting its business in Canada. S.D. Myers has claimed damages of not less than US$20 million.

3. The tribunal was established on March 4, 1999, with S.D. Myers's appointment of Dr. Bryan Schwartz, Professor of Law, University of Manitoba, and both parties agreeing to the appointment of Professor Martin Hunter (U.K.) as presiding arbitrator. Canada's appointee to the tribunal was Edward Chiasson of Vancouver, B.C.

4. In accordance with the tribunal's timetable, Canada submitted its Statement of Defence on June 18, 1999. On July 20, 1999, S.D. Myers submitted its Memorial (i.e. main argument). Canada submitted its Counter-memorial on October 5, 1999. Supplementary briefs were delivered on December 15, 1999, and pre-hearing submissions on January 14, 2000.

5. Both the United States and Mexico had representatives present throughout the proceedings, although only Mexico made any submissions to the tribunal. Mexico intervened on questions of interpretation of Chapter 11 obligations, and its interventions were largely supportive of Canada's position.

6. Hearings took place before the tribunal in Toronto from February 14 to16, 2000.

7. The tribunal decision was delivered to the parties on November 13, 2000. The tribunal decision held that Canada's temporary ban on the export of PCB waste between November 1995 and February 1997 breached two provisions of the NAFTA's investment chapter. The ruling does not require Canada to change its environmental laws, including its regulations to control PCBs. The tribunal's decision was with respect to an interim order, which is no longer in effect. Nothing in the decision detracts from Canada's ability to regulate the safe movement and disposal of hazardous wastes, including PCB wastes. The tribunal directly acknowledged that NAFTA members "have a right to establish high levels of environmental protection. They are not obliged to compromise their standards merely to satisfy the political or economic interests of other states."

8. On February 8, 2001, Canada applied to the Federal Court for an application to set aside the NAFTA tribunal's November 13, 2000, partial award.