Summary

IN THE MATTER OF AN ARBITRATION UNDER
ANNEX 14-C OF THE CANADA-UNITED STATES-MEXICO AGREEMENT

("CUSMA"), CHAPTER 11 OF THE NORTH AMERICAN FREE TRADE
AGREEMENT ("NAFTA"),

AND THE 2013 UNCITRAL ARBITRATION RULES

TABLE OF CONTENTS

I. INTRODUCTION
A. THE DISPUTING PARTIES
B. THE DISPUTE
II. PROCEDURAL HISTORY
A. COMMENCEMENT OF ARBITRATION
B. PRELIMINARY ISSUE - BIFURCATION
C. AMENDMENTS TO PROCEDURAL CALENDAR
D. DOCUMENT PRODUCTION PHASE
E. FURTHER SUBMISSIONS
F. HEARING AND POST-HEARING SUBMISSIONS
III. FACTUAL BACKGROUND
A. THE RELEVANT ENTITIES
(i) The Claimant's Subsidiaries and Management
(ii) The Respondent's Organs of State
B. THE REGULATORY FRAMEWORK
C. THE WOLFE ISLAND SHOALS PROJECT
D. THE FIT CONTRACT
E. MOE OFFSHORE WIND STRATEGY REVIEW AND FORCE MAJEURE
F. THE MORATORIUM
G. WINDSTREAM I ARBITRATION
H. EVENTS POST-WINDSTREAM I ARBITRATION
(i) Post-Windstream I Award Potential Investors
(ii) Post-Windstream I Award Work Conducted
(iii) Post-Windstream I Award Interactions with MOE and MEI
(iv) Post-Windstream I Award Interactions with IESO
(v) Post-Windstream I Award Public Information Regarding Moratorium
(vi) Post-Windstream I Award Internal Ontario Government Correspondence
(vii) Post-Windstream I Award Emerging Renewable Power Program
I. COURT PROCEEDINGS AND FIT CONTRACT TERMINATION
J. THE FORD GOVERNMENT ELECTION
K. COMMENCEMENT OF THE CURRENT ARBITRATION
IV. PRELIMINARY ISSUES
A. RES JUDICATA, COLLATERAL ESTOPPEL, AND ABUSE OF PROCESS
(i) The Respondent's Position
(a) The Applicable Legal Standard
(b) Application to the Facts
(ii) The Claimant's Position
(a) The Applicable Legal Standard
(b) Application to the Facts
(iii) The Tribunal's Analysis
(a) The Applicable Legal Standard
(b) Application to the Facts
(i) Expropriation Cause of Action
(ii) FET Cause of Action
(iii) Conclusion
B. FAILURE TO ESTABLISH PRIMA FACIE LOSS OR DAMAGE
(i) The Respondent's Position
(ii) The Claimant's Position
(iii) The Tribunal's Analysis
C. LIMITATION PERIOD ARGUMENT
(i) The Respondent's Position
(ii) The Claimant's Position
(iii) Mexico's Position
(iv) The United States' Position
(v) The Tribunal's Analysis
V. THE CLAIMANT'S EXPROPRIATION CLAIM
A. THE APPLICABLE STANDARD
(i) The Claimant's Position
(ii) The Respondent's Position
(iii) Mexico's Position
(iv) The United States' Position
B. APPLICATION OF THE STANDARD
(i) The Claimant's Position
(a) Investment Capable of Expropriation
(b) Existence of Expropriation in Fact
(c) Lawfulness of Expropriation
(ii) The Respondent's Position
(a) Investment Capable of Expropriation
(b) Existence of Expropriation in Fact
(c) Lawfulness of Expropriation
C. THE TRIBUNAL'S ANALYSIS
(i) The Applicable Standard
(ii) Application of the Standard
VI. THE CLAIMANT'S FAIR AND EQUITABLE TREATMENT (FET) CLAIM
A. APPLICABLE STANDARD
(i) The Claimant's Position
(ii) The Respondent's Position
(iii) Mexico's Position
(iv) The United States' Position
B. APPLICATION OF THE STANDARD
(i) The Claimant's Position
(ii) The Respondent's Position
(iii) The Tribunal's Analysis
VII. CAUSATION AND DAMAGES
VIII. COSTS
A. THE CLAIMANT'S POSITION
B. THE RESPONDENT'S POSITION
C. THE TRIBUNAL'S ANALYSIS
IX. THE DISPOSITIVE

....

B. THE DISPUTE

4. This is the second arbitration in Windstream Energy LLC v. Canada (i.e., Windstream II). It arises out of the first arbitration award, the Windstream I Award, and events thereafter. For consistency, where possible, this Award mirrors the factual findings in the Windstream I Award.

5. The original dispute is set out in the Windstream I Award as follows (the same defined terms are adopted in this Award):4

The dispute between the Parties arises out of an offshore wind electricity generation project in the Wolfe Island Shoals area in Ontario, Canada (the "Project" or the "WWIS Project"). The Project was undertaken following Ontario's enactment of the Green Energy and Green Economy Act of 2009 ("GEGEA") and the subsequent promulgation of additional rules and regulations, creating a Feed-in-Tariff ("FIT") program ("FIT Program") (the "FIT Program") for the development of renewable energy projects, including onshore and offshore wind. According to the Claimant, following the award of a Feed-in- Tariff Contract (the "FIT Contract") to the Claimant, the Government of Ontario (also referred to as the "Government" or "Ontario") delayed the approval of the required permits and authorizations, including those allowing access to Crown land, and eventually, on 11 February 2011, imposed a moratorium on the development of offshore wind that frustrated the Claimant's attempts to develop the Project.

6. The disputing parties' positions in the Windstream I dispute were as follows:5

6. The Claimant argue[d] that the conduct of the Government, including the Ontario Power Authority (the "OPA"), is attributable to the Respondent and contends that the measures taken by Ontario authorities are inconsistent with the Respondent's obligations under Chapter 11 of the North American Free Trade Agreement ("NAFTA"), specifically Articles 1110 (Expropriation and Compensation), 1105 (Minimum Standard of Treatment), 1102 (National Treatment), 1103 (Most-Favored-Nation Treatment) and, to the extent that the OPA is a State enterprise as defined in NAFTA Article 1505, Article 1503(2) (State Enterprises).

7. The Respondent dispute[d] that it is in breach of any of its obligations under NAFTA. According to the Respondent, the Claimant was always aware of the regulatory risks related to the development of the regulatory processes and the significant scientific uncertainty regarding the effects of offshore wind projects on human health, safety and the environment. The Respondent contends that Ontario's decision to defer the development of offshore wind was taken to allow the necessary scientific research to be completed and applied to all such projects and thus was not discriminatory, and fell within the legitimate policy-making power of the Government of Ontario to regulate in the public interest.

7. The Windstream I Award determined that the Respondent had breached NAFTA Article 1105 by failing to accord the Claimant's investments in Windstream Wolfe Island Shoals Inc. ("WWIS"), the WWIS Project and the FIT Contract, fair and equitable treatment, awarding the Claimant CAD 25 million in compensatory damages.6 It rejected three remaining claims for breach of (i) NAFTA Article 1110 (alleged unlawful expropriation of the Claimant's investments); (ii) NAFTA Article 1102 (alleged failure to accord treatment no less favourable than accorded, in like circumstances, to its own investors); and (iii) NAFTA Article 1103 (alleged failure to accord treatment no less favourable than that accorded to investors of third party States).7

8. Most significantly for the Windstream II arbitration and Award, the Windstream I Award made the following findings in respect of alleged expropriation:8

290. The Tribunal has carefully reviewed the relevant evidence and finds that, on the facts, no expropriation has taken place in this case. First, the Claimant's FIT Contract is still formally in force and has not been unilaterally terminated by the Government of Ontario; consequently, while the Tribunal agrees with the Claimant that the Project can no longer be completed by the MCOD, 4 May 2017, it continues to remain open for the Parties to re-activate and, as appropriate, renegotiate the FIT Contract to adjust its terms to the moratorium. Second, and more importantly in the context of the Claimant's expropriation claim, the Claimant's CAD 6 million security deposit is still in place and has not been taken or rendered otherwise worthless as a result of any action taken by the Government of Ontario. Under Article 10.1(g) of the FIT Contract, if by reason of force majeure the MCOD is delayed for an aggregate of more than 24 months (which is the case here), completion and performance security will be returned at the time of the termination of the agreement by either party. Consequently, the Respondent cannot terminate, and indeed confirmed at the hearing that it would not be able to terminate, the FIT Contract pursuant to Article 10.1(g) without returning the security. It therefore cannot be said that the Claimant has been substantially deprived of its investment.

291. In reaching the conclusion that, on the facts, the Claimant has not been substantially deprived of its investment, the Tribunal has taken into account its determination of the overall value of the Claimants' investment, as set out in Section B below. As determined in Section B, the amount of money invested by the Claimant in the Project - its sunk costs - do not substantially exceed, if at all, the value of the security deposit.

Consequently, although the Tribunal accepts (as determined in Section B below) that the Claimant's investment consists not only of the sunk investment costs and the security deposit, but also of the value created by the Claimant in developing the Project, the value of the asset that is still available to the Claimant as it has not been taken (i.e., the security deposit) is substantial, in particular when compared to the overall value of the investment. In the circumstances, the Tribunal is unable to conclude that the Claimant has been substantially deprived of the value of its investment.

9. In Windstream II, the Claimant submitted that it was "[e]ncouraged by the tribunal's decision and Canada's representations that the Project had a future", and claimed to have "emerged from the NAFTA proceedings with the expectation that the Project would proceed".9 Accordingly, and thereafter it proceeded as follows:10

While courting substantial third-party interest in investing in the Project, Windstream worked to advance the Project and attempted to engage the Government of Ontario and the Independent Electricity System Operator ["IESO"] [the successor of the OPA] in discussions about the path forward. The Ontario Government ignored those requests - and its promise in 2011 to "freeze" the FIT Contract - and allowed the IESO to terminate the FIT Contract in February 2020.

10. According to the Claimant, despite its own post-Windstream I Award efforts, the Respondent:

a. failed in a timely manner to complete the work necessary for lifting the moratorium to ensure it would not further prejudice WWIS by continued delay to the WWIS Project (claiming that none of the studies stated to be the basis for the moratorium was completed) and no steps were taken to lift it;

b. continued the moratorium, knowing it would create conditions allowing IESO to terminate the FIT Contract (directly contradicting its promise to protect the WWIS Project from the effects of the moratorium); and

c. failed to direct IESO not to terminate the FIT Contract, or to amend the FIT Contract to ensure that the Project would be "deferred", "frozen" and "on hold".11

11. In the meantime, on 1 July 2020, the applicable investment protection regime changed. NAFTA was terminated and replaced by the Canada-United States- Mexico Agreement ("CUSMA"), which contains no investor-State arbitration mechanism for investments of U.S. investors in Canada. However, the CUSMA Contracting Parties consented to submit to arbitration, in accordance with NAFTA Chapter 11 Section B and CUSMA Annex 14-C, claims arising out of alleged breach of NAFTA Chapter 11 Section A obligations for "an investment of an investor of another Party [to CUSMA] in the territory of the Party established or acquired between January 1, 1994, and the date of termination of NAFTA 1994 [i.e., 1 July 2020], and in existence on the date of entry into force of this Agreement [i.e., also 1 July 2020]", for a period of three years from the date of NAFTA termination.12

12. In December 2020, the Claimant commenced the Windstream II arbitration pursuant to the provisions of CUSMA Annex 14-C, seeking "the full value of its investment", which it alleges "has now been destroyed - not just damaged - as a result of the Ontario Government's actions (and inaction) after the Windstream I Award".13

13. In these Windstream II arbitration proceedings, the Claimant requests by way of relief:14

a. a declaration that the Respondent has now unlawfully expropriated its investments in WWIS, the Project, and the FIT Contract, contrary to NAFTA Article 1110;

b. a declaration that the Respondent has again failed to accord its investments fair and equitable treatment in accordance with international law, contrary to NAFTA Article 1105;

c. alternatively, a declaration that the Respondent failed to ensure through regulatory control, administrative supervision or the application of other measures, that its State enterprise, the IESO, acted in a manner consistent with the Respondent's obligations under NAFTA Chapter 11;

d. damages in the range of between CAD 291.4 million and CAD 333 million, to be updated as at the time of the hearing, or alternatively between CAD 284.7 million and CAD 299.1 million, to be updated as at the time of the hearing;

e. pre- and post-award interest at a rate to be fixed by the Tribunal;

f. all legal fees and costs associated with this arbitration; and

g. such other relief as the Tribunal considers appropriate.

14. The Respondent requests that the Tribunal dismiss the claims in their entirety and with prejudice, order that the Claimant bear the costs of this arbitration, including the Respondent's costs for legal representation and assistance, and grant any further relief it deems just and proper.15

...

IX. THE DISPOSITIVE

530. For the reasons set out above, the Tribunal hereby declares, orders and awards as follows:

a. the Tribunal has jurisdiction and the claims are admissible;

b. the disputing parties are bound by the res judicata (cause of action estoppel) and collateral (issue) estoppel based on the findings of fact in the Windstream I Award as set out above;

c. Canada has not unlawfully expropriated Windstream's investments in WWIS, the Project and the FIT Contract, contrary to Article 1110 of NAFTA;

d. Canada has not further failed to accord Windstream's investments fair and equitable treatment in accordance with international law, contrary to Article 1105 of NAFTA, following the Windstream I Award;

e. Canada has not failed to ensure through regulatory control, administrative supervision or the application of other measures, that its State enterprise, the IESO, acts in a manner consistent with Canada's obligations under Chapter 11 of NAFTA;

f. no additional damages are payable in this arbitration;

g. each Party shall bear its own legal fees and costs associated with this arbitration; and

h. the Tribunal rejects all other claims in full.

...

Footnotes omitted