PCA Case No. 2012-17 24 March 2016 AN ARBITRATION UNDER CHAPTER 11 OF THE NAFTA ...

190 Pages·2016·1.9 MB·English

PCA Case No. 2012-17 24 March 2016

AN ARBITRATION UNDER CHAPTER 11 OF THE NAFTA
AND THE UNCITRAL ARBITRATION RULES, 1976

between

MESA POWER GROUP, LLC

Claimant

and

GOVERNMENT OF CANADA

Respondent

AWARD

ARBITRAL TRIBUNAL
Professor Gabrielle Kaufmann-Kohler (Presiding Arbitrator)
The Honorable Charles N. Brower
Toby Landau, QC

Secretary of the Tribunal
Rahul Donde
TABLE OF CONTENTS
TABLE OF ABBREVIATIONS ................................................................................................... V
I. THE PARTIES ................................................................................................................... 1
A. The Claimant .................................................................................................................... 1
B. The Respondent ............................................................................................................... 2
II. MAIN FACTS ..................................................................................................................... 3
A. Background of Ontario’s Electricity Sector ................................................................... 3
B. The FIT Program .............................................................................................................. 4
C. Applications to the FIT Program ..................................................................................... 5
1. Launch Period Applications ................................................................................................ 5
2. Other Applications.............................................................................................................. 6
D. Mesa’s Applications to the FIT Program ........................................................................ 7
E. Awarding FIT Contracts ................................................................................................... 7
1. First Round of FIT Contract Offers ..................................................................................... 7
2. Second Round of FIT Contract Offers ................................................................................ 7
3. Third Round of FIT Contract Offers .................................................................................... 8
F. The Green Energy Investment Agreement ..................................................................... 9
III. PROCEDURAL HISTORY ............................................................................................... 10
A. Initial Phase .................................................................................................................... 10
B. Written Phase ................................................................................................................. 11
C. Hearing on Merits, Liability and Quantum and Subsequent Submissions ................ 29
IV. POSITIONS OF THE PARTIES AND RELIEF REQUESTED .......................................... 33
A. Summary of the Claimant’s Position ............................................................................ 33
B. The Claimant’s Request for Relief ................................................................................ 34
C. Summary of the Respondent’s Position ....................................................................... 34
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D. The Respondent’s Request for Relief ........................................................................... 35
V. ANALYSIS....................................................................................................................... 36
A. Preliminary Matters ........................................................................................................ 36
1. Relevance of Previous Decisions and Awards ................................................................. 36
2. Applicable Legal Framework ............................................................................................ 37
a. Law Governing the Procedure.......................................................................................... 37
b. Law Governing Jurisdiction .............................................................................................. 37
c. Law Governing the Merits ................................................................................................ 38
d. Principles of Interpretation ............................................................................................... 38
3. Burden of Proof ................................................................................................................ 40
B. Submission of a Claim to Arbitration ........................................................................... 41
1. Requirements for Submission of a Claim to Arbitration .................................................... 42
a. Article 1121 ...................................................................................................................... 42
b. Article 1116 ...................................................................................................................... 43
c. Article 1118 ...................................................................................................................... 48
d. Article 1119 ...................................................................................................................... 49
2. Article 1120 Objection ...................................................................................................... 50
a. The Respondent’s Position .............................................................................................. 50
b. The Claimant’s Position ................................................................................................... 53
c. The Non-Disputing Parties’ Position ................................................................................. 55
d. Analysis ........................................................................................................................... 56
3. Ratione temporis Objection .............................................................................................. 64
a. The Respondent’s Position .............................................................................................. 64
b. The Claimant’s Position ................................................................................................... 65
c. The Non-Disputing Parties’ Submissions ......................................................................... 65
d. Analysis ........................................................................................................................... 65
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4. Attribution Objection ......................................................................................................... 71
a. Article 4 of the ILC Articles ............................................................................................... 73
b. Article 5 of the ILC Articles ............................................................................................... 75
C. Procurement Exception ................................................................................................. 84
1. The Respondent’s Position .............................................................................................. 84
2. The Claimant’s Position ................................................................................................... 86
3. The Non-Disputing Parties’ Position ................................................................................. 88
4. Analysis ........................................................................................................................... 89
a. Whether Article 1103 precludes the application of Article 1108 ........................................ 90
b. The FIT Program constitutes “procurement” ..................................................................... 91
c. The FIT Program is a procurement program “by a Party or a state enterprise” ............... 107
D. Article 1105(1) .............................................................................................................. 108
1. Interpretation of Article 1105 .......................................................................................... 108
a. The Claimant’s Position ................................................................................................. 108
b. The Respondent’s Position ............................................................................................ 109
c. Non-Disputing Parties’ Position ...................................................................................... 110
d. Analysis ......................................................................................................................... 110
2. Scope and Content of Article 1105 ................................................................................. 113
a. The Claimant’s Position ................................................................................................. 113
b. The Respondent’s Position ............................................................................................ 114
c. The Non-Disputing Parties’ Position ............................................................................... 115
d. Analysis ......................................................................................................................... 116
3. Canada’s Alleged Breaches of Article 1105 ................................................................... 121
a. Implementation of the FIT Program by the OPA ............................................................. 122
b. The GEIA ....................................................................................................................... 130
c. Allocation of capacity in the Bruce Region ..................................................................... 155
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VI. COSTS .......................................................................................................................... 175
A. Background .................................................................................................................. 175
B. Positions of the Parties ............................................................................................... 175
1. The Claimant’s Position ................................................................................................. 175
2. The Respondent’s Position ............................................................................................ 176
C. Analysis ........................................................................................................................ 176
1. Costs ............................................................................................................................. 177
2. Applicable Legal Framework .......................................................................................... 178
3. Allocation of Costs ......................................................................................................... 178
VII. DECISION ..................................................................................................................... 180

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TABLE OF ABBREVIATIONS

Arran Arran Wind Project, ULC
AWA American Wind Alliance, LLC
BIT Bilateral Investment Treaty
Canada’s Notes General notes to Appendix 1 of the GPA
Canada-Czech Canada-Czech Republic Foreign Investor Promotion and Protection
Republic FIPA Agreement, 2009
CanWEA Canadian Wind Energy Association
C-Mem. Canada’s Counter-Memorial and Reply on Jurisdiction dated 28
February 2014
DAT Distribution Availability Test
ECT Economic Connection Test
EDA Economic Development Adder
Exh. C- Claimant’s Exhibit (Documentary exhibits)
Exh. CL- Claimant’s Exhibit (Legal exhibits)
Exh. R- Respondent’s Exhibit (Documentary exhibits)
Exh. RL- Respondent’s Exhibit (Legal exhibits)
FET Fair and Equitable Treatment
FIT Program Feed-in Tariff Program
FTC NAFTA Free Trade Commission
FTC Note FTC “Notes of Interpretation of Certain Chapter Eleven Provisions”,
2001
GATT General Agreement on Tariffs and Trade, 1994
GE General Electric
GEA Green Energy Act, 2009
GEGEA Green Energy and Green Economy Act, 2009
GEIA Green Energy Investment Agreement, 2010
Government Government of Ontario
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GPA Government Procurement Agreement
Hydro One Hydro One, Inc.
ICJ International Court of Justice
ICSID International Centre for Settlement of Investment Disputes
IESO Independent Electricity System Operator
ILC International Law Commission
ILC Articles ILC Articles on Responsibility of States for Internationally Wrongful
Acts, 2001
IPA Individual Project Assessment
Korean Consortium Samsung and the Korea Electric Power Corporation
kV Kilovolts
LEI London Economics International, LLC
LTEP Long-Term Energy Plan, 2010
Mem. Memorial of the Investor dated 20 November 2013
Mesa Mesa Power Group, LLC
MFN Most-Favored-Nation
Minister of Energy or Minister of Energy of the Government of Ontario
Minister
MOU Memorandum of Understanding
MW Megawatts
NAFTA North American Free Trade Agreement
NoA or Notice of Investor’s Notice of Arbitration dated 4 October 2011
Arbitration
North Bruce North Bruce Project, ULC
NT National Treatment under NAFTA
OPA Ontario Power Authority
PCA Permanent Court of Arbitration
PIA Postal Imports Agreement
PPA Power Purchase Agreement
REA Renewable Energy Approval
Rejoinder Canada’s Rejoinder on the Merits dated 2 July 2014
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Reply Investor's Reply Memorial and Rejoinder on Jurisdiction dated 30 April
2014
RESOP Renewable Energy Standard Offer Program, 2006
Samsung Samsung C&T Corporation
SCM Agreement Agreement on Subsidies and Countervailing Measures
Slovak Treaty Canada-Slovak Republic Agreement for the Promotion and Protection
of Investments, 2010
Summerhill Summerhill Project, ULC
TAT Transmission Availability Test
TTD TTD Wind Project, ULC
UNCITRAL Rules UNCITRAL Arbitration Rules, 1976
US-Ecuador BIT Treaty Between the United States of America and the Republic of
Ecuador Concerning The Encouragement and Reciprocal Protection
of Investment, 1993
VCLT or Vienna Vienna Convention on the Law of Treaties
Convention
WTO World Trade Organization
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I. THE PARTIES

A. THE CLAIMANT
1. Mesa Power Group, LLC (“Mesa” or “the Claimant”) is a Delaware limited liability
corporation created in July 2008 with its head office at 8117, Preston Road, Suite 260,
West Dallas, TIC 75225, United States. Mesa is part of the Mesa group of companies,
which oversee and develop renewable energy projects, notably in the wind sector.1
2. Mesa owns Mesa Wind, LLC, a Delaware corporation, which in turn owns Mesa AWA,
LLC, another Delaware corporation.2 Mesa AWA owns American Wind Alliance, LLC,
also a Delaware corporation (“AWA”). Through four Delaware incorporated
“development corporations”,3 AWA and, therefore, its indirect parent Mesa owns four
unlimited liability corporations incorporated in the Canadian province of Alberta, each of
which owns a specific wind project: 22 Degrees Holdings, ULC owns TTD Wind Project,
ULC (“TTD”); Arran Holdings, ULC owns Arran Wind Project, ULC (“Arran”); North Bruce
Holdings, ULC owns North Bruce Project, ULC (“North Bruce”); and Summerhill
Holdings, ULC owns Summerhill Project, ULC (“Summerhill”).4 This corporate
organisation has been depicted by the Claimant as follows:5

1 Witness Statement of Cole Robertson dated 19 November 2013 (“Robertson WS I”) §7.
2 GE Energy, LLC initially held an interest in American Wind Alliance, LLC. On 7 July 2010, Mesa
Power purchased the interests of GE Energy LLC, and became the sole owner of American Wind
Alliance, LLC (Reply §§93-96; Reply Witness Statement of Cole Robertson dated 28 April 2014
(“Robertson WS II”) §10).
3 AWA TTD Development, LLC; AWA Arran Development, LLC; AWA North Bruce Development, LLC;
AWA Summerhill Development, LLC.
4 Reply §§852-856.
5 Exh. C-0055; Mem. §35.
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3. The Claimant has been represented in this arbitration by:
Appleton & Associates International Lawyers
77 Bloor Street West, Suite 1800
Toronto, ON M5S 1M2
Canada
Tel.: + 416 966 8800
Fax: + 416 966 8801
E-mail: [email protected];
[email protected].

B. THE RESPONDENT
4. The Respondent is the Government of Canada (the “Respondent” or “Canada”), having
its address at the Office of the Deputy Attorney General of Canada, 284 Wellington
Street, Ottawa, ON KIA OH 8, Canada.
5. The Respondent has been represented in this arbitration by:
Ms. Sylvie Tabet, General Counsel and Director
Mr. Shane Spelliscy, Counsel
Mr. Michael Owen, Deputy Director and Counsel
Mr. Ian Philp, Counsel
Ms. Heather Squires, Counsel
Ms. Jennifer Hopkins, Counsel
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