Table of Contents
I. Executive Summary
II. Claimants Have Met the Jurisdictional Requirements of the ICSID Convention and Annex 14-C
III. To the Extent the Tribunal Applies a Burden of Proof Framework, Respondent Bears the Burden of Proving Its Objection
IV. The Ordinary Meaning of Annex 14-C Shows that Claimants May Submit Claims Arising from Measures Taken during the Transition Period
A. Annex 14-C Applies Prospectively to Measures Taken After USCMA Entered into Force
B. The Disputing Parties Have Chosen NAFTA as the Applicable Law, and that Choice Is Binding on the Tribunal, Regardless of Whether NAFTA Would Otherwise Apply
1. Parties Have Complete Freedom to Choose the Applicable Substantive Law for Resolving Their Dispute
2. The Disputing Parties Have Chosen NAFTA as the Applicable Substantive Law
3. The Tribunal Must Apply NAFTA as the Applicable Law to Resolve the Dispute, Even If NAFTA Is Not Otherwise in Force
C. If the USMCA Parties Had Intended to Preclude Claims Under Article 14-C Arising from Measures Taken during the Transition Period, They Would Have Said So in the Text
V. The Context of Paragraph 1 of Annex 14-C Shows that Claimants May Submit Claims Arising from Measures Taken during the Transition Period
A. Footnote 21 of Annex 14-C Shows that the USMCA Parties Consented to Arbitration of Claims Arising from Measures Taken during the Transition Period
1. Respondent's Interpretation of Annex 14-C Renders Footnote 21 Meaningless and Does Not Accord with the Text or Common Sense
2. Respondent's Interpretation of Footnote 21 Produces Absurd Results
B. The USMCA Protocol Shows that the USMCA Parties Intended to Allow Claimants to Submit Claims under Paragraph 1 of Annex 14-C Arising from Measures Taken during the Transition Period
C. The Definition of "Legacy Investment" Reflects an Intention to Allow Claims Arising from Measures Taken during the Transition Period
D. Article 34.1 of USMCA Does Not Support Respondent's Objection
VI. Claimants' Interpretation of Annex 14-C is Consistent with the Object and Purpose of USMCA
VII. Supplementary Means of Interpretation Under Article 32 of the VCLT Confirm that Annex 14-C Allows Claims for Damages Arising from Measures Taken during the Transition Period
A. The Three-Year Transition Period Does Not, and Was Not Intended to, Correspond to the Limitations Period in NAFTA Chapter 11
B. Statements by the USMCA Parties, U.S. Government Advisors, and Former USMCA Negotiators Show that Annex 14-C Allows Claims for Damages Arising from Measures Taken during the Transition Period
VIII. Equity Requires the Tribunal to Reject Respondent's Jurisdictional Objection
A. The Principle of Consistency Forecloses Respondent's Preliminary Objection
B. The Doctrine of Unclean Hands Forecloses Respondent's Preliminary Objection
I. Executive Summary
1. In Annex 14-C ("Annex 14-C") of the United States-Mexico-Canada Agreement ("USMCA"), Respondent consented to arbitrate claims alleging that it breached Section A of Chapter 11 of the North American Free Trade Agreement ("NAFTA") (the "Section A obligations") with respect to legacy investments. Under paragraph 1 of Annex 14-C, investors holding legacy investments were required to submit such claims to arbitration in accordance with Section B of NAFTA Chapter 11. Under paragraph 3 of Annex 14-C, Respondent's consent extended through the three-year period after the termination of NAFTA ("transition period"). Through the filing of their Request for Arbitration ("RFA"), Claimants accepted Respondent's offer of arbitration and gave reciprocal consent. Claimants' claims meet each of the jurisdictional requirements of Annex 14-C. Claimants held legacy investments, submitted their claims during the transition period and in accordance with Section B of NAFTA Chapter 11, and alleged that President Joseph Biden's politically motivated decision to revoke the Presidential Permit ("2019 Permit") for the Keystone XL Pipeline ("KXL Pipeline") breached Respondent's Section A obligations. None of these points can be seriously disputed.
2. The text of Annex 14-C is clear on its face: Respondent consented to the arbitration of claims alleging that Respondent breached the Section A obligations during the transition period. Nevertheless, in its Memorial on Its Preliminary Objection ("Memorial"), Respondent argues that paragraph 1 of Annex 14-C permits claims only with respect to measures taken while NAFTA was in force, i.e., before the start of the transition period. Therefore, Respondent says, the Tribunal may not hear Claimants' claims because Respondent revoked the 2019 Permit after NAFTA terminated. As Claimants show in this Counter-Memorial, Respondent seeks to insert a temporal limitation in Annex 14-C that is not there.
3. Respondent's objection begins and ends with its argument that, under a "general principle of intertemporal law," NAFTA does not apply to measures taken after the treaty terminated. Respondent misstates the true issue in dispute. The actual question before the Tribunal is whether paragraphs 1 and 3 of Annex 14-C of USMCA allow investors to submit claims alleging that Respondent's actions taken during the transition period breached the Section A obligations with respect to legacy investments. This is not an abstract question about the intertemporal application of treaties but a concrete question about the effect of specific provisions of USMCA, the scope of the parties' arbitration agreement, and the parties' choice of applicable law.
4. Respondent recognizes--in fact vehemently argues--that consent is "paramount for" or the `"cornerstone' of" the Tribunal's jurisdiction.1 What Respondent fails to recognize is that its consent to arbitration, combined with Claimants' acceptance of that offer and reciprocal consent, constitute an arbitration agreement. That arbitration agreement binds Respondent to arbitrate disputes under Annex 14-C and includes a choice of law--NAFTA--that is binding on the Tribunal and must be respected regardless of whether NAFTA would otherwise apply or whether NAFTA is otherwise in force.
5. Even apart from the parties' choice of law, the evidence is plentiful and manifest that the USMCA Parties agreed to allow claims under Annex 14-C arising from measures taken during the transition period. That conclusion follows naturally from the default rule under customary international law that treaties--including, in the present case, USMCA and Annex 14-C, in particular--apply prospectively to measures taken after the entry into force of the treaty. In addition:
The text of the Protocol Replacing the North American Free Trade Agreement with USMCA ("USMCA Protocol") provides that the replacement of NAFTA with USMCA is "without prejudice" to those provisions in USMCA that refer to specific NAFTA provisions. Annex 14-C refers to Sections A and B of NAFTA Chapter 11, and thus preserves those obligations during the transition period with respect to legacy investments.
Footnote 21 of Annex 14-C provides that an investor that is eligible to assert claims under Annex 14-E of USMCA may not assert claims under Annex 14-C. Arbitration under Annex 14-E is only available for claims in relation to measures taken after the termination of NAFTA. The carve out in Footnote 21 makes no sense unless Annex 14-C also applies to measures taken after the termination of NAFTA.
Arbitration under paragraph 1 of Annex 14-C is only available for "legacy investments," which are defined to include only investments that existed at the start of the transition period. The natural implication of this definition is that paragraph 1 of Annex 14-C protects investments from actions taken during the transition period.
Statements made by the USMCA Parties contemporaneously with the negotiation and conclusion of USMCA, as well as statements of former USMCA negotiators after the agreement's conclusion, make it crystal clear that paragraph 1 of Annex 14-C permits claims arising from measures that a USMCA Party may take during the transition period.
6. On Respondent's side of the ledger, there is nothing. There is no provision in Annex 14-C or any other part of USMCA stating that paragraph 1 of Annex 14-C applies only to acts that pre-dated the entry into force of USMCA. There is no way to construe Respondent's interpretation of Annex 14-C in a way that does not lead to absurd results. There is no contemporaneous evidence that shows, when the USMCA Parties negotiated Annex 14-C, they intended to exclude claims in connection with actions taken during the transition period. And there is no merit to its legal argument regarding the intertemporal application of treaties as applied to this case.
7. Respondent makes various assertions, without evidence, about the USMCA Parties' intentions. Respondent does not provide any USMCA negotiating history, and it brushes aside contemporaneous statements of the USMCA Parties that contradict its position. Unlike Respondent, Claimants do not independently have access to the negotiating history, as the USMCA Parties have declared such documents confidential. Clearly, whatever negotiating history that exists is not helpful to Respondent or Respondent would have included it. In fact, as Claimants shall show, the few internal U.S. Government documents that Claimants have obtained in connection with the negotiation of USMCA undermine Respondent's objection. Claimants intend to request all relevant negotiating history during the discovery phase of this bifurcated proceeding.
8. The parties spent considerable time debating these issues in their submissions about whether to bifurcate Respondent's preliminary objection ("the bifurcation request stage"). Given that Respondent has repeated many of the arguments that it made during the bifurcation request stage, some repetition of Claimants' arguments is necessary in this submission. However, Claimants have sought to minimize the repetition by incorporating Claimants' earlier arguments and then further elaborating as appropriate to address the specific points Respondent has made in its Memorial.
9. This Counter-Memorial proceeds as follows:
In Section II, Claimants demonstrate that they have met the jurisdictional requirements of the ICSID Convention and Annex 14-C.
In Section III, Claimants show that, to the extent the Tribunal applies a burden of proof framework, Respondent bears the burden of proving its objection.
In Sections IV - VI, Claimants show that, consistent with the ordinary meaning of paragraphs 1 and 3 of Annex 14-C, the context of those provisions, and the object and purpose of USMCA, claimants may submit claims arising from measures taken during the transition period.
In Section VII, Claimants show that the supplementary means of interpretation under Article 32 of the Vienna Convention on the Law of Treaties ("VCLT") confirm that claimants may submit claims arising from measures taken during the transition period.
In Section VIII, Claimants show that equity requires the Tribunal to reject Respondent's preliminary objection.
In Section IX, Claimants conclude.