On 13 July 2018, an ICSID arbitral tribunal issued a decision on jurisdiction and admissibility in Mobil Investments Canada Inc v. Canada, rejecting some of Respondents’ preliminary objections.
The dispute arose out of oil projects located off the coast of the Canadian province of Newfoundland and Labrador. Following the Canada’s implementation of the 2004 Guidelines for Research and Development Expenditures (“2004 Guidelines”), by which it imposed on the Claimants’ projects new expenditures, the investor filed a request for arbitration under the ICSID Additional Facility Rules. It alleged that Canada had breached the performance requirement prohibition in Article 1106 of the North American Free Trade Agreement (“NAFTA”). In 2012, the arbitral tribunal upheld its jurisdiction and decided the case in favour of the investor. It added that Claimant was entitled to recover damages (“Mobil I decision”). In 2015, it awarded damages to the investor (“Mobil I award”). Respondent’s application to set aside the award on the grounds that the arbitral tribunal allegedly exceed its powers was dismissed by the Supreme Court of Ontario in 2016.
Meanwhile, after the Mobil I decision and on its basis, Claimant requested Respondent’s regulatory agency to waive the projects’ related outstanding shortfall under the 2004 Guidelines and to confirm that these regulations will not be further applicable. The agency responded that there was no intention to waive any of the investor’s obligations with regard to research and development expenditures. As a result, the investor started new arbitration proceedings, in which Respondent raised two preliminary objections.
Specifically, it asserted that the claim is time-barred by Articles 1116(2) and 1117(2) of NAFTA and by the res judicata doctrine. With respect to this latter plea, Respondent also contented that should the arbitral tribunal decide otherwise, Claimant failed to discharge the burden of showing that the entirety of the disputed expenditure was incurred due to the application of the 2004 Guidelines.
The arbitral tribunal rejects the two preliminary objections and decides that the remaining question of causality will be the subject of separate hearings and of a separate award.
With regard to the time-bar allegation, it recalls that the objective of this rule is to guarantee legal certainty for all three States. To verify if the investor complies with this requirement, a two-tier analysis shall be applied. First, there must be knowledge of the alleged breach. Secondly, there must be knowledge that the investor has suffered loss or damage as a result of that alleged breach. Rejecting Claimant’s argument on the existence of a continuous breach, the arbitral tribunal finds that the investor acquired knowledge that the 2004 Guidelines would be enforced in the future, which is a fresh alleged breach, and that it had suffered loss as a result. Thus, the time-bar objection fails.
In respect to the res judicata doctrine, the arbitral tribunal considers that in the present case, there is no doubt concerning the identity of parties and of the claim. Regarding the question of whether actual losses, that were not found to be actual at the time of the Mobil I decision, were definitively settled by the Mobil I award, the arbitral tribunal answers negatively. Consequently, the second plea is also deemed to be ill-founded.