Westmoreland Mining Holdings LLC v Canada - ICSID Case No. UNCT/20/3 - NAFTA - Government of Canada - Request for Bifurcation - 24 July 2020
Reproduced from www.worldbank.org/icsid with permission of ICSID.
1. In accordance with the procedure agreed to by the disputing parties and confirmed by the Tribunal, Canada requests that the Tribunal bifurcate these proceedings and hear the jurisdictional and admissibility objections set out in Canada's Statement of Defence in a preliminary phase.
2. In particular, Canada requests that the Tribunal hear Canada's jurisdictional objections under NAFTA Articles 1101(1), 1116(1), 1116(2), 1117(1), and 1117(2), along with Canada's objection under Article 1108(7)(b), as a preliminary matter. These objections are discrete and ripe for determination.
3. The 1976 UNCITRAL Arbitration Rules (the "1976 UNCITRAL Rules") establish a presumption that questions of jurisdiction should be heard in a preliminary phase, a presumption aimed at ensuring efficiency in arbitration proceedings. In this case, bifurcation is the fairest and most efficient method of proceeding. Preliminary consideration of Canada's serious and substantial objections will not require the Tribunal to prejudge or enter the merits and, if successful, will eliminate the totality of the Claimant's claim. It would be procedurally unfair and inefficient to require either disputing party to spend potentially millions of dollars and thousands of hours of lawyer, expert, and witness time litigating claims over which the Tribunal has no jurisdiction or which are inadmissible. For these reasons, the Tribunal should first consider issues of jurisdiction and admissibility, rather than combining these preliminary objections with an unnecessary and expensive merits phase.
II. JURISDICTIONAL AND ADMISSIBILITY OBJECTIONS SHOULD BE CONSIDERED AS A PRELIMINARY MATTER WHEN DOING SO WILL INCREASE THE FAIRNESS AND EFFICIENCY OF THE PROCEEDINGS
4. Article 21(4) of the 1976 UNCITRAL Rules provides: "In general, the arbitral tribunal should rule on a plea concerning its jurisdiction as a preliminary question. However, the arbitral tribunal may proceed with the arbitration and rule on such a plea in their final award." This rule creates a presumption in favour of bifurcating jurisdictional questions.
5. The presumption in favour of bifurcation is intended to increase the fairness and efficiency of arbitration proceedings. Holding a preliminary phase to hear jurisdictional objections "enables the parties to know where they stand at an early stage; and it will save them spending time and money on arbitral proceedings that prove to be invalid." It also helps to ensure that the tribunal only hears and decides a dispute where the conditions of consent to arbitrate have been met. This principle is particularly salient in investment treaty arbitration, including under NAFTA Chapter Eleven, because it is a "basic rule of international law and a principle of international relations that a State is not obliged [to] give an account of itself on issues of merits before an international tribunal which lacks jurisdiction or whose jurisdiction has not yet been established." NAFTA and other international arbitral tribunals frequently decide questions of jurisdiction as a preliminary matter separate from the merits, a practice described as "standard procedure" in ICSID arbitrations.
6. Similarly, Article 15(1) of the 1976 UNCITRAL Rules confers the Tribunal discretion to consider other matters as preliminary questions even if they do not fall within the ambit of Article 21(4) of the 1976 UNCITRAL Rules, as long as the disputing parties are treated with equality and have a full opportunity to present their case. The imperative of procedural efficiency "may [...] be used to bifurcate in order to end the procedure at the phase of preliminary objections if that saves the very considerable work and time that would be needed for a procedure on the merits."
7. The tribunal in Philip Morris v. Australia, an arbitration governed by the 2010 UNCITRAL Arbitration Rules, considered bifurcation to be appropriate for issues of both jurisdiction and admissibility when the objection: (i) is prima facie serious and substantial, (ii) can be examined without prejudging or entering the merits, and, (iii) if successful, would dispose of all or an essential part of the claims raised. NAFTA and other investment treaty arbitration tribunals have adopted a similar approach, applying these factors to questions of both jurisdiction and admissibility. These questions provide a useful framework for assessing whether to bifurcate each of Canada's preliminary objections. If an objection satisfies each question, then it is fair and efficient to have that issue heard in a preliminary phase.
III. BIFURCATION WILL INCREASE THE FAIRNESS AND EFFICIENCY OF THE PROCEEDINGS
A. Canada's Objections That the Alleged Breaches Pre-Date the Claimant's Investment in Canada
1. The Claimant Was Not a Protected Investor at the Time of the Alleged Breaches
2. The Claimant Has Not Made Out a Prima Facie Damages Claim
3. The Challenged Measures Do Not Relate to the Claimant or its Investments under NAFTA Article 1101(1)
B. Canada's Objection That the Claimant Has Not Made a Timely Claim
C. Canada's Objection That NAFTA Article 1102 Does Not Apply to Alberta's Allocation of Transition Payments by Virtue of NAFTA Article 1108(7)(b)
 See Correspondence from the Tribunal to the Disputing Parties, dated 9 July 2020.
 Canada's Statement of Defence, 26 June 2020 ("Statement of Defence"), ¶¶ 62-74, 95-103.
 1976 UNCITRAL Rules, Article 21(4). Unlike Article 23(3) of the 2010 UNCITRAL Arbitration Rules, which provides that the Tribunal "may" bifurcate, the preceding 1976 UNCITRAL Rules provide that the tribunal "should" rule on a plea concerning its jurisdiction as a preliminary question. The use of "should" rather than "may" provides narrower discretion to a tribunal under the 1976 UNCITRAL Rules and creates a presumption in favour of bifurcation. See RLA-002, Philip Morris Asia Limited v. The Commonwealth of Australia (UNCITRAL) Procedural Order No. 8 Regarding Bifurcation of the Procedure, 14 April 2014 ("Philip Morris - Procedural Order No. 8"), ¶ 101.
 See, e.g., RLA-003, Mesa Power Group LLC v. Government of Canada (UNCITRAL) Procedural Order No. 2, 18 January 2013, ¶ 16 (holding that under the 1976 UNCITRAL Rules "when a Party raises an objection to jurisdiction, the presumption is in favor of addressing the objection as a preliminary question"); RLA-004, President Allende Foundation, Victor Pey Casado and Coral Pey Grebe v. Republic of Chile II (UNCITRAL) Decision on Respondent's Request for Bifurcation, 27 June 2018 ("Pey Casado - Decision on Request for Bifurcation"), ¶ 100 ("The Tribunal agrees with Respondent that Article 21(4) of the UNCITRAL Rules creates a presumption in favor of treating the issue of jurisdiction as a preliminary question"); RLA-005, Resolute Forest Products Inc. v. Government of Canada (UNCITRAL) Procedural Order No. 4, Decision on Bifurcation, 18 November 2016 ("Resolute - Decision on Bifurcation"), ¶ 4.3 ("As a starting point, Article 21(4) of the UNCITRAL Rules provides that `[i]n general, the arbitral tribunal should rule on a plea concerning its jurisdiction as a preliminary question. However, the arbitral tribunal may proceed with the arbitration and rule on such a plea in their final award.' This creates a presumption in favour of bifurcation, subject to the Tribunal exercising discretion to deal with jurisdictional pleas together with the merits in appropriate circumstances.").
 See, e.g. RLA-006, Cairn Energy PLC and Cairn UK Holdings Limited (CUHL) v. Republic of India (UNCITRAL) Decision on the Respondent Application for Bifurcation (Procedural Order No. 4), 19 April 2017, ¶ 78 ("These considerations - fairness and procedural efficiency - are the determining factors that should guide the Tribunal's discretion. As noted above, these were the principles that guided the negotiations for the 1976 Rules."); RLA-007, Glamis Gold, Ltd. v. The United States of America (UNCITRAL) Procedural Order No. 2 (Revised), 31 May 2005 ("Glamis Gold - Procedural Order No. 2 (Revised)"), ¶ 11 ("In examining the drafting history of Article 21(4) of the UNICTRAL Rules, the Tribunal finds that the primary motive for the creation of a presumption in favor of the preliminary consideration of a jurisdictional objection was to ensure efficiency in the proceedings"), ¶12(c) ("[I]f an objection is raised to the jurisdiction of the tribunal and a request is made by either party that the objection be considered as a preliminary matter, the tribunal should do so.").
 RLA-008, Alan Redfern and Martin Hunter, Law and Practice of International Commercial Arbitration, 4th ed. (London: Thomson, Sweet & Maxwell, 2004) [Excerpt], p. 258. See also RLA-009, Gary Born, International Commercial Arbitration (Alphen aan den Rijn: Kluwer Law International, 2009), Volume I [Excerpt], pp. 994-995 ("Although no absolute rules can be prescribed, the more appropriate course for the arbitral tribunal is generally to conduct a preliminary proceeding on credible good faith jurisdictional challenges. That permits the parties to fully address the issue and, if jurisdiction is lacking, avoids the expense of presenting the case on merits. It also avoids forcing a party, who may not be subject to a tribunal's jurisdiction, to litigate the merits of its claims in what may be an illegitimate forum.").
 RLA-010, Shabtai Rosenne, The World Court: What It Is and How It Works, 5th ed. (Dordrecht: Martinus Nijhoff, 1995) [Excerpt], p. 99. See also RLA-011, Southern Pacific Properties (Middle East) Ltd. v. Arab Republic of Egypt (106 I.L.R. 531) Decision on Jurisdiction, 14 April 1988, ¶ 63 (in bifurcating, the tribunal confirmed "there is no presumption of jurisdiction - particularly where a sovereign State is involved - and the tribunal must examine [a sovereign's] objections to the jurisdiction of the Centre with meticulous care, bearing in mind that jurisdiction in the present case exists only insofar as consent thereto has been given by the Parties").
 See, e.g., RLA-005, Resolute - Decision on Bifurcation, ¶ 5.1 (NAFTA Chapter Eleven tribunal deciding to treat the respondent's jurisdictional and admissibility objections as a preliminary question); RLA-012, Canfor Corp. v. United States of America (UNCITRAL) Decision on the Place of Arbitration, Filing of a Statement of Defence and Bifurcation of the Proceedings, 23 January 2004, ¶ 55 (NAFTA Chapter Eleven tribunal deciding to treat the respondent's jurisdictional objection as a preliminary question); RLA-013, GAMI Investments, Inc. v. United Mexican States (UNCITRAL) Procedural Order No. 2, 22 May 2003, ¶ 1 (NAFTA Chapter Eleven tribunal deciding to address preliminary issues separate from proceeding on the merits); RLA-014, United Parcel Service of America Inc. v. Government of Canada (UNCITRAL) Decision of the Tribunal on the Filing of a Statement of Defence, 17 October 2001, ¶ 16 ("[Jurisdictional issues] are [...] frequently, as the UNCITRAL rules indicate they should be, dealt with as a preliminary matter."); RLA-015, The Loewen Group, Inc. and Raymond L. Loewen v. United States of America (ICSID Case No. ARB(AF)/98/3) Decision on Hearing of Respondent's Objection to Competence and Jurisdiction, 5 January 2001, (NAFTA Chapter Eleven tribunal addressing the respondent's objections to competence and jurisdiction as a question separate from the merits); RLA-016, Ethyl Corporation v. Government of Canada (UNCITRAL) Award on Jurisdiction, 24 June 1998, (NAFTA Chapter Eleven tribunal directing parties to brief and argue preliminary issues separate from proceeding on the merits); RLA-017, Emmis International Holding, B.V., Emmis Radio Operating, B.V., MEM Magyar Electronic Media Kereskedelmi és Szolgáltató Kft. v. The Republic of Hungary (ICSID Case No. ARB/12/2) Decision on Respondent's Application for Bifurcation, 13 June 2013, ¶ 57 ("Emmis International - Decision on Application for Bifurcation") (deciding to hear respondent's objections to jurisdiction as a preliminary question); RLA-004, Pey Casado - Decision on Request for Bifurcation, ¶ 118 (deciding to hear jurisdictional objections as a preliminary question).
 RLA-018, Christoph Schreuer et al., The ICSID Convention: A Commentary, 2nd ed. (Cambridge: Cambridge University Press, 2009) [Excerpt], pp. 534 ("ICSID tribunals have routinely suspended proceedings on the merits upon receipt of an objection to jurisdiction."), 537 ("In the practice of ICSID tribunals, treatment of jurisdictional issues as preliminary questions is standard procedure.").
 Article 15(1) of the 1976 UNCITRAL Rules states: "Subject to these Rules, the arbitral tribunal may conduct the arbitration in such manner as it considers appropriate, provided that the parties are treated with equality and that at any stage of the proceeding each party is given a full opportunity of presenting its case."
 RLA-002, Philip Morris - Procedural Order No. 8, ¶ 118. The Philip Morris tribunal made this observation with respect to Article 17(1) of the 2010 UNCITRAL Arbitration Rules, which were applicable in that arbitration, and state in relevant part: "Subject to these Rules, the arbitral tribunal may conduct the arbitration in such manner as it considers appropriate, provided that the parties are treated with equality and that at an appropriate stage of the proceedings each party is given a reasonable opportunity of presenting its case." This provision is similar to Article 15(1) of the 1976 UNCITRAL Rules.
 In Philip Morris, the tribunal found that "at least for the issue of bifurcation, it does not matter whether [the objection] is characterized as going to jurisdiction or admissibility," since the tribunal had the power to rule on such an objection as a preliminary matter under its general powers. See RLA-002, Philip Morris - Procedural Order No. 8, ¶ 118.
 RLA-002, Philip Morris - Procedural Order No. 8, ¶ 109.
 See, e.g., RLA-005, Resolute - Decision on Bifurcation, ¶ 4.3 (stating "[t]he Disputing Parties also agree that for a Tribunal to determine whether bifurcation is appropriate in a given case, it is helpful to apply the three-part test applied in Philip Morris v. Australia [...]", and proceeding to apply the framework); RLA-007, Glamis Gold - Procedural Order No. 2 (Revised), ¶ 12; RLA-017, Emmis International - Decision on Application for Bifurcation, ¶ 37 ("The overarching question is one of procedural efficiency. Factors that may be relevant in this regard are: (a) whether the request is substantial or frivolous, (b) whether the request, if granted, would lead to a material reduction in the proceedings at the next stage, (c) whether bifurcation is impractical in the sense that the issues are too intertwined with the merits."); RLA- 019, Tulip Real Estate Investment and Development Netherlands B.V. v. Turkey (ICSID Case No. ARB/11/28) Decision on the Respondent's Request for Bifurcation under Article 41(2) of the ICSID Convention, 2 November 2012 ("Tulip Real Estate - Decision on Request for Bifurcation"), ¶¶ 30-31 ("Three considerations have been identified as relevant to the exercise of the Tribunal's discretion. These are (i) whether it is desirable to bifurcate for reasons of procedural economy; and (ii) whether the preliminary objection is intimately linked to the merits; and (iii) whether a determination of the preliminary objection is capable of resulting in the dismissal of the entire case or reducing significantly its scope and complexity.").
 See, e.g., RLA-019, Tulip Real Estate - Decision on Request for Bifurcation, ¶¶ 30-31, 39-44; RLA-005, Resolute - Decision on Bifurcation, ¶¶ 4.17-4.19.