Summary

Reproduced from www.worldbank.org/icsid with permission of ICSID.

I. PROCEDURAL HISTORY

1. This case concerns a dispute submitted to the International Centre for Settlement of Investment Disputes ("ICSID") on the basis of Chapter Eleven of the North American Free Trade Agreement ("NAFTA") and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the "ICSID Convention").

2. On 16 January 2015, Mobil Investments Canada Inc. ("Mobil" or "Claimant") filed a Request for Arbitration with ICSID (the "Request").

3. Canada is the Respondent.

4. The present case arises out of the Claimant's investment in the Hibernia and Terra Nova oil field development projects located off the coast of the Canadian province of Newfoundland and Labrador (together, the "Projects") and the application by the Canada-Newfoundland and Labrador Offshore Petroleum Board (the "C-NLOPB") of the Guidelines for Research and Development Expenditures (the "2004 Guidelines"), to the Projects. In an earlier arbitration involving the same disputing Parties[1] ("Mobil I"), the Claimant had challenged the application of the 2004 Guidelines to the Projects. The majority of the tribunal in Mobil I held that Canada had breached the performance requirement prohibition in NAFTA Article 1106 and awarded the claimants a portion of the damages they sought for expenditures incurred under the 2004 Guidelines during the period 2009 to 1 January 2012 (in respect of Terra Nova) and 1 May 2012 (with respect to Hibernia).[2]

5. In the Request, Mobil claimed damages for the continued application by the C-NLOPB of the 2004 Guidelines after 1 January 2012 (Terra Nova) and 1 May 2012 (Hibernia). It adduced evidence in respect of damages allegedly sustained in respect of the period from those dates to 31 December 2015. The Claimant did not adduce evidence in respect of losses allegedly incurred after that date.

6. On 24 July 2015, the Claimant and Canada (the "Parties") informed ICSID that, pursuant to NAFTA Article 1123, the tribunal would consist of three arbitrators, one to be appointed by each Party and the third, presiding arbitrator, to be appointed by agreement of the Parties. Mobil appointed Mr. J. William Rowley, QC (a national of the United Kingdom and Canada) as arbitrator, and Canada appointed Dr. Gavan Griffith, QC (a national of Australia). Both arbitrators accepted their appointments. By agreement of the Parties, Sir Christopher Greenwood, QC (a national of the United Kingdom) was appointed President of the Tribunal, and he accepted his appointment on 11 September 2015.

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II. AWARD

20. Accordingly, the Tribunal unanimously decides that the terms of settlement agreed to by the Parties be recorded verbatim as an Award as follows:

This Settlement Agreement ("Agreement") is made and entered into by and among Mobil Investments Canada Inc., a corporation incorporated under the laws of the State of Delaware, in the United States of America, and its Canadian subsidiaries, ExxonMobil Canada Ltd., ExxonMobil Canada Properties, and ExxonMobil Canada Resources Company (collectively "ExxonMobil"), and her Majesty the Queen in Right of Canada ("Government of Canada"). ExxonMobil and the Government of Canada are hereinafter referred to each as "Party" and collectively as "Parties".

WHEREAS, to create a legal regime for exploitation of the Hibernia field and other offshore fields, in 1985 the Government of Canada and her Majesty in Right of Newfoundland and Labrador ("Province") entered into a Memorandum of Agreement on Offshore Oil and Gas Resource Management and Revenue Sharing and enacted parallel legislation implementing this agreement, namely the Canada-Newfoundland and Labrador Atlantic Accord Implementation Act and the Canada-Newfoundland and Labrador Atlantic Accord Implementation Newfoundland and Labrador Act ("Accord Acts");

WHEREAS, the Accord Acts govern the conduct of petroleum projects offshore of the Province and established the Canada-Newfoundland and Labrador Offshore Petroleum Board ("Board") to regulate such projects;

WHEREAS, ExxonMobil Canada Properties and ExxonMobil Canada Resources Company own interests in the Hibernia Project, and ExxonMobil Canada Properties owns an interest in the Terra Nova Project, both of which are operating oil fields located offshore of the Province;

WHEREAS, on November 5, 2004, the Board issued Guidelines for Research and Development Expenditures, which require operators of offshore petroleum projects to spend a fixed percentage of revenues on research and development and education and training within the Province ("R&D Obligations");

WHEREAS, on January 16, 2015, Mobil Investments Canada Inc. issued to the Government of Canada a Request for Arbitration pursuant to Chapter Eleven of the North American Free Trade Agreement ("NAFTA") in which it claimed compensation for amounts it has incurred in complying with the R&D Obligations for the Hibernia Project and the Terra Nova Project (the "Claim");

WHEREAS, the Claim was registered by the International Centre for the Settlement of Investment Disputes ("ICSID") as ICSID Case No. ARB/15/6 and an arbitral tribunal was appointed ("Tribunal");

WHEREAS, the Tribunal issued a Decision on Jurisdiction and Admissibility on July 13, 2018 ordering the Parties to proceed to arguments on damages, and subsequently issued a Procedural Order No. 9 on December 11, 2018 on the scope of the damages phase, and a Procedural Order No. 10 on March 5, 2019 setting out procedural aspects and a schedule for the damages phase;

WHEREAS, on October 3, 2018, Mobil Investments Canada Inc. served a Notice of Intent to Submit a Claim to Arbitration to the Government of Canada pursuant to Chapter Eleven of the NAFTA in which it claimed compensation for amounts it has incurred in complying with the R&D Obligations for the Hibernia Project and the Terra Nova Project from 2016 until the end of the Projects' durations;

WHEREAS, the Parties wish to finally and irrevocably settle the Claim and any future claims with respect to the Guidelines for Research and Development Expenditures issued on November 5, 2004, with effect from April 1, 2004, and any revisions, amendments, reinterpretations or substitutions thereof ("2004 Guidelines"), and commitments made to adhere to the 2004 Guidelines (collectively "Claims");

NOW THEREFORE, in consideration of the mutual promises, undertakings and representations contained in this Agreement, the Parties agree as follows:

1. ExxonMobil hereby irrevocably and permanently withdraws the Request for Arbitration dated January 16, 2015 issued against the Government of Canada and the Notice of Intent to Submit a Claim to Arbitration dated October 3, 2018 served to the Government of Canada.

2. ExxonMobil hereby releases and forever discharges the Government of Canada from the Claim.

3. ExxonMobil, on its own behalf and on behalf of its Affiliates, hereby waives any right to bring a NAFTA Chapter Eleven claim or any other claim under any other treaty or domestic law against the Government of Canada, the Province or the Board with respect to the 2004 Guidelines, as applied to the Hibernia Project or Terra Nova Project or any commitment by ExxonMobil to adhere to the 2004 Guidelines as they are applied to the Hibernia Project or Terra Nova Project.

4. ExxonMobil shall not, on its own behalf or on behalf of its affiliates, directly or indirectly, individually or by, through, or with any third party, pursue, participate in or receive any benefit from any other claim, whether by arbitration or court proceeding, under treaty or domestic law, against the Government of Canada, the Province or the Board with respect to the 2004 Guidelines, or any commitment by ExxonMobil to adhere to the 2004 Guidelines, as they are applied to the Hibernia Project and Terra Nova Project.

5. Notwithstanding anything to the contrary, the waivers under articles 3 and 4 above, do not include any waiver of ExxonMobil's right to bring, participate in, or benefit from an action against the Board with respect to the administration or approval of expenditures under sections 3 (Eligibility Criteria) and 4 (Administrative Criteria and Expenditure Management) of the 2004 Guidelines.

6. ExxonMobil relies on the Canada-Newfoundland and Labrador Offshore Petroleum Board's implementation of an industry competitiveness measure in the form of a 0.5% ceiling on the R&D Benchmark as set out in the 2004 Guidelines. In consideration for the withdrawal, settlement and waiver of the Claims, ExxonMobil has received a credit of C$35 million to apply against R&D Obligations under the 2004 Guidelines.

7. ExxonMobil and the Government of Canada shall each bear their own legal costs and expenses arising from the Claim and shall pay in equal shares the fees and expenses of the Tribunal and of ICSID.

8. In accordance with NAFTA Annex 1137.4, ExxonMobil and the Government of Canada agree to the publication of the Consent Award.

9. The Parties hereby acknowledge that this Agreement constitutes a settlement of the Claim for the purpose of mitigating the costs and burdens of further litigation and that nothing contained herein constitutes an acknowledgment or admission of liability in any way, and the Government of Canada expressly denies any liability or wrongdoing in connection with the Claim.

[signatures]

[1] Murphy Oil Co. was also a Claimant in Mobil I (hence the references in quotations from Mobil I to "the Claimants") but it has not participated in the present proceedings.

[2] Mobil Investments Canada Inc. and Murphy Oil Corporation v. Canada, ICSID Case No. ARB(AF)/07/4: Decision on Liability and on Principles of Quantum, 22 May 2012 ("Mobil I Decision"); Award, 20 February 2015 ("Mobil I Award").